With Flipkart and India, Walmart Needs 1 Thing From Investors: Patience

Walmart (NYSE:WMT)recently acquired a majority stake in Indian e-commerce company Flipkart. However, the buyout comes with a lot of strings for Walmart investors, including a hit to earnings and years of potential losses.

On this episode of Industry Focus, Vincent Shen and senior Motley Fool contributor Asit Sharma dive into the deal and what it means for each stakeholder. From India’s growing middle class to the fierce rivalry with Amazon(NASDAQ:AMZN)and Alibaba (NYSE:BABA), find out why India is such a massive, exciting growth opportunity for these global retail giants.

A full transcript follows the video.

This video was recorded on May 15, 2018.

Vincent Shen: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. It’sTuesday, May 15th, and I’m your host, Vincent Shen.

Wehave an awesome discussion in store for you today, Fools,because we’re in the middle of our latest theme week, international theme week. If you tune into this show regularly, you’re aware that Industry Focus is a U.S.-basedpodcast. We talk mostly about the U.S. stock market. As a result, we spend most of our timefocused on domestic companies. But there’s a whole world ofstocks out there, and no portfolio is truly diversified without international exposure, sothis week, we’re changing things up by turning our attention tocompanies and stories from around the world.

The timing of this theme week, for me, at least, for the consumer and retail sector, couldn’t be any better, giventhe huge news in consumer and retailthat we’ve been processing the last few days. And that’s the deal announced between Walmart and Flipkart. The $16 billion transaction is going to havesignificant implications for Walmart investors, for consumers in India, andother major e-commerce companiesthat are looking to gain a foothold in the Indian market likeAmazon andAlibaba. To cover all that and more, I’ve enlisted the help of senior Motley Fool contributor, Asit Sharma. Hey, Asit! Welcome back!

Asit Sharma:Vince, namaste!

Shen:Great to have you with us! We have a lot to cover. We’re going to jump right into the discussion. First, alittle bit of context and some highlights from the official deal announcement,because we first covered the possibility that Walmart wouldinvest in Flipkart back in March. At the time, it was reportedto be just a $7 billion deal for a big stake of the company. Since those initial rumblings, and as investors have been waiting for an official deal to be announced, we kept hearing thatit was imminent pretty much week after week. There were also reports that Amazon wouldpotentially make a rival bid to prevent Walmartfrom succeeding.

But Walmart has finally deliveredthat final announcement. They did it on May 9th. The value of itsinvestment in Flipkart has come out to$16 billion. Thisis the biggest deal ever for Walmart. Iteasily eclipses its$3 billion acquisition of jet.com from 2016. That $16 billionincludes about $2 billion of new equity funding to support Flipkart growth. That’s anecessity, given the competitive environment, which we’lldig into more later in the show.

With this deal, Walmart will get a 77% stake in Flipkart. Thatimplies a total valuation forFlipkart of about $21 billion –quite a jump from as recently as November 2016,when the company was valued at less than $6 billion. Then, the remainder of the ownership will be held by current investors. Thatincludes some pretty big names likeTencent,Tiger Global, andMicrosoft, andalso the co-founder, Binny Bansal.

Before we goany further, I think the next thing we need to do is really lay out for listenerswhat Walmart is getting for this $16 billion check that it’s writing. Asit,can you tell us a little bit more about Flipkart, the market in India, and what makes it such an attractive buyout target for anybig retailer that’s eyeing this region?

Sharma:Sure. Asour listeners are probably familiar with,India is a huge market. There are 1.3 billion people in the market. Butit’s highly fragmented. India is a country which still has quite a rural population, andlarge swathes of the monetizable market there is based in big cities. Flipkart has sprung up in a short amount of time. Thecompany was founded in 2007 bytwo guys who were friends, Sachin Bansal andBinny Bansal — no relation,same last name. These two guysessentially had worked for Amazon andstarted out selling books online. Doesthat story sound familiar?

Thecompany grew through acquisition and multiple rounds of funding. Today, it services most major cities in India. Oneof the prime pieces that Walmart obtains by buying Flipkart is this logistics or supply chain arm. This is called Ekart. Now, as Walmart announced in its press release, Ekart is in more than 800 cities, and it makes 500,000 deliveries daily. That’s a massive amount for a country which, again, has quite a rural population. There’s a lot of supply chain depth and expertise there.

