(ATF) The bosses of Flipkart, Walmart’s Indian e-commerce venture, have signed a pact with tycoon Gautam Adani’s conglomerate to build one of the largest retail warehouses in India, as the US giant prepares to grab a bigger share of the burgeoning local market.
The partnership with the Adani Group, which claims to be India’s largest multinational infrastructure company, aims to ramp up its supply chain and technology infrastructure. It also marks the entry of Gautam Adani, India’s fastest-rising billionaire, into a three-way fight for dominance in India’s online shopping space.
India's online marketplace has been turbocharged by pandemic restrictions keeping people away from stores and it is expected to generate $200 billion in sales by 2026. Vying for dominance in this sector is not just Amazon, but also Reliance Industries, controlled by Mukesh Ambani, India’s richest man.
Online retailer Flipkart will work with Adani Logistics, a diversified end-to-end logistics service, to strengthen its supply-chain infrastructure and enhance its ability to serve a rapidly growing base of customers.
It also plans to set up a third data centre at AdaniConnex Private, a facility in Chennai (formerly Madras) in the south, where it can leverage AdaniConneX’s expertise and data centre technology solutions.
AdaniConnex Private is a new Joint Venture formed between EdgeConneX and Adani Enterprises Ltd.
This partnership will build a 534,000-square-feet "fulfillment centre" in Mumbai, on the west coast, and lease it to Flipkart, according to a joint statement on Monday from the two companies.
This warehouse, which is expected to be operational in the third quarter of 2022, will be roughly the size of 11 football fields -- big enough to store 10 million units of inventory, the statement said.
Flipkart, which is based in Bengaluru, will also develop a third data centre at the AdaniConnecX facility in Chennai to help the e-commerce company keep its data within India.
"We see this as a great opportunity to serve Flipkart's physical, as well as digital infrastructure needs," Karan Adani, the brother of Gautam and chief executive officer of Adani Ports, said.
The partnership is another sign of Adani's rising clout, experts say. The conglomerate is involved in coal mining, infrastructure and data centres, having expanded rapidly and diversified across a whole range of sectors.
Gautam Adani has added $24 billion to his net worth, now estimated at almost $58 billion – the fastest rise in wealth globally, according to Bloomberg.
Alvis Lazarus, the chief executive of the supply chain and management consulting firm Hesol Consulting, told ATF: "This is a deadly trio, because although Walmart comes to India with strong merchandising expertise, while Flipkart complements that with its strength of understanding the Indian market and providing the venture with strong tools and technology. But the missing link was strong infrastructure and the network, knowing nooks and corners of India and providing that reach, which Adani, as one of the largest infrastructure companies, can provide.”
The Adani Group, according to Walmart, is unmatched for building infrastructure across India and already "a leader in the arena of logistics, real estate, green energy, and data centre infrastructure."
THE THREE FACTORS
Lazarus said technology, merchandising, and logistics infrastructure would be "crucial factors of success” in India's highly competitive online marketplace.
“For instance, despite decades of existence and access to a network of over 12 million offline retail mom-and-pop stores, some multinational fast-moving consumer goods (FMCG) companies still have not penetrated a large part of country,” he said.
“With Adani onboard, the Walmart-Flipkart duo will now have the infrastructural support and be able to leverage Adani’s offline experience.”
Based on secondary research done by Hesol, Lazarus estimates that India's e-commerce market could be even bigger than others have forecast, estimating possible growth to $240 billion a year by the end of 2026.
This “broad-ranging partnership across our logistics and data centre businesses” would also be a unique business model, that will serve Flipkart’s physical, as well as digital infrastructure needs, Karan Adani said.
While Flipkart has been instrumental in defining e-commerce adoption in India, both through the value it creates and its constant technological innovation to serve its consumers, the new format will focus on learning from each other as well as leveraging the mutual strengths to prioritise consumers and development of India’s meduim and small scale business ecosystem, the statement said.
“And that means, the deal will be a win-win for Indian online customers,” Lazarus predicted.
Because eventually, they will get access to a wide range of products made available by sellers across the country, he said.