Walmart CEO pens a letter to PM on data privacy, regulatory stability

Walmart CEO Doug McMillon has written to Prime Minister Narendra Modi on issues related to data privacy and regulatory stability for the e-commerce sector and has urged him to reduce the number of licences and permits for the opening of new stores.

McMillon in a letter has assured the prime minister of Walmart's commitment to increasing global sourcing from India, empower small and medium enterprises and more job creation. McMillon had met Modi during the prime minister's recent US visit.

Global retail giant Walmart, which has invested $16 billion in Flipkart, is facing challenges after the foreign direct investment rules for e-commerce marketplaces were changed by the government through a revised policy on FDI in online retail.

"A stable, welcoming regulatory environment will allow us to continue to invest in creating more jobs and building infrastructure that benefits the Indian suppliers and customers," McMillon said in the letter.

He also appreciated the prime minister for listening to the retailer's concerns on regulatory stability and uniform implementation of regulations in the e-commerce and retail sectors.

"We have been encouraged by the recent consultations with your government and we remain ready to collaborate to ensure proper protection while creating a pro-growth agenda," It said.

The new FDI policy, which has come into effect from February this year has barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price. It also mandates them to offer equal services or facilities to all its vendors without discrimination.

Moreover, both leading online sellers are also facing regulatory investigations here for alleged violation of the guidelines by predatory pricing and deep discounting.

Doug McMillon has also raised the issues related to data privacy saying regulating new technologies are issues which are faced by the governments around the world.

"We share the Indian government's concern about data privacy for Indian citizens and their ability to control the use of their personal data. Flipkart and PhonePe have invested in local data infrastructure to ensure Indian can benefit from the growth of the data economy in India," McMillon said.

Walmart, which has selected India as a hub for its global retail technology innovation, believe it is important to allow business appropriate means to transfer data across borders.

"We understand regulator have concerns and are happy to work with your government as specific policies are being considered to ensure details of the policy do not unnecessarily have a negative impact on the industry," it said.

He has also pointed out the number of permits and timeframe required to open new stores for the retail industry and expressed to work with the government to find an effective way to streamline licensing and permitting procedure.

"High number of overlapping permits are challenge in the retail sector as well. On average, we currently need more than 45 permits and three years to open a new best price store. This is significantly longer than it takes in the US and many markets in which we operate," it said.

Within a few years, Walmart will be sourcing at least 25 per cent of our fruits and vegetables directly from farmers, benefitting farmers from UP, Andhra Pradesh and Telangana as it would provide greater price transparency and direct value for their product, he informed.

Walmart is also looking to increase sourcing from the Indian companies for its global supply chain as well as local operations here.

"We see significant opportunities to grow sourcing from Indian companies to sell in India and for export to our global supply chain," the letter said adding that Walmart sources 95 per cent locally, which it sells through its network of Best Price Stores in India.

Last year on August 18, Walmart had completed the acquisition of 77 per cent stake in Flipkart for about USD 16 billion (Rs 1.05 lakh crore), a deal which gave the US retailer access to the Indian e-commerce market.

India's tech renaissance: PhonePe, Paytm could be the next TCS, Infosys

India’s largest startup is ready to birth its own unicorn. That’d be unusual anywhere, but that it’s happening in India offers some hope for the country’s long-awaited tech renaissance.

This is also great news for Walmart. The US retail behemoth paid $16 billion for 77 per cent of Indian e-commerce company Flipkart Group in May last year. That deal included payments unit PhonePe — an early pioneer in the digital-wallet business — which Flipkart had acquired two years earlier.

Now Walmart is engineering a spinoff as part of a $1 billion funding round that could value payment unit at up to $10 billion and give the retailer an 82 per cent stake in PhonePe and Flipkart, Economic Times reported. From one $20.8 billion company 18 months ago, India will get two unicorns at a combined value of up to $30 billion. (1)

There are already indications that PhonePe has shed its Flipkart training wheels. From 50 per cent of its transactions three years ago, Flipkart now accounts for just 0.5 per cent, The Ken reported, citing PhonePe’s head of strategy and planning. During Flipkart’s annual Big Billion Days sale last month, PhonePe’s logo no longer had top billing on the e-commerce website, according to The Ken. Instead it was listed as just one of the many payment options available to online shoppers.

