The world’s biggest retailer is making the biggest-ever ecommerce acquisition, paying $16bn for Flipkart, India’s top online retailer.

To add yet another superlative, the purchase is also India’s biggest foreign acquisition to date. Walmart has tried to crack the Indian market before, opening its first physical store there in 2009, but has met with limited success. It has just 21 stores in the country, which generate only 0.1% of its $500 billion in global revenues. As part of the new ecommerce deal, Walmart will take a 77% stake in Mumbai-based Flipkart, putting it in direct competition with arch-rival Amazon in the Indian market. Amazon is currently the second-ranking online retailer in India after Flipkart, and quickly gaining ground.

Walmart’s foray into Indian ecommerce will take it into new territory, literally and figuratively. The retail giant’s home market is mature and oversaturated: 95% of Americans shop at Walmart at least once a year. Conversely, Flipkart operates in a country where online shopping has been slow to catch on, due to low incomes as well as regulatory roadblocks. Only 5-10% of Indians have ever made an online purchase, The Economist reports. Walmart is banking on significant growth in the Indian ecommerce market, which is currently worth only about $15 billion, versus nearly $500 billion in America and twice that in China.

In Walmart’s efforts to grow its presence in the ecommerce market and better compete with Amazon, it acquired Jet.com for $3 billion in 2016. In 2017 it paid $310 million for fashion ecommerce company Bonobos. With a valuation upwards of $20 billion, Flipkart represents a bold new level of ambition, not to mention risk. “Walmart warned its shareholders that the purchase would reduce its net income by at least $750 million this year and by more than double that amount next year,” the New York Times reports. It is playing the long game.

No one is expecting short-term gains from Flipkart. Analysts say that Flipkart is actually a money-losing operation. It is believed that, at one point, it was burning through some $2 million a day on discounts and shipping subsidies meant to entice customers. Then there are the market’s competitive threats. Apart from Amazon, which has committed $5 billion to India, the competitive landscape also includes Paytm Mall, a newer online rival backed by China’s ever-ambitious Alibaba.

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