In addition,Flipkart has been a serial acquirer of smaller businesses. It’s boughtfashion houses like the site called Myntra. There’s another site called Jabong, which is an online fashion destination and a company called PhonePe.PhonePe isextremely interesting. It sounds like I’m saying “phone pay” — translatedfrom Hindi, roughly, this means “on the phone” or “you can do it on the phone” or “where the phone is”. This is a burgeoning phone-based payments app. We will probably get deeper into the relation of payments to this whole e-commerce bit in Indiawhen we talk a little later in the show aboutcompetitors like Amazon and Alibaba, but PhonePe isanother integral piece of this system that Walmart is buying.

Amazon, of course — which,again, we will get to in a moment — has a foot in the door. Alibaba is going in stages. It’sentering the market very methodically. Walmart getsinstant entry into a business which did about $3 billion worth of U.S. revenue last year.

And lastly, I want to addbefore I send it back to you, Vince, Flipkart has pioneered a holiday that it created by itself. These are Billion Dollar Days. You have Singles Day in China. In the U.S., you have Black Friday and Cyber Monday. Billion Dollar Days issequence of five days in India which takes placeduring the festival season in the fall. This is late September. Flipkart tellseveryone in India that prices are going up, but during these five days,you’re going to see them lowered. It’s become a huge week of selling for the company.Walmart instantly acquires that big surge of sales within fivebusiness days. Again, we’ll talk more about that.

But what I see is, it’s getting an integrated piece of e-commerce, which, with its own very ample resources, it can extend and try to dominate before Amazon grabs the market share that Flipkart’s created.

Shen:Sure. I think what you mentioned, in terms of this integratedorganization, is really important. The Flipkartumbrella, like you said, itincludes that namesake platform and then that fashion focus, Myntra and Jabong, thatPhonePe payments business, the Ekartsupply chain segment. The almost four-for-one nature of this deal is very, very important, because it offers that fulle-commerce package with the marketplace, with apparel retail, with the payments business and the beginnings of a pretty extensive fulfillment and logistics network that Walmart will be able to build off of.

I found some figures for the broad retail industry in India. Electronics and apparel account for about 47% and 31% ofonline shopping respectively. As it turns out, large appliances, fashion and mobile phones and electronics make up the most important categories for Flipkart, as well. That aligns quite well for them.

Then, getting into some of the additional specific numbers for the company and then for the opportunity, for the fiscal year ending March 31st, Flipkart had annual gross merchandise value pinned at about $7.5 billion. Then, the revenue was around $4.6 billion. Itmight be a little different than what you mentioned, Asit. A few of the different sources, depending on what time of year, the numbers differ slightly. But what’s important to keep in mind is both those figures in terms of gross merchandise value and revenue, they were both up50% year over year from what I could find in the press release. Then, active customers for the company as well, they’ve grown about 7x since 2014 to over 50 million last year. Important to note that.

Ifwe move on a little bit to the broader opportunity herein India, I think those figures that we’ve discussed are representative of the very strong growththat’s expected in India overallthe next several decades. We zoom out and take a broader look at this market, the scaleand opportunity here is really incredible. Youmentioned 1.3 billion people in the country. They have really strong GDP growth that’sexpected to make India the world’s second-largesteconomy by 2040. The middle class is growing very quickly. You have to keep in mind that e-commerce penetration is stillvery, very low here. It’s forecasted to grow at 4x the overall rate of retail in the near-term.

Morgan Stanley, I found, they have their own projections thatonline shopping in India will grow from $30 billion to $200 billionin the next decade. On top of that, the14% of internet users currently making online purchases willexpand to over 50%, so quite a jump there. I think that contexthelps to explain why Walmart is willing to spend so much on this deal, not to mention the competitors who arealso pouring billions into the market.

But even as bullish as all that sounds and appears,Walmart’s stockactually declined about 3% the day of the announcement.I think the skeptics are worried by several things,including the price tag for this majority Flipkart stake.I’m curious, Asit,are you sympathetic to the bears at all and their concerns that maybe Walmart is diving intoo quickly at too high a price? Given in the past, especially in international markets, they’vesometimes taken, in early stages, like in India, more of a partnership approach versus a majorityacquisition approach like they’re doing here.

Sharma:I’m sympathetic to the bears,but I understand where the bulls are coming from, too. Youdon’t see the bulls rushing in now. They’ve already owned this stock, let’s put it that way.I don’t think Walmart attracted new bulls with this deal.