That PhonePe is preparing to fly solo is also a sign of India’s maturing digital sector. Not only is the company willing to directly tackle rivals such as Alphabet’s Google Pay and Facebook’s forthcoming WhatsApp payments, but it’s also managing to survive in the scary wilderness beyond the gates of Flipkart. (Survive, of course, is a relative term. It’s likely still burning cash and posting losses, though at least it can keep up with well-funded adversaries, a key measure of success at this point in the game.)

More broadly, the PhonePe spinoff would strengthen the case that a homegrown hero can hold its own when foreign rivals enter. Paytm, another Indian startup, is on the verge of landing a $2 billion round of funding from investors including Ant Financial, SoftBank Group and Discovery Capital Management which could give it a $16 billion valuation, Bloomberg News reported this week.

Hopefully the momentum at both PhonePe and Paytm will spur more Indian entrepreneurship, feeding a rebirth in India’s tech sector not seen since the IT-outsourcing boom two decades ago. While that gave us Tata Consultancy Services, Infosys, Wipro and dozens more, most of those businesses focused on serving foreign needs.

Now, a crop of stars is emerging to meet the needs of India’s 1.3 billion people. It’s not a big step from this spinoff to an actual IPO, a development that will put India back on the global technology map.

Walmart boosts local MSME sourcing ahead of Diwali, shuns plastic packaging

US-based retail biggie Walmart has bolstered the local micro, small and medium enterprises (MSME) procurement ahead of Diwali, a senior company official said here today.

The local MSME sourcing is to cater both Diwali gifting options and staple consumer and food items.

“We are getting good ‘Diwali’ response as we expand our basket of locally-sourced goods in Uttar Pradesh and other states, especially for Diwali gifting,” Walmart India vice president (Operations North) Vijeet Singh Shekhawat said in Lucknow this afternoon.

He said the company was sourcing a range of food items made in UP, including pickles, wheat flour, jams and sweet items, apart from traditional handicraft goods such as brassware from Moradabad and aluminium items from Hathras. Indigenous goods were also being sourced from Jaipur, Panipat, Sholapur and Ahmedabad, among other places.

“During this Diwali season, the MSME procurement is in focus as we also look at strongly pitching our private labels across different products,” Shekhawat said, adding currently 98 per cent of sourcing by Walmart was being done locally.

Meanwhile, Shekhawat said Walmart had completely phased out single-use plastic packaging from its private brands following the Centre's green initiatives.

“We are also working actively with our suppliers to ensure total compliance with the norms relating to the use of plastic material in packaging of products,” he said.

Walmart India is the wholly-owned subsidiary of Walmart, the world’s leading retailer. In India, it operates 27 Best Price Modern Wholesale stores across 9 states with an integrated omni-channel format. It has also opened 2 Fulfillment Centres at Mumbai and Lucknow, which exclusively caters to small kirana stores, retailers and institutional customers at their doorsteps.

Last year, Walmart India president and CEO Krish Iyer had said the company envisaged total store count of almost 45 in about 3 years.

In UP, Walmart operates four stores in Lucknow, Meerut and Agra even as it is actively exploring opening new stores in other major towns such as Varanasi, Gorakhpur, Moradabad, Kanpur, Ghaziabad, Saharanpur and Prayagraj (Allahabad).

Walmart International Q2 operating income declines 29.6% due to Flipkart

Walmart International, the segment which consists of the retail giant’s operations outside US including retail websites, on Thursday posted 29.6 per cent decline in operational income on a reported basis and 27.3 per cent decline in constant currency, primarily due to Indian e-commerce firm Flipkart.

The Bentonville-based company (in Arkansas) is locked in a battle with US rival Amazon for dominance in India’s online retail market through Flipkart, which it acquired for $16 billion last year in May.

“Walmart International continued to make progress on managing costs and delivered 36 basis points of expense leverage in the quarter. However, operating income declined 27.3 percent in constant currency and 29.6 percent on a reported basis due primarily to the expected dilution from Flipkart as well as the overall gross margin pressure,” said Brett Biggs, executive vice-president and chief financial officer of Walmart Inc.

