Walmart India plans to leverage Flipkart to cross-sell private labels
While the Bentonville-based retail giant gets nearly a third of its revenues from its own labels in the US, private brands like Right Buy and Member's Mark account for only 6-7% of Walmart India's overall sales.
- Sep 25, 2018,
- Updated Sep 25, 2018 3:18 PM IST
With the closing of the $16 billion Walmart-Flipkart deal last month, the two companies are now focussing on building synergies. The homegrown ecommerce leader obviously gains a lot from the deal - not only in terms of leveraging the US giant's strengths, especially in the grocery and fresh produce segment, but also no longer having to worry about raising capital or its valuations.
But what's in it for Walmart, apart from an entry into India's red-hot ecommerce segment? The local unit of the Beast of Bentonville has finally shared a part of its plans.
Krish Iyer, the CEO of Walmart India said that it could leverage Flipkart to cross-sell each other's private brands, and use the etailer's expertise in technology and analytics, The Economic Times reported.
"Currently, we are selling our private brands only in our stores but don't see any reason why we can't sell it outside our stores. With Flipkart, there is an option," said Iyer. "Flipkart is a platform and there are sellers on it, and when you talk about grocery, it's about getting the right sellers to complete the mix. They are very good at technology, analytics and customer relationship management."
While the Bentonville-based retail giant gets nearly a third of its revenues from its own labels in the US, private brands like Right Buy and Member's Mark account for only 6-7% of Walmart India's overall sales.
India allows 51% FDI in multi-brand retail, while 100% FDI is allowed in cash-and-carry wholesale ventures that sell grocery and other products to business entities such as neighbourhood stores. Hence, Walmart can neither sell its own brands directly to end consumers, nor list it directly on Flipkart's platform.
However, kirana stores are already selling Walmart's private labels after buying them from Walmart's Best Price wholesale stores. The latter stocks over 5,000 items, including a wide range of fresh, frozen and chilled foods, fruits and vegetables, dry groceries, personal and home care items, hotel and restaurant supplies, apparel, office supplies, electronic goods and other general merchandise items. So the company now hopes to leverage Flipkart in a similar manner.
"As long as there's a reseller involved, there should not be any legal issue. Walmart can also set up another company just for these FMCG brands and list it at Flipkart but there could be complications," Devangshu Dutta, chief executive at consultancy firm Third Eyesight, told the daily.
Walmart India further clarified that both companies have a separate team and the benefits will not accrue immediately. "Nothing is going to happen in the next 2-3 months. It takes time and needs a lot of planning and good execution to get the benefit in the short to medium term," Iyer announced, after the company opened its second Best Price Modern Wholesale store in Ludhiana on Saturday. This takes the total tally of such stores to 22 across India.
Walmart India reportedly already generates nearly half its sales from outside its cash-and-carry stores. "It's all about omni-channel - anytime and anywhere concept because the customer wants to shop that way," said Iyer.
Meanwhile, Flipkart is also planning to invest heavily to promote its in-house labels such as MarQ (appliances like washing machines and ACs), Perfect Homes (furniture brand) and SmartBuy (electronics and accessories) during the upcoming festive season. Its fashion subsidiary Myntra, too, boasts several in-house brands like Roadster and Dressberry.
For the record, private labels are mostly priced much lower than branded products because of substantial marketing and distribution savings. Retailers instead rely on in-store promotions and prominent displays to push their own brands. Hence, a major benefit of focussing on private label is high margin value, which can really create a difference in the gross sales of a company.
With the closing of the $16 billion Walmart-Flipkart deal last month, the two companies are now focussing on building synergies. The homegrown ecommerce leader obviously gains a lot from the deal - not only in terms of leveraging the US giant's strengths, especially in the grocery and fresh produce segment, but also no longer having to worry about raising capital or its valuations.
But what's in it for Walmart, apart from an entry into India's red-hot ecommerce segment? The local unit of the Beast of Bentonville has finally shared a part of its plans.
Krish Iyer, the CEO of Walmart India said that it could leverage Flipkart to cross-sell each other's private brands, and use the etailer's expertise in technology and analytics, The Economic Times reported.
"Currently, we are selling our private brands only in our stores but don't see any reason why we can't sell it outside our stores. With Flipkart, there is an option," said Iyer. "Flipkart is a platform and there are sellers on it, and when you talk about grocery, it's about getting the right sellers to complete the mix. They are very good at technology, analytics and customer relationship management."
While the Bentonville-based retail giant gets nearly a third of its revenues from its own labels in the US, private brands like Right Buy and Member's Mark account for only 6-7% of Walmart India's overall sales.
India allows 51% FDI in multi-brand retail, while 100% FDI is allowed in cash-and-carry wholesale ventures that sell grocery and other products to business entities such as neighbourhood stores. Hence, Walmart can neither sell its own brands directly to end consumers, nor list it directly on Flipkart's platform.
However, kirana stores are already selling Walmart's private labels after buying them from Walmart's Best Price wholesale stores. The latter stocks over 5,000 items, including a wide range of fresh, frozen and chilled foods, fruits and vegetables, dry groceries, personal and home care items, hotel and restaurant supplies, apparel, office supplies, electronic goods and other general merchandise items. So the company now hopes to leverage Flipkart in a similar manner.
"As long as there's a reseller involved, there should not be any legal issue. Walmart can also set up another company just for these FMCG brands and list it at Flipkart but there could be complications," Devangshu Dutta, chief executive at consultancy firm Third Eyesight, told the daily.
Walmart India further clarified that both companies have a separate team and the benefits will not accrue immediately. "Nothing is going to happen in the next 2-3 months. It takes time and needs a lot of planning and good execution to get the benefit in the short to medium term," Iyer announced, after the company opened its second Best Price Modern Wholesale store in Ludhiana on Saturday. This takes the total tally of such stores to 22 across India.
Walmart India reportedly already generates nearly half its sales from outside its cash-and-carry stores. "It's all about omni-channel - anytime and anywhere concept because the customer wants to shop that way," said Iyer.
Meanwhile, Flipkart is also planning to invest heavily to promote its in-house labels such as MarQ (appliances like washing machines and ACs), Perfect Homes (furniture brand) and SmartBuy (electronics and accessories) during the upcoming festive season. Its fashion subsidiary Myntra, too, boasts several in-house brands like Roadster and Dressberry.
For the record, private labels are mostly priced much lower than branded products because of substantial marketing and distribution savings. Retailers instead rely on in-store promotions and prominent displays to push their own brands. Hence, a major benefit of focussing on private label is high margin value, which can really create a difference in the gross sales of a company.