To go back to the numbers that I cited earlier and also to explain, if any listeners are seeingboth of these sets of figures out there. This is relevant to answering Vince’s question. The $3 billion worth of U.S commerce that I was citing before wasas of the last fiscal year, which was reported at March 31, 2017.Indian companies take a little bit longer to report.We do have rough figures out, whichVince mentioned, for this current fiscal year. Those were cited by Walmart. If you look at the most recently reported numbers, which werejust put out into the market, that’s $4.6 billion, indeed.

But going back to last year’snumbers, because we have a more complete set, Flipkart lost $1.3 billion on the $3 billionin revenue it was able to claim. This is indicative of the e-commerce market. AsWestern investors, we’re used to seeing these kinds of numbers, because Amazon has trained us to expect market share growth and early losses. ButWalmart investors are very interested in Walmart’smodel, which is a model of growthwith small profit,incremental profit each year.

I know thatwhen Walmart announced this deal, they also had to tell shareholders, “Look, we arelooking at a headwind of about $0.60 in earnings per share from this deal, because we’re going to have to fund some losses.” Of course, they’reafter the potential competitors like Alibaba andthe more formidable competitors like Amazon. Vincementioned that provision to invest another $3 billionbefore the anniversary date of this deal rolls around. Also, he mentioned $2 billion in cash, so there’snew equity coming into this deal. Aside from buying out the first $14 billion fromprevious investors, Walmart is pumping that $2 billion of additional money in, of course,to have even wider sales and try to compete.

But looking at the total picture and the opportunity here forFlipkart, I do want to say that it hassome things figured outin a way that Amazon is still learning. Ifyou’ve ever had the opportunity to travel to India and live there for a while, maybe in one of the big cities,you’ve probably seen that it’s already a delivery-oriented culture. Everyone wholives in a city of any size is used to asteady stream of vendors coming throughout the day. Someone isbringing the milk, someone is bringing the fruit. Yourlocal grocer may be 50 to 200 meters away, and he or she is going to call you in the morning, “Hey,do you need some more chicken?I can send it up.” Labor isstill very cheap in India, so on an economic basis,it’s easy for small stores to send people up to your flat, your apartment. This is a model that’sexisted for a long time. Flipkart reallytook to this model, and its owndelivery is based on a cheap, very low-costdelivery system.

It’s set aninteresting bar for Amazon. To go into a little bit of detail with delivery, in Flipkart’s model,if you buy an item that’s over 500 rupees, you get it free — the delivery fee is free, you have to pay for the item. [laughs]So what is 500 rupees? At current exchange rates, that’s about $7.50. When Amazon came into India just a few years ago anddecided it really wanted to compete with Flipkart, it knew that it had to offer its Primeservice at a figure which would make them competitive with that number. So you get a Prime subscription in India for 1,000 rupees– $15. Thisreflects both Amazon’sdesire to compete with Flipkart but the basic economicsof delivery. The human labor component of it is very cheap still.

Where Amazon might have an edge is in the fact that it builds fulfillment centers. You see a new one spring up every week here in the U.S., it seems, and the same is in India. I just want to point out thatin the few years that Amazon has been in theIndian market, it has built 41 fulfillment centers, and it has about 26 sorting centers in addition.

I’mprobably offering up a good transition into talking about the competitive aspects of the deal for Walmart. But to recapitulate my answer to your question, Vince, I think longer-term,this is worth the investment of billions that it’s going to take. Butthis isn’t even a case of years, this is a case of investingover the next couple decades.

Shen:We’regoing to move on to the competition, because there’s some really interestingdevelopments there.I’ll just add that something to keep in mindif you’re aWalmart investor or if you’re considering picking up shares, youlike this opportunity and you like the other opportunities that it has in its bigger markets, like in the U.S. Walmart does have some experience in India as well. Itfirst entered the market about tenyears ago in partnership with Bharti Enterprisesand has an existing 21 Best Price stores,totaling about 1 million square feet of brick-and-mortar retail presence in the country.

This deal — the company is funding it with a mix of cash and debt. Whenthe deal closes, Flipkart will be reported as part of Walmart’s international segment. Thatsegment generated almost $120 billion of revenue last year,about a quarter of the company’s total top line. Justkeep in mind that scale here, again. For a company like this, massive, it takes a lot to move the needle.

