She said Walmart is still supportive of Flipkart doing an initial public offering (IPO) “when the time is right for it”, as it stated in the original press release after acquiring a 77% stake in the Indian company in 2018. The company currently holds 72% stake in Flipkart.
“And when the time is right will depend on a number of factors, not least the market, but also the business performance,” McKenna said. “They’ve hit our deadlines… We wouldn’t have invested if we didn’t believe they could become profitable in the longer term, and we continue on track for that.”
Speaking at Baird 2022 Global Consumer, Technology & Services Conference in New York on Tuesday, McKenna said there has been “clear proof of value”. Walmart had invested in Flipkart at a valuation $20 billion. Last year, the Indian company raised $3.6 billion from Walmart and SoftBank at a valuation of close to $38 billion, she pointed out.
“And we’ve been really clear and that we’ve been happy at every step of the way over the four years that we’ve made the investment. So, they’ve achieved our expectations, and they’ve delivered what they need to deliver,” she said.
McKenna said India is Walmart’s biggest market in terms of advertisement revenue. “The new profit pools are really interesting. They’re our biggest market by a long way for advertising revenue,” she said.
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ETtechFlipkart is also looking at using its advertisement technology in other markets.
“They’re (Flipkart) also thinking about ways they can offer software-as-a-service,” McKenna said. “In fact, one of the markets that we are using them for is Chile. So, they’re building out our ad tech platform for Chile, which is a really interesting development for them. And they’re building out the ecosystem.”
In 2021, Walmart clocked $2.1 billion from its advertising business worldwide, whereas Amazon generated $31 billion in ad revenue from all its businesses.
Revenue from advertisement has emerged as an important revenue stream for ecommerce companies to make a profit from operations, by giving sellers tools and software to advertise on marketplaces to get better discoverability.
For example, a dental care brand could bid for keywords like ‘toothpaste’ to make sure that their products come on top of the search list and thereby increase sales. These tools have also emerged as lucrative ways for sellers to drive sales on ecommerce marketplaces.
For Flipkart, which is gearing up for an IPO, achieving profitability is important.
“The advertising stream is particularly important in Flipkart because of their sellers,” McKenna said. “And one of the things that they’re running is seller academies to help sellers get better at doing advertising on the platform in a self-service and easier way.” Flipkart is building this “mutually enforcing ecosystem” to facilitate that, she added.
Apart from its core ecommerce businesses that also include fashion retailer Myntra and social commerce marketplace Shopsy, Flipkart is increasingly diversifying into businesses like travel and healthcare through acquisitions of Cleartrip and SastaSundar. Flipkart also owns fintech platform PhonePe.
The company has recently invested more than $800 million into its marketplace business, healthcare, and Myntra, as ET reported in March and April.
For Walmart, India is among the four key markets outside the US, the others being Canada, Mexico and China. The American retailer is present in over 23 countries outside the US and together they contribute over $100 billion in revenue for Walmart, which is about 18% of the company’s total revenue.
