Walmart's Vietnam has become a reality

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I wrote an article titled & nbsp;Walmart & # 39; s Vietnam on September 3, 2018, where I exposed many reasons why Walmart will encounter significant problems in India as a result of its acquisition of Flipkart, First online retailer in India. The title of the article, & nbsp;Walmart's Vietnam, & nbsp;was chosen because of the similarities I've identified between Walmart's grand visions in India and the same grand visions of the United States when he chose to enter Vietnam.

Before continuing, I recommend reading Walmart & # 39; s Vietnam & nbsp;This will help readers to better understand what I point out later in this article.

India and the new settlers

Reality can do a lot of things: bringing relief, arousing fear, confirming what was once a suspicion, and leveling out a person / company with regard to the facts. When I wrote my article & nbsp;Walmart's Vietnam, & nbsp;Walmart executives contacted me to reprimand me for what I wrote. In Walmart World, what I described just could not become a reality.

Five months later, Walmart executives realized that what I described as possibilities in my article has really become a reality. A feeling of worry slipped into the voices of the same people who had joked with me months earlier.

According to several reportsThe Indian government has again targeted US multinationals to prevent these companies from gaining market share in India. The Indian government has approved a new set of rules that will come into effect on February 1st. The rules are designed to perform the following tasks:

1. Prohibit online retailers from selling products of companies in which they hold a capital investment.
2. Prohibit exclusive arrangements with these companies.
3. Limit rebates and refund programs.

The Indian government claims that the rules will be applied uniformly, but the new rules clearly target Walmart and Amazon. According to one report by & nbsp;The Motley Fool (TMF), Amazon and Walmart have a combined e-commerce market share of over 70%. The repression exercised by the government will limit the operating capacity of the two companies.

For example, it was already forbidden for Walmart to sell Flipkart products from outside of India.

The economists and retail badysts with whom I spoke continue to be surprised that Walmart and Amazon are hiring Indian employees through the H1B visa program. The consensus among the people I've talked to in informal conversations is that Amazon and Walmart should make it clear that unless they are able to compete fairly in India, Without any restrictions, neither company will hire Indian collaborators to work. United States

In addition, President Trump should commit and reinforce the same message: to allow American companies operating in India to face fair competition or by executive order, President Trump will cancel the H1B visa program. (I have a different point of view but it's not a debate).

India's new rules on e-commerce also stipulate that companies that own the stocks sold on the dominant e-commerce platform will no longer be able to do so if the platform owns 25% or more of these businesses. Flipkart, 77% owned by Walmart, derived most of its sales from its subsidiary WS Retail. But apparently, anticipating the new rules, he has largely stopped selling his products on the platform in accordance with & nbsp;TMF.

Amazon, however, derives approximately 40% of its Amazon India sales from Cloudtail India, its joint contract with Catamaran Ventures. It has another big retailer, Appario Retail, which also exceeds the 25% threshold. Under the new rules, they will not be able to sell to Amazon in accordance with & nbsp;TMF. & Nbsp;

The rules were created after intense lobbying by groups representing millions of Indian small traders and traders who believe that not only are they disadvantaged because of their small size, but what is more, they believe that the Indian government should favor compared to foreign companies. referred to as "the new settler."

To insult the insult, Mukesh Ambani, president of Reliance Industries in India, ad a partnership between its subsidiary Reliance Retail and the Jio telecommunications unit to create a new trading platform to "empower and enrich the 1.2 million small Indian retailers and traders". In other words, instead of using e-commerce platforms owned and operated by India by Amazon and Flipkart / Walmart, Indians should shop on a platform of e-commerce owned and operated by Indians.

Ambani's statement was full of hypocrisy as the new platform was published in Gujarat. Gujarat is the home state of Reliance's founder, Ambani's father, Dhirubhai, and Indian Prime Minister Narendra Modi, who was previously the chief minister of the state.

Mukesh Ambani has "been actively encouraging" The Indian prime minister will implement the new rules that will limit the competitiveness of Walmart and Amazon. (Reliance being an Indian company, it will not be subject to the new rules). Ambani also spoke of the need for India to fight against colonization:

Mahatma Gandhi led the Indian movement against political colonization. Today, we must collectively launch a new movement against the colonization of data. Indian data must be controlled and owned by Indians – not by corporations, especially global corporations … we will have to transfer control and ownership of Indian data to India.

In simple terms, Ambani has managed to convince the Indian prime minister to enforce rules to punish and weaken Walmart's and Amazon's ability to compete on an equal playing field for the sole reason that Walmart and Amazon are US multinationals. . Ambani also uses his position as president of Reliance to mobilize badets for which he has a direct financial interest, in order to create an alternative ecommerce platform to those run by Flipkart and Amazon, without being required to adhere to the new rules that he has. he helped create.