Onthe investor call, analystsdedicated a decent amount of time to questions regarding the deal’simpact on Walmart’s financials. Asit, you mentioned that$0.60 per share headwind for earnings.I’ll just expand on that. Thepurchase will have a negative impact on fiscal 2019 earningsspecifically, about $0.25 to $0.30 per share. And then, the following year, due to those ongoing investments in India, theearnings hit will be another $0.60 per share.

You have to keep in mind that for the trailing 12-month period, earnings were $3.28 per share, so that’s no small impact on the bottom line. Not only that,another question that cropped up on theinvestor call that I think is important is,you have to consider whether a $16 billion spend in India — that’s a 5x sales valuation for Flipkart, by the way so quite generous — will mean thatWalmart will be forced to short change its investments in its home market and other markets. Clearly, the company is thinking about its global footprint right now and its operations.

This isactually the second of two big deals fromWalmart in the past month or so, because they also had that announcement regarding Asda andSainsbury in the U.K. market. Really quick,we didn’t cover that on Industry Focus. Recently,Walmart announced that it’s going to allow its third-placesupermarket chain, Asda,to be acquired by the No. 2 chain, Sainsbury, forabout $10 billion in a cash and stock deal. Walmart will still hold on to a 42% stake in the combined company, and that company, if it passesregulatory muster, will take the crown as the U.K.’slargest grocer with $70 billion of sales and 2,000 stores.Butmanagement is clearly thinking about their internationaloperations andhow they want to right-size things and optimize things.

Going back to Flipkart, though, Walmart’s management noted that spending and losses in India will shrink over time. But declining losses,that’s not the same as turning a profit. As we’ve seen withthe long history with Amazon, that does take time. Management wasultimately unwilling to look out beyond fiscal 2020 to pinpoint when Flipkart, for example, might transition its bottom line to the black.

Thelast thing I’ll note: if you’re a Walmart shareholder, the company also has a pretty spottytrack record outside North America. The U.S. andMexico operations, strong, butthe company has either shuttered, sold out of, or downsizedoperations in places like Germany, South Korea,Japan, and Brazil. It also sold itsYihaodian e-commerce arm in China to JD.com for a stake in JD.com. That’s a lot of context andconsiderations to keep in mind. I think, in this case,Walmart has considered some of those challenges, and they’ve said to themselves, “We’re going to write a big check, $16 billion, to take this majority stake and immediately have a place as the No. 1 e-commerce player in this very fast-growing, important market.”

Thenext thing I’d like to touch on is just whatWalmart brings to the table for Flipkart, too. You have to keep in mind thatWalmartgenerates significant revenuefrom groceries, and Flipkart does not. Thatpresents a big opportunity forWalmart to lend its expertise in that food and groceriescategory. Retail in India is over $650 billion, and grocery and foods account for the majority of that. They represent something very important in that they areconsistent, repeatable purchases. Then,not only that, but Walmart will also have plenty of expertisein terms of any brick-and-mortar operations that pop up, thee-commerce supply chains, and it can connect Flipkart,obviously, with a huge network of product vendors and suppliers.

So all in all, I think from what I’ve seen, Flipkart will remain a more independent part of the international segment,similar to how Marc Lorehas been given the reins for e-commercewithin the United States. Then, with Flipkart, their branding is really interesting, because they marketthemselves as this homegrown Indian success story, and they’refocused on really great customer experiences.

But that brings us now, finally, to a look at thecompetitive landscape. Let’s talk a little bit about howcompetition in India is shaping up. Howdo things look on that end, Asit?

Sharma:Thefirst thing that we want to look at is, I think,delivery logistics, which I mentioned earlier. Ultimately, this will determine who wins in India. When I order from Amazon,I might ordertoothpaste. I’ve done it occasionally.I might order some household goods. But again, inIndia, because of these small grocers –the term is kirana, it’s like your neighborhood grocer — there’s a large amount of goods on a U.S. website orWalmart or Amazon which you simply don’t see as much on a Flipkart website or Amazon.in. The battlegrounds are really in electronics, in mobile phones, and in fashion.Flipkart, as you mentioned, Vince, that’s where it’s beenreally successful, and that’s where Amazon has to compete.So confined to these goods, the delivery becomesextremely important.

