WHY WALMART FLIPKART DEAL REQUIRES AN INTERROGATION
AMAZON & ALIBABA IN LINE TO FOLLOW THE PATH
Secretary General, Confederation of All India Traders
The Walmart-Flipkart Deal is under clouds of strong opposition from trading bodies and others as both are well known for flouting the policies, circumventing the law and indulging into deep discounting and predatory pricing. Being having the same mindset, they both agreed to enter into the deal with an urge to capture, control and monopolised not only e commerce market but even the offline retail trade of India. Interestingly, both e commerce and retail trade have no specific Government policy paving the easy way for both of them to manipulate things to their advantage. More than Flipkart, it is an opportunity for Walmart to fulfil its desire to enter the Indian market which it is trying desperately since years. For Flipkart, it is the best offer for making money and earning huge profit. The Venture capitalist and Private Equity people those who have funded Flipkart have all smiles since their part of share is earning them handsome margin. Only the poor retailer of the Country is at the receiving end.
Flipkart has a leading market share across certain product categories (like smartphones and fashion) through a combination of predation (which they have admitted in a tax proceedings), exclusive tie ups and preferential sellers. The market presence would be further augmented once the said transaction takes place. This would lead to adverse effect on both offline market and online markets.The offline retailers/ wholesalers would not be able to compete with the said conglomerate due to lack of funding and due to the prevalent market practices, small traders have to partner with e-commerce players like Flipkart but they have to face discriminatory conditions. This fact would be accentuated since Flipkart would, probably, give preference to inventory of Walmart.Both Walmart and Flipkart have a demonstrated history of engaging in predation, which they would continue in India, resulting in foreclosure to other offline retailers/wholesalers.
Walmart,, would sell its inventory on the platform of flipkart.com either directly or through a web of associated preferred sellers with the result that their market share would rise exponentially and pure offline retailers / wholesalers would have two options: (i) exit the market or (ii) sell their goods on flipkart.com and face discriminatory terms and conditions fromflipkart.com in comparison to its preferred sellers.There is no level playing field on flipkart’s platform. There is a clear case of discrimination which is there between preferential sellers and other sellers in terms of commission, discounts etc. which would be further accentuated because of this transaction. There is a clear case of denial of market access for these non-preferential sellers on online platform coupled with complete annihilation of small time trader on offline platform.
Flipkart and Walmart have access to vast amounts of data, which they would use for targeted advertisements for consumers. They would create private labels (on the lines of Smart buy etc.) for products which are fast moving (based on data analytics) and sell the same via their preferred seller network. These preferred sellers, like WS Retail, Retailnet, Omnitech Retail, SupercomNet are only on the platform of Flipkart and not on any other platform.The present modus operandi is very clear: Flipkart purchases goods and sells at discounted prices, while incurring a loss, to few sellers like W.S. Retail, Retailnet, Omnitech Retail which are further sold on the platform of Flipkart. Flipkart purchases goods and sells at discounted prices, while incurring a loss, to few sellers like W.S. Retail, which are further sold on the its platform.
Furthermore, there are important competition concerns regarding Walmart’s role on Flipkart’s B2B platform. With Walmart, a global retail giant with its own range of multi-brand products, attempting to take another shot at the Indian market, there is a high likelihood of Flipkart and Walmart would affect other wholesalers on the platform and eliminating them in the long run. In several cases global search engines have been shown to use certain algorithms to favour their partners or services in searches and there is a possibility for Flipkart to increase listings for Walmart’s inventory or propagating a search bias for Walmart’ inventory in its platform. Similar to the entire modus operandi of preferential sellers, they may create preferential sellers with better commissions / discounts in order to augment the sale of Walmart’s inventory. This would have an adverse effect on competitors in both the online and offline market, both at the B2B level and B2C level.In addition, Flipkart (through its subsidiary, Myntra) has launched private labels which are Myntra Fashion Brands on which they are sold at high margins, and Flipkart also controls the sales, marketing and distribution of their products. The sellers of these private brands are also preferential sellers of Flipkart, thus eroding the very concept of level playing field.
The combined entity would have affiliates in the entire supply chain. The Complainant apprehends that the deal is bound to circumvent established laws and FDI policy of the government since the ultimate object of Walmart is to enter the retail trade of the country and in the absence of any policy on e-commerce or retail trade, it would be easy for Walmart to reach out to retail market, which otherwise it cannot enter due to FDI policy.Capital is huge entry barrier (due to the manner in which the said market has evolved) and even established players would find it difficult to enter this market unless they are fine with burning cash.