In May, Walmart had said its reported international operating income in the Q1 declined 41.7 per cent and went down 37.5 per cent in constant-currency terms was on account of Flipkart.

Doug McMillon, president and chief executive, Walmart Inc., said the ecosystem the company is building through Flipkart is impressive and comprises strong businesses. For example, he said Myntra, a leading online fashion destination, recently concluded their largest sale event of the year – the End of Reason sale – where more than two million customers shopped during the four-day period with 7,000 plus orders per minute at peak. To help fulfill these orders, the Flipkart team partnered with almost 11,000 local Kirana stores to support last mile delivery, said McMillon. This Kirana partner network helped deliver approximately 70 percent of the 8.5 million packages that were fulfilled during the event, he said.

Flipkart also recently launched their co-branded credit card, which has received positive initial feedback from customers. In addition, “our digital payments platform, PhonePe,” recently crossed the milestone of two billion transactions with 50 million monthly active users, said McMillon.

The company had solid top-line growth in this quarter as total constant currency revenue grew 2.9 per cent to $131.7 billion, with currency having a negative effect of approximately $1.3 billion, said Biggs of Walmart. Both Walmart US and Sam’s Club delivered strong sales growth and Walmart International’s overall sales were solid despite some softness in certain markets including the UK and Canada, he said.

Consolidated gross profit margin declined 46 basis points on both reported and constant currency basis. “While the inclusion of Flipkart in this year’s results contributed to the decline, we also continue to make strategic price investments in various markets, including the US, which pressured year-over-year comparisons,” said Biggs.

Operating income of Walmart was better than the company expected, down 2.9 per cent on a reported basis and 2.4 per cent on a constant currency basis. Strong results from physical stores drove Walmart US operating income up 4 per cent, the fifth consecutive quarter of growth, while Sam’s Club delivered strong profitability with operating income up more than 19 per cent.

“This improvement was offset by the expected dilution from Flipkart, as well as softer gross margin rates in the UK The deconsolidation of Brazil somewhat benefitted second quarter results versus last year,” said Biggs. “As expected, net interest expense increased 16.3 per cent due primarily to the company’s previous bond issuance related to the Flipkart transaction,” said Biggs.

Walmart is also betting big on China. The company launched new Walmart Daojia delivery app in China. It announced plans to invest $1.2 billion to upgrade logistics network in China.The company also unveiled blockchain traceability platform for Walmart China.

When Walmart got a $10 billion Phone Pe surprise after buying Flipkart

When Walmart Inc paid $16 billion for control of India’s e-commerce pioneer Flipkart Online Services Pvt last year, the American retail giant got a little-noticed digital payments subsidiary as part of the deal. Now the business is emerging as one of the country’s top startups, a surprise benefit for Walmart from its largest-ever acquisition.

Flipkart’s board recently authorized the PhonePe Pvt Ltd. unit to become a new entity and explore raising $1 billion from outside investors at a valuation of as much as $10 billion, according to people familiar with the matter, asking not to be named because the discussions are private. The funding may close in the next couple of months, although the talks are not finalised and terms could still change, they said. The unit would then become independent with a distinct investor base, although Walmart-owned Flipkart would remain a shareholder. Walmart and Flipkart didn’t respond to emails seeking comment.

PhonePe -- which means “on the phone” in Hindi and is pronounced “phone pay” -- has grown into one of India’s leading digital payments companies. Its volume and value of transactions have roughly quadrupled over the past year as the country’s consumers adopt the technology to transfer money digitally to businesses and each other. PhonePe is gaining ground on Paytm, which leads the field and is backed by Warren Buffett.

PhonePe is an “underappreciated asset,” Edward Yruma, an analyst from KeyBanc Capital Markets, wrote in a recent research note. He estimated the business may be worth $14 billion to $15 billion, separate from Flipkart’s e-commerce operation.

The startup was founded in December 2015 by three friends who left Flipkart to get it off the ground. Within a year, Flipkart founders Binny Bansal and Sachin Bansal decided to acquire PhonePe, realizing that solving payments friction would make it easier for consumers to buy online. Less than a year later, the Indian government made the unprecedented move to ban large banknotes to curb corruption and boost digital transactions. With this “demonetization,” Paytm, PhonePe and other fledgling services flourished.

