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Walmart's Tax Windfall Will Create More Minimum Wage Jobs...In India

This article is more than 5 years old.

Walmart’s big tax windfall is supposed to help create more jobs here in America. Instead, it will end up financing investments that will create more jobs overseas, in India.

That's where the company is spending $16bn to acquire a 77% stake in Flipkart, India's biggest online retailer.

Walmart’s Indian investment comes at a time when the company is closing stores in America, laying off thousands of workers. And that's upsetting some labor advocates. Making Change at Walmart (MCAW) director, Randy Parraz is one of them. “Instead of Walmart investing all of its $2 billion U.S. federal tax savings on its workers and stores in the U.S., it continues to spend more money acquiring businesses overseas.”

Still, Walmart’s acquisition of Flipkart makes a great deal of sense. It gives Walmart a foothold in India’s e-commerce market, which has the potential to be bigger than that of China’s, according to Porter Erisman, author of Six Billion Shoppers (New York: St. Martin’s Press, 2017).

“At first glance, India looks like it could be ‘the next China’ for e-commerce,” says Erisman. “But although e-commerce growth in India will be dramatic, taking root in India will take longer than in China because of the many additional frictions in the Indian market.”

In the long run, these frictions represent the greatest opportunities for entrepreneurs in India,” he adds. “Once they are resolved, it’s easy to imagine that e-commerce will play an even more important role in India than in China.”

Like helping to unleash the buying power of those at the bottom of the pyramid, a term coined by C.K. Prahalad more than a decade ago.

There’s trillions in disposable income waiting in the hands of the masses of poor consumers at the bottom of India’s income pyramid.

And that hides a great potential – the kind of potential which some managers and marketers routinely overlook or write off altogether, as these markets are either too small in terms of revenue potential or too costly in terms of the operating expenses required to tap into them.

But not for Indian online retailer like Flipkart, already mining the “fortune” at the bottom of the pyramid.

Then there are smaller Indian online marketplaces like Snapdeal and Paytm in partnership with Alibaba mining that fortune, too. “Two leading marketplaces, Snapdeal and Paytm, have Alibaba as a partner, which will accelerate the flood of Chinese products,” notes Erisman.“This will lead to tensions and perhaps even restrictions on Chinese goods coming into the country at the same time that “Make in India” is getting a huge push.”

And there’s Walmart’s biggest US competitor Amazon that already has a large presence in the Indian e-commerce market.

Company 12-months 2-years
Walmart (WMT) 8.30% 18.15%
Amazon (AMZN) 68.76 128.84

Source: Finance.yahoo.com 5/9/2018

Company    Total Revenue (ttm)   Operating Margin   Quarterly Earnings Growth
Walmart $500.34B   4.45%   -42.10%
Amazon $177.87B     2.31 147.90

Source: Finance.yahoo.com 5/9/18

Walmart’s offer to acquire a controlling stake in Flipkart is a smart strategic move for its stockholders, but not for American taxpayers who will help pay the bill.