Walmart paid $16 billion for a controlling stake in India’s giant online retailer Flipkart in order to gain access to India’s fast-growing e-commerce market. Photo Credit: Associated Press

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I wrote an article titled Walmart’s Vietnam on September 3, 2018, where I outlined multiple reasons why Walmart will encounter significant issues in India as a result of its acquisition of Flipkart, India’s leading online retailer. The title of the article, Walmart’s Vietnam, was chosen as a result of similarities I identified between Walmart’s visions of grandeur in India, and the same visions of grandeur of the U.S. when it chose to enter Vietnam in the 1950’s eventually leading to the Vietnam War.

Before continuing, I advise reading Walmart’s Vietnam as it will help readers better understand what I outline in the remainder of this article.

India And The New Colonists

When I wrote the article Walmart’s Vietnam, executives at Walmart reached out to me to chide me for what I had written. The executives I spoke with were confident that Walmart had made a “game changing” decision with its decision to acquire Flipkart. None of the executives believed my pessimistic view of India and Walmart.

I did not criticize Walmart for wanting to have a presence in India. However, I struggled to understand the value of acquiring a retailer in India with a government so willing to implement regulations that benefit India while punishing multinationals. Especially U.S. multinational corporations.

Fast-forward five months and executives at Walmart have come to the realization that what I described as possibilities in my article are becoming a reality. A sense of concern has crept into the voices of the same individuals who joked with me months earlier.

According to multiple reports, India’s government has once again taken aim at U.S. multinational corporations in an attempt to prevent the companies from increasing market share in India’s fast-growing and lucrative online e-commerce market.

India’s government has approved a new set of rules that are set to go into effect on February 1st. The rules are designed to do the following:

  1. Prohibit e-commerce retailers from selling products from businesses they have an equity investment in.
  2. Prohibit exclusive arrangements with those businesses.
  3. Limit discounts and cash-back programs.

India’s government claims the rules will be applied evenly but the target of the new rules are clearly Walmart and Amazon. According to a report by The Motley Fool (TMF)Amazon and Walmart have a combined e-commerce market share in excess of 70%. The government crackdown will severely limit the ability of how both companies can operate.

For example, Walmart was already prohibited from selling products on Flipkart that were sourced outside of India. (Imagine if Amazon in the U.S. was suddenly prevented from selling anything on Amazon.Com that wasn’t sourced from a company inside the U.S. Imagine if Walmart couldn’t sell any products in its stores or online that weren’t manufactured and sourced in the U.S. The results would be devastating to both companies.)

India’s new e-commerce rules stipulate that businesses that own the inventory being sold on the controlling e-commerce platform will no longer be able to do so if the platform owns 25% or more of those businesses. Flipkart, which is 77% owned by Walmart, used to derive most of its sales from its subsidiary WS Retail. But apparently in anticipation of the new rules, it largely stopped selling its products on the platform according to TMF.

Amazon, though, derives around 40% of its Amazon India sales from Cloudtail India, its joint deal with Catamaran Ventures. It has another major retailer, Appario Retail, that also exceeds the 25% threshold. Under the new rules, they won’t be able to sell on Amazon according to TMF. 

The rules were created after intense lobbying by groups representing millions of India’s small traders and shopkeepers who believe not only are they at a disadvantage due to their small size, but more importantly, they believe India’s government should favor them over foreign owned companies commonly referred to as “the new colonist.”

To add insult to injury, Mukesh Ambani, Chairman of India’s Reliance Industries, announced a partnership between its Reliance Retail subsidiary and the telecom unit Jio for the purpose of creating a new commerce platform to “empower and enrich India’s 1.2M small retailers and shopkeepers.” In other words, instead of Indian’s using e-commerce platforms owned and operated by Amazon and Flipkart, Indian’s should shop on an Indian-owned and operated e-commerce platform.

The proposed Reliance/Jio platform will be launched in Gujarat. Gujarat is home to the 1.2M small retailers and shopkeepers referenced by Ambani. (There are an estimated 14M small retailers and shopkeepers in India operating stores that average 500 square feet in size). Gujarat is also the home state of both Reliance’s founder, Mr Ambani’s father Dhirubhai, and of Indian prime minister Narendra Modi, who was previously the state’s chief minister.

It is perceived that Ambani has actively been encouraging India’s Prime Minister to implement the new rules that will restrict the ability of Walmart and Amazon to compete. Because Reliance is an Indian-owned and based company, it will not be subject to the new rules that Amazon and Flipkart must follow.

Satish Meena, an analyst at Forrester Research stated “Reliance being able to control the supply of goods that are sold on its marketplace will certainly benefit them” he said in a discussion with the Financial Times. Stated another way, Reliance can source products from India and other countries, and Reliance can own the inventory that it sells on the Reliance/Jio platform. Reliance can also provide inventory to small retailers and shopkeepers using the Reliance/Jio platform.

If the platform created by Reliance/Jio becomes popular (which it should) it’s conceivable that a large percentage of the 14M retailers and shopkeepers operating in India will migrate to the platform to gain access to products provided by Reliance. In addition, the majority of online shopping will be conducted on the Reliance/Jio platform as customers will find more products at lower prices than can be found at Amazon and Flipkart. This is what Ambani is counting on.

Ambani also spoke out about the need for India to beat back colonization:

Mahatma Gandhi led India’s movement against political colonization. Today, we have to collectively launch a new movement against data colonization. India’s data must be controlled and owned by Indian people — and not by corporates, especially global corporations …we will have to migrate the control and ownership of Indian data back to India.