Cheap smartphones and cut-rate wireless data plans have brought millions of Indians online in the years since, boosting the whole industry. In June, the PhonePe app reached 290 million transactions with an aggregate value of $85 billion, compared with 71 million transactions at $22 billion a year earlier, according to the company.

The service gained momentum by offering an array of services, including mutual funds, movie tickets and airline bookings. Earlier this year, it began using Bollywood star Aamir Khan in its advertising.

“Globally, hardly any privately held fintech company has reached PhonePe’s scale on both sides of the network so rapidly,” Sameer Nigam, PhonePe’s co-founder and chief executive officer, said in a statement, pointing to its 150 million plus customers and more than 5 million merchants. “That’s why the strong investor interest.”

Walmart debated for months whether to keep funding the payments business internally or whether to separate the operation so it could raise outside funds. After plowing nearly $300 million into PhonePe, the U.S. retailer opted for the latter course. Alibaba Group Holding Ltd. made a similar decision when it split off its Alipay business, helping growth by allowing it to work with a broader range of merchants.

Walmart is still grappling with whether to bring in strategic or financial investors, according to one of the people familiar. While a strategic investor would likely be better for growth, senior Walmart executives are concerned that such backers typically want more voting rights, the person said. Walmart wants to use the lessons from PhonePe in other operations around the globe.

Also unresolved are the future roles for Flipkart’s outside investors. Tiger Global Management and Tencent Holdings Ltd. each hold board seats and equity stakes of about 5%, while Walmart holds about 80%. The board will have to navigate the companies’ varied interests before any deal can be finalized.

The new funding is aimed at helping PhonePe’s growth. The company plans to delve deep into the country’s heartland, where rivals have yet to expand, with the goal of reaching profitability, one person said.

The market has vast potential. Digital payments in India are projected to reach $1 trillion by 2023 from about $200 billion now, said Credit Suisse Group AG. Beyond PhonePe and Paytm, Google Pay, Amazon Pay and the soon-to-launch WhatsApp payments service will compete for customers. They’re taking advantage of India’s Unified Payment Interface, a technology backbone that includes 140 of the country’s banks and digital payments companies.

“The market is getting bigger and fintech startups are becoming innovative,” said Kunal Pande, partner, advisory services at KPMG. “The accelerated growth in many fintech areas is attracting investor interest.”

Walmart faces major India test over unit Flipkart's legal spat with GOQii

An Indian startup's legal challenge against a Walmart unit claiming losses caused by sharp discounting of its products is winning support from other online sellers, in what is shaping as a key test of how the giant retailer operates in the country.

The legal tussle between GOQii, a seller of smartwatch-type health devices, and Walmart's Flipkart unit, comes just months after India imposed stricter rules for foreign investment in e-commerce that were aimed at deterring such sharp discounts.

GOQii sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70% to the retail price, much more than the two sides had agreed to, legal documents related to the case showed.

The case will next be heard on Friday. Flipkart has denied any wrongdoing, saying it was not responsible for any discounts which are only determined by third-party companies which sell on the e-commerce website.

The legal spat has brought to the fore concerns long raised by small traders and a right-wing group close to Prime Minister Narendra Modi's ruling party. They say companies such as Flipkart and Amazon.com deeply discount some products by burning billions of dollars to lure customers onto their sites in the expectation that they will also buy other goods.

"It will set a precedent if the final decision goes against Flipkart for predatory pricing," said Salman Waris, a partner at TechLegis Advocates & Solicitors.

"Small traders' associations and other startups may take other marketplaces adopting deep discounting strategy to court."

The GOQii case could snowball. The All India Online Vendors Association told Reuters in a statement it plans to file a plea to join GOQii's case against Flipkart on behalf of 3,500 online sellers it represents.

Flipkart said in a statement it takes legal compliance seriously and was compliant with Indian law. "We are engaged with the supplier to come to a swift resolution," it said.