According to an economist who I spoke to: "India has not earned the reputation of being one of the most corrupt and protectionist countries of the world by accident, he worked very hard to get this distinction. "

Walmart and all multinational companies operating in India are better prepared for a future of strengthened rules designed to limit their competitiveness. India is getting closer and closer to China. The potential impact on US multinationals is staggering if India and China strengthen their collaboration and partnerships.

Note to Walmart: You'd better become a lot more aggressive in India. Several strategies can be implemented to completely negate the effectiveness of the new e-commerce rules in India. In addition, the strategies will convince the 1.2 million small retailers and Indian traders that Flipkart / Walmart should be its preferred trading partner, not Reliance and Jio.

The best intentions do not count

Am I surprised at what is happening in India? No, I warned in my article Walmart & # 39; s Vietnam & nbsp;that could happen.

Amazon has invested $ 7 billion in India, much less than the $ 20 billion invested by Walmart. (Walmart continues to claim that it outbid on Amazon for Flipkart.) Completely false. "Amazon had no intention of buying back Flipkart." Amazon's bid was a form of guerrilla designed to change the market. Walmart's narrative at Amazon It worked. "Media badysts confirmed Amazon received the majority of media coverage during the process of acquiring Flipkart, not Walmart.This coverage has greatly increased the reputation of the company. 39, Amazon in India.)

Given my knowledge of Amazon's projects in India and the fact that Amazon-India is managed by highly qualified executives, I am confident that Amazon will be able to rotate and re-engineer the business. promptly implement changes that will reduce but not eliminate the impact of India's new e-commerce rules. That's why I did not write an article called & nbsp;Amazon's Vietnam. & Nbsp;

I do not have the same level of trust in Flipkart. Here's why.

Binny Bansal, co-founder and former CEO of Flipkart, was forced to resign from Flipkart after Walmart discovered that Bansal had concealed details of a possible badual badault. I wrote about the resignation of Bansal in this article. (I was asked if, in my opinion, Bansal was working with the Indian government to develop the new e-commerce rules as a form of "repayment" against Walmart.) I have no evidence at all. 39, support such an accusation.)

On the basis of informal discussions with contacts at Flipkart, Flipkart did not recover from Bansal's resignation. It is also to be feared that many of Flipkart's most skilled collaborators will join the new Reliance / Jio partnership. In fact, Flipkart is struggling to retain and attract the best talent.

in the article about Bansal, I pointed out that forces in India would conspire against Walmart to drag society "into the deep waters." The forces I listed were Amazon, the Indian government and Indian business leaders such as Ambani). I specifically recommended Walmart to downplay the role of Judith McKenna, President and CEO of Walmart International in India, and significantly increase the responsibilities of Marc Lore, President and Chief Executive Officer of Walmart E-Commerce U.S.

Walmart is facing a future where it may have no choice but to write some, if not all, of its investments in India. (Indian economists with whom I spoke are convinced that this will happen). In Walmart & # 39; s Vietnam, I pointed out that, regardless of the desire of the United States to be in Vietnam, the Vietnamese still regarded America as an invader. I can make the same argument of Walmart in India. Walmart may want to be in India but India clearly does not want Walmart.

Of all the countries on the planet, few, if any, are getting closer to the fervent nationalism of India. The phrase "Forever Indian" This is not a slogan, it's a deeply ingrained belief. (An Indian economist I know says it well: when Walmart acquired Flipkart, the latter ceased to be an Indian company).

Walmart needs a new strategy for India and Marc Lore is the only person at Walmart who can create it. I support my recommendation that Lore become Flipkart's CEO. Lore is highly respected in India, although Walmart is not. Lore is also Walmart's most capable leader in e-commerce. Frankly, I think Lore's title should be CEO of Global E-Commerce Operations and Strategy. Lore should have full authority to design, implement and manage e-commerce activities in India.

I also support my recommendation that the Walmart Board of Directors engage with external experts to audit Flipkart's operations and evaluate Walmart's strategy in India. You read it first: It is not impossible that Walmart decides to dispose of Flipkart if the number of losses increases. In other words, withdraw from India. Sounds familiar? Those who read & nbsp;Walmart & # 39; s Vietnam & nbsp;will think so.

Walmart may have the best intentions in India, but the best intentions matter little when operating in a country that sets the rules and can modify them to its advantage at any time.

Conclusion

The water gets deeper for Walmart in India. Pressuring the Indian government to revoke the new regulations will not work. Offering to invest more in infrastructure projects to win the hearts and minds of the Indian people will not work.