In plain English, what Ambani has been able to accomplish is convince the Prime Minister of India to implement rules to punish and weaken the ability of Walmart and Amazon to compete on a level playing field for no other reason than Walmart and Amazon are U.S. multinationals. Ambani is also using his position as Chairman of Reliance to leverage assets he has a direct financial interest in to create an alternative e-commerce platform to those operated by Flipkart and Amazon, while also not being required to follow the new rules he helped to influence.

India is home to an estimated 14M small retailers and shopkeepers. India's government continues to... [+] introduce rules to protect its small retailers and shopkeepers from being negatively impacted by multinational companies like Amazon and Walmart. Photo Credit: Getty

According to an economist I spoke with: “India didn’t gain a reputation for being one of the most corrupt and protectionist countries in the world by accident, It worked very hard to gain the distinction.”

Walmart and all multinational corporations operating in India better prepare for a future of increased rules designed to limit their ability to compete. India is moving closer and closer to China. The potential impact on U.S. multinationals is staggering if India and China increase collaboration and partnerships.

The Best Intentions Don’t Matter

Am I surprised by what’s taking place in India? No. I warned in my article Walmart’s Vietnam that it could happen.

As for Amazon, it has invested $7B in India, far less than the $20B invested by Walmart. (Walmart continues to state that it outbid Amazon for Flipkart. Completely false. Amazon had no intention of acquiring Flipkart. Amazon’s bid was a form of guerilla warfare designed to change the narrative away from Walmart back to Amazon. It worked. Media analysts confirmed that Amazon received the majority of press coverage during the process of Flipkart being acquired, not Walmart. The press coverage greatly increased Amazon’s brand awareness in India.)

Based on my knowledge of what Amazon has planned for India as well as the fact Amazon-India is being run by highly skilled executives, I am confident that Amazon will be able to quickly pivot and implement changes that will reduce but not eliminate the impact of India’s new e-commerce rules. This is why I didn’t write an article titled Amazon’s Vietnam. 

I do not have the same level of confidence in Flipkart. Here’s why.

Binny Bansal, Flipkart’s co-founder and former CEO, was forced to resign from Flipkart after Walmart discovered Bansal had hid details related to a possible sexual assault. I wrote about Bansal’s resignation in this article. (I’ve been asked if I think Bansal has been working with India’s government to craft the new e-commerce rules as a form of “payback” against Walmart. I have no evidence to support such a charge.)

Based on off-the-record discussions with contacts at Flipkart, Flipkart has not recovered from the resignation of Bansal. There is also concern that many of Flipkart’s most-skilled associates will defect to the new Reliance/Jio partnership. In fact, Flipkart is currently struggling to retain and attract the best talent.

In the article about Bansal, I stressed that forces within India would conspire against Walmart to drag the company “into deep water.” The forces I listed were Amazon, India’s government and India’s business leaders such as Ambani). I specifically made the recommendation for Walmart to minimize the role of Judith McKenna, President and CEO of Walmart International, and other Walmart executives in India and instead, greatly increase the responsibilities of Marc Lore, President and CEO, Walmart E-Commerce U.S.

Marc Lore, President and CEO of Walmart eCommerce. I believe Lore should be made CEO of Flipkart.... [+] Bloomberg Finance LP

Walmart is facing a future where it may have no choice but to write down some if not all of its investment in India. (Indian economists I spoke with are convinced this is going to happen). In Walmart’s Vietnam, I pointed out that no matter how badly the U.S. wanted to be in Vietnam, the Vietnamese always viewed America as being an invader. I can make the same argument of Walmart in India. Walmart may want to be in India but India clearly doesn’t want Walmart.

Of all the countries on earth, few if any come close to India’s fervent nationalism. The phrase “Forever Indian” isn’t a slogan, it’s a deeply held belief. (An Indian economist I know said it best: When Walmart acquired Flipkart, Flipkart stopped being an Indian company).

Walmart needs a new strategy for India and Marc Lore is the only person at Walmart who can create it. I stand behind my recommendation that Lore become the CEO of Flipkart. Lore is highly respected in India even if Walmart isn’t. Lore is also Walmart’s most capable executive as it relates to e-commerce. Frankly, I believe Lore’s title should be CEO of Global E-Commerce Operations and Strategy. Lore should have complete authority to design, implement and manage India’s e-commerce business.

I also stand behind my recommendation for Walmart’s Board of Directors to get involved by seeking outside experts to independently audit Flipkart’s operations and assess Walmart’s strategy in India. You read it here first: It is not beyond the realm of possibility that a recommendation could be made for Walmart to divest Flipkart if losses mount. In other words, withdraw from India. Sound familiar? Those who read Walmart’s Vietnam will think so.

Walmart may have the best intentions in India but the best intentions don’t matter when operating in a country that makes the rules and can change the rules to its benefit at any time.


The water is getting deeper for Walmart in India. Lobbying India’s government to rescind the new regulations won’t work. Offering to make increased investments in infrastructure projects to win the hearts and minds of India’s population won’t work.

Walmart is in a precarious situation whether it wants to admit or not. I strongly encourage Walmart to become much more aggressive in India. Naming Marc Lore as CEO of Flipkart is a must-have. It is inconceivable to me that Walmart’s most capable executive isn’t running Walmart’s biggest e-commerce investment in a country with the biggest retail potential out of any country in the world.

I warned that India could become Walmart’s Vietnam. And it has.