With a 19 percent market share, GOQii was the second-biggest player in India's so-called wearables market last year, data from industry tracker IDC in December showed. The market is dominated by China's Xiaomi, with Samsung a small player.

GOQII VS FLIPKART

GOQii's dispute with Flipkart centres around two of its wearables devices that allow users to track exercise measurements, such as the number of steps walked, or heart rates.

GOQii's Chief Executive Vishal Gondal told Reuters the firm signed an agreement in September with a Flipkart unit, allowing it to sell the two GOQii devices at a price not below 1,999 rupees and 1,499 rupees, after discounts.

But GOQii last month found Flipkart's website showed the devices on sale for 999 rupees and 699 rupees. The company wrote to Flipkart, saying it was giving "unauthorized" discounts and resorting to "predatory pricing", violating the agreement, its legal notice showed.

Flipkart was just a business-to-business wholesale venture which sells good to re-sellers, its law firm, Shardul Amarchand Mangaldas, said in its response that was seen by Reuters.

That's central to how Flipkart operates - as India prohibits foreign e-commerce firms from stocking and selling their own inventory on its websites, their wholesale units purchase goods in bulk and sell them to re-sellers. Those re-sellers use Flipkart's own website to sell some of those goods to customers.

Flipkart does not control or influence prices which were determined by such re-sellers, the law firm said, adding that it reserves "the right to institute actions for defamation, both civil and criminal".

GOQii's Gondal, however, said he was in possession of WhatsApp messages and e-mails from Flipkart's employees that show the company was aware and involved in discounting products on its website. He declined to share those with Reuters, citing the ongoing court case.

Gondal said about 500,000 device orders were cancelled after GOQii's other customers accused the startup of cheating them when they saw cheaper prices on Flipkart. The company was also assessing monetary damages it plans to seek from court.

"It's a matter of survival. It's not easy to take on a multi-billion-dollar company," Gondal said.

In interim relief, the court has ordered the sellers, who are also party to the case, to remove the wearable devices from the Flipkart platform.

WALMART'S STRUGGLES

India's new foreign investment rules introduced in February were troubling for Flipkart and Amazon as they barred companies from selling products via firms in which they have an equity interest and stopped them from pushing their sellers to sell exclusively on their websites.

The policy was aimed at deterring deep discounts and helping small traders, but it shocked Walmart as it had just months ago closed its biggest deal by investing $16 billion in Flipkart.

Swadeshi Jagran Manch (SJM), the economic wing of the Rashtriya Swayamsevak Sangh, the ideological parent of Modi's ruling party, said on Tuesday the government must investigate online discounts.

"We are standing behind any small trader, businesses who suffer online," said Ashwani Mahajan, SJM's co-convenor, adding it would discuss GOQii's legal case against Flipkart with government officials.

Walmart Q1 operating income declines 41.7% primarily due to Flipkart

Walmart, the world’s largest retailer, said its reported international operating income in the quarter declined 41.7 per cent and went down 37.5 per cent in constant-currency terms, primarily on account of Flipkart.

The Bentonville-based company (in Arkansas) is locked in a battle with US rival Amazon for dominance in India’s online retail market through online retailer Flipkart, which it acquired for $16 billion last year in May.

“A large part of the decline was due to dilution from Flipkart, which was expected, partially offset by the deconsolidation of Brazil. The timing of Easter also negatively affected operating income versus last year. The full year earnings dilution related to Flipkart is still in line with expectations,” said Brett Biggs, executive vice-president and chief financial officer, Walmart Inc, about the first quarter of FY20 earnings.

Doug McMillon, president and chief executive officer, Walmart Inc, said he continued to be excited about the opportunity he saw in Flipkart and its digital payments company, PhonePe.

“I got to visit our teams in India and China a few weeks ago. I’m impressed with the team and their ability to innovate for customers with speed,” said McMillon.

He was on a crucial visit to India in April to assess the progress made by Flipkart and discuss the strategy to take on its rival Amazon, according to sources.

During the quarter, the company returned $3.7 billion to shareholders through dividends and share repurchases. Its level of share repurchases increased significantly year-on-year in Q1.