Walmart is in a precarious situation, whether he wants to admit it or not.

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

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I wrote an article entitled Walmart & # 39; s Vietnam on September 3, 2018, where I exposed many reasons why Walmart will encounter significant problems in India as a result of its acquisition of Flipkart, the leading online retailer in India. The title of the article, Walmart & # 39; s Vietnam, was chosen because of the similarities I've identified between Walmart's grand visions in India and the same grand visions of the United States when he chose to enter Vietnam.

Before continuing, I recommend reading Walmart & # 39; s Vietnam This will help readers to better understand what I point out later in this article.

India and the new settlers

Reality can do a lot of things: bringing relief, arousing fear, confirming what was once a suspicion, and leveling out a person / company with regard to the facts. When I wrote my article Walmart & # 39; s Vietnam, Walmart executives contacted me to reprimand me for what I wrote. In Walmart World, what I described just could not become a reality.

Five months later, Walmart executives realized that what I described as possibilities in my article has really become a reality. A feeling of worry slipped into the voices of the same people who had joked with me months earlier.

Numerous reports indicate that the Indian government has again targeted US multinationals with the aim of preventing these companies from gaining market share in India. The Indian government has approved a new set of rules that will come into effect on February 1st. The rules are designed to perform the following tasks:

1. Prohibit online retailers from selling products of companies in which they hold a capital investment.
2. Prohibit exclusive arrangements with these companies.
3. Limit rebates and refund programs.

The Indian government claims that the rules will be applied uniformly, but the new rules clearly target Walmart and Amazon. According to a report by The Motley Fool (TMF), Amazon and Walmart have a combined e-commerce market share of over 70%. The repression exercised by the government will limit the operating capacity of the two companies.

For example, it was already forbidden for Walmart to sell Flipkart products from outside of India.

The economists and retail badysts with whom I spoke continue to be surprised that Walmart and Amazon are hiring Indian employees through the H1B visa program. The consensus among the people I've talked to in informal conversations is that Amazon and Walmart should make it clear that unless they are able to compete fairly in India, Without any restrictions, neither company will hire Indian collaborators to work. United States

In addition, President Trump should commit and reinforce the same message: to allow American companies operating in India to face fair competition or by executive order, President Trump will cancel the H1B visa program. (I have a different point of view but it's not a debate).

India's new rules on e-commerce also stipulate that companies that own the stocks sold on the dominant e-commerce platform will no longer be able to do so if the platform owns 25% or more of these businesses. Flipkart, 77% owned by Walmart, derived most of its sales from its subsidiary WS Retail. But apparently, anticipating the new rules, he has largely stopped selling his products on the platform according to TMF.

Amazon, however, derives approximately 40% of its Amazon India sales from Cloudtail India, its joint contract with Catamaran Ventures. It has another big retailer, Appario Retail, which also exceeds the 25% threshold. Under the new rules, they will not be able to sell on Amazon according to TMF.

The rules were created after intense lobbying by groups representing millions of Indian small traders and traders who believe that they are not only disadvantaged because of their small size, but are especially convinced that the Indian government should favor them. compared to foreign companies. like "the new settler."

Mukesh Ambani, president of Reliance Industries, India, announced a partnership between its subsidiary Reliance Retail and the Jio telecommunication unit to create a new trading platform aimed at "empowering and enriching the 1.2 million small retailers and Indian traders ". "In other words, instead of using e-commerce platforms owned and operated by Amazon and Flipkart / Walmart, Indians should buy on an e-commerce platform owned and operated by Indians.

Ambani's statement was full of hypocrisy as the new platform was published in Gujarat. Gujarat is the home state of Reliance's founder, Ambani's father, Dhirubhai, and Indian Prime Minister Narendra Modi, who was previously the chief minister of the state.

Mukesh Ambani has "actively encouraged" the Indian prime minister to implement the new rules that will limit the competitiveness of Walmart and Amazon. (Reliance being an Indian company, it will not be subject to the new rules). Ambani also spoke of the need for India to fight against colonization:

Mahatma Gandhi led the Indian movement against political colonization. Today, we must collectively launch a new movement against the colonization of data. Indian data must be controlled and owned by Indians – not by corporations, especially global corporations … we will have to transfer control and ownership of Indian data to India.

In simple terms, Ambani has managed to convince the Indian prime minister to enforce rules to punish and weaken Walmart's and Amazon's ability to compete on an equal playing field for the sole reason that Walmart and Amazon are US multinationals. . Ambani also uses his position as president of Reliance to mobilize badets for which he has a direct financial interest, in order to create an alternative ecommerce platform to those run by Flipkart and Amazon, without being required to adhere to the new rules that he has. he helped create.

According to an economist with whom I spoke: "India has not earned the reputation of being one of the most corrupt and protectionist countries in the world by accident." worked hard to make the distinction. "

Walmart and all multinational companies operating in India are better prepared for a future of strengthened rules designed to limit their competitiveness. India is getting closer and closer to China. The potential impact on US multinationals is staggering if India and China strengthen their collaboration and partnerships.

Note to Walmart: You'd better become a lot more aggressive in India. Several strategies can be implemented to completely negate the effectiveness of the new e-commerce rules in India. In addition, the strategies will convince the 1.2 million small retailers and Indian traders that Flipkart / Walmart should be its preferred trading partner, not Reliance and Jio.

The best intentions do not count

Am I surprised at what is happening in India? No, I warned in my article Walmart & # 39; s Vietnam that could happen.

Amazon has invested $ 7 billion in India, much less than the $ 20 billion invested by Walmart. (Walmart continues to claim that it outbid on Amazon for Flipkart.) Completely false. "Amazon had no intention of buying back Flipkart." Amazon's bid was a form of guerrilla designed to change the market. Walmart's narrative at Amazon It worked. "Media badysts confirmed Amazon received the majority of media coverage during the process of acquiring Flipkart, not Walmart.This coverage has greatly increased the reputation of the company. 39, Amazon in India.)

Given my knowledge of Amazon's projects in India and the fact that Amazon-India is managed by highly qualified executives, I am confident that Amazon will be able to rotate and re-engineer the business. promptly implement changes that will reduce but not eliminate the impact of India's new e-commerce rules. That's why I did not write an article entitled The Vietnam of Amazon.

I do not have the same level of trust in Flipkart. Here's why.

Binny Bansal, co-founder and former CEO of Flipkart, was forced to resign from Flipkart after Walmart discovered that Bansal had concealed details of a possible badual badault. I wrote about the resignation of Bansal in this article. (I was asked if I think Bansal was working with the Indian government to develop the new e-commerce rules as a form of "recovery" against Walmart.) I have no evidence at all. support of such an accusation.)

On the basis of informal discussions with contacts at Flipkart, Flipkart did not recover from Bansal's resignation. It is also to be feared that many of Flipkart's most skilled collaborators will join the new Reliance / Jio partnership. In fact, Flipkart is struggling to retain and attract the best talent.

In the article on Bansal, I insisted that Indian forces were conspiring against Walmart to drag the company "into deep waters". The forces I listed were Amazon, the Indian government and Indian business leaders such as Ambani). I specifically recommended Walmart to downplay the role of Judith McKenna, President and CEO of Walmart International in India, and significantly increase the responsibilities of Marc Lore, President and Chief Executive Officer of Walmart E-Commerce U.S.

Marc Lore, President and CEO of Walmart eCommerce. I think Lore should become CEO of Flipkart. Bloomberg Finance LP© 2017 Bloomberg Finance LP

Walmart is facing a future where it may have no choice but to write some, if not all, of its investments in India. (Indian economists with whom I spoke are convinced that this will happen). In Walmart & # 39; s Vietnam, I pointed out that, regardless of the desire of the United States to be in Vietnam, the Vietnamese still regarded America as an invader. I can make the same argument of Walmart in India. Walmart may want to be in India but India clearly does not want Walmart.

Of all the countries on the planet, few, if any, are getting closer to the fervent nationalism of India. The phrase "Forever Indian" is not a slogan, it's a deeply ingrained belief. (An Indian economist I know says it well: when Walmart acquired Flipkart, the latter ceased to be an Indian company).

Walmart needs a new strategy for India and Marc Lore is the only person at Walmart who can create it. I support my recommendation that Lore become Flipkart's CEO. Lore is highly respected in India, although Walmart is not. Lore is also Walmart's most capable leader in e-commerce. Frankly, I think Lore's title should be CEO of Global E-Commerce Operations and Strategy. Lore should have full authority to design, implement and manage e-commerce activities in India.

I also support my recommendation that the Walmart Board of Directors engage with external experts to audit Flipkart's operations and evaluate Walmart's strategy in India. You read it first: It is not impossible that Walmart decides to dispose of Flipkart if the number of losses increases. In other words, withdraw from India. Sounds familiar? Those who read Walmart & # 39; s Vietnam will think so.

Walmart may have the best intentions in India, but the best intentions matter little in the countries that set the rules and can change them to their advantage at any time.

Conclusion

The water gets deeper for Walmart in India. Pressuring the Indian government to revoke the new regulations will not work. Offering to invest more in infrastructure projects to win the hearts and minds of the Indian people will not work.

Walmart is in a precarious situation, whether he wants to admit it or not.

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