Walmart’s operating income in the US grew 5.5 per cent because the gross margin rate was better than expected due to several factors including a better merchandise mix in both stores and e-commerce, and less pressure from transportation costs, partially offset by continued price investments.

This improvement was offset by some pressure from international results, including dilution from Flipkart, said the company.

The deconsolidation of Brazil benefited the first-quarter results. Net interest expense increased 28 per cent due primarily to the company’s bond issuance related to the Flipkart transaction.

Financial services firm Morgan Stanley estimates the Indian online retail market to touch $200 billion by 2028, from about $30 billion last year.

Walmart's US store managers make $175,000 a year on average

Walmart outlined average wages for its store workers and efforts to improve benefits in a social responsibility report, part of the retailer’s long-running efforts to rebut criticism of its pay and bolster its competitive position in a tight labour market.

Walmart’s US store managers earn an average of $175,000 a year while full-time hourly workers make an average of at least $25,000, or $14.26 an hour, the company disclosed Wednesday.

Pressure on Walmart has intensified as competitors including Amazon.com and Costco Wholesale have raised their minimum wage to at least $15 an hour.

Last year, Walmart expanded parental leave benefits for all company employees. Its executives often publicly cite added worker training that is intended to help low-level employees more easily advance to higher-paying management jobs.

Store managers, the highest position inside a Walmart store, have a wide range of duties. In the largest supercenters they can manage over 300 workers and oversee more than $100 million in annual sales.

The vast majority of Walmart’s 1.5 million U.S. workers are hourly employees. And over half of hourly store workers are considered full-time employees, the company said in the report.

Along with benefit increases, Walmart has raised wages in recent years. In 2015, Walmart set a minimum wage for hourly workers at $9. Wages have climbed more than 50 per cent over the past three years and the minimum starting wage is now $11, Walmart said.

Walmart’s average hourly wage for full-time store workers in April 2018 was $14.08, a spokesman said, about 18 cents lower than it is today.

Walmart executives have told investors they are working to keep wages competitive in a tight labor market by raising wages in certain regions, individual stores and for particular jobs, as needed.

Some 55% of Walmart’s workers, both at stores and in corporate jobs, are female, while 44% are people of colour, the report said.

Walmart hints at one-day free shipping to take on Amazon's $800-mn gameplan

Is Walmart Inc. taking on Amazon with one-day free shipping?

The retail giant appeared to be taking a jab at its rival with a tweet on Friday, teasing one-day free shipping without a membership fee.

Amazon.com Inc. said it would spend $800 million in the current quarter to reduce delivery times for top customers to one day from two -- sending Walmart shares slumping 1.9 percent to $101.53 at the close, the most in two months. Amazon jumped 2.5 percent to the highest in almost seven months as several analysts raised their price targets after the announcement.

Walmart could easily match Amazon’s one-day delivery gambit, according to an analyst who previously worked at the world’s largest retailer.

Not Shocking “One day shipping is neither shocking nor difficult for retailers at scale,” Brandon Fletcher, an analyst at Sanford Bernstein, said in a note Friday.

Fletcher, who previously worked in Walmart’s strategy and operations departments, said the retailer’s existing network of 156 distribution centers, combined with the fact that much of the U.S. population is concentrated in urban areas, means that it wouldn’t require much investment to build out a one-day service. He cited previous research conducted by consultants A.T. Kearney -- where Fletcher also briefly worked a decade ago -- that showed Walmart could get to one-day shipping with only eight additional distribution facilities.

Walmart has offered free two-day shipping on orders of $35 or more since early 2017, helping it keep pace with Amazon, which accounts for about half of all e-commerce spending in the U.S. The $35 threshold has been adopted by other retailers, as well, in order to offset the delivery costs. Some retailers, like Target Corp., temporarily ditched the requirement during the holiday period in a bid to lure shoppers.

Retail transactions with free shipping increased about 13 percent in North America last year, and rose 8 percent through April 15 of this year, according to DynamicAction, an analytics firm.

Amazon Prime, the subscription program that helped make the company the world’s largest online retailer, charges customers monthly and annual fees -- typically $119 in the U.S. In return, Prime customers get shipping discounts and access to music and video programming. It offers free two-day delivery on many items.