Vince, you mentioned thestumbles that Walmart has had over the years with foreign investments. This isthe one thing that bothers me about this deal. In competing with Amazon,I do believe that Walmart will have to invest in more infrastructure. One of the reasons they don’t want to talk about eventual profits or losses beyond this window of a year or two isbecause, I think, they’re going to the drawing board andfiguring out what they need to build out inIndia to compete with those fulfillment centers andsorting facilities I mentioned.

Amazon isextremely good at understanding local market logistics. Oneof the things they’ve done in India is to go into that very difficult thing called the last mile. Here in the U.S., last-mile logistics may mean, from aUPScenter, getting that onto yourdoorstep, or the U.S. Postal Service getting itto your mailbox. You can imagine a city in India, which, they’reincredibly dense, very, very, difficult sometimes to find an address.

Amazon hasactually partnered up with thousands of these small storesthat I mentioned, these kirana stores. They have about 27,000 storesthey have relationships with, and they have an app which enables Amazon to take a parcel from its sorting center to these mom and pop shops, andthey can wash their hands of the delivery from there. The mom or pop willdeliver the goods to this hard-to-find address, maybe behind a bazaar — that is, a marketplace — or in a denseneighborhood. The person who delivers it then gets paid once a month using this app. So Amazon is fighting back against Flipkart’s really well-entrenched logistical capability. And Walmart isgoing to have to invest here.

Moving on,we should talk about the other big player in India, and that’s Alibaba, thecompany founded by Jack Ma. Alibaba is sort of interesting. I talked about howWalmart is coming in and getting this one piece.Alibaba is very methodical in the way it enters countries.India is actually its first real big forayoutside of China. And they have started with twointeresting acquisitions, to me. Thefirst is a company called PayTM, like ATM, it’s pronounced Pay-t-m. This is another phone-enabledpayment service, and it’s a competitor to Flipkart’s own PhonePe service. This was acquired in, I believe, 2015. I might need to correct that in a moment.

Shen:It wasn’t too long ago.

Sharma:Itwasn’t too long ago. Alibaba has only been in India, actually, for about two years. Recently, they added to their strategy by acquiring a company calledBigBasket. This was a $200 millionacquisition of an online grocer. Vince talked about the importance of grocery to Walmart. In a country with 1.3 billion people, wherefood distribution is a problem and the options for people who haveresources — that is,this burgeoning middle class — thoseoptions are expanding. It’s really important to get a footholdin the onlinegrocery marketplace, and Alibaba has made its firstinvestment in this space there.

So you see Alibaba also coming in, picking and choosing its own parts of the battlefield. Butyou can look for them to also be aformidable competitor. Right now, they don’t have the type of market share that Flipkart and Amazon do, but as a Walmart investor, you want to keep your eye on what Alibaba’s up to.

Shen:Yeah. I’ll say, just to wrap up the competitive discussion, somethings to remember, especially with Amazon, is they’re entering this Indian market,and I feel like, in the back of their minds, they’re kind of rememberingwhat happened to them in China, where they were shut out by domestic players like Alibaba and JD. So they’regoing to be very aggressive in how they invest in India.I think they’ve already had plans toinvest about $5 billion in the region, and it has only taken them a few years to catch up and take the No. 2position behind Flipkart in terms of e-commerce. Half of that $5 billion dollars that they’ve spent, I’ve found,has been in logistics — faster, more reliable delivery.Amazon has seen how important that convenience was insetting it apart in its home market,and I’m sure they believe that a robust logistics delivery network willoffer similar advantages in this market.

In terms of market share, some of the numbers varied by source, butI found market share figures for Flipkart and for Amazon at about 36% and20% respectively in 2017. In terms of the war chest for these companies, prior to this Walmart deal,Flipkart’s estimated to have raised about $7.5 billion from other investment and funding rounds. As of August last year, the company said that they had about $4 billion on their balance sheet to growoperations in India. But on a monthly basis, I found an interesting number where Amazon is burning through about $35 to $40 million every month in this market, while Flipkart is at about half that, $17 to $18 million, as they’ve had to rein in their spending a little bit.

Those are the top two players.Alibaba, I think, we’ve coveredthe big investments that they’ve made. In total, I think, they’ve spent about $2 billion in Indiathrough these various start-ups, thesevarious e-commerce companies. Some others thatI found include Zomato,that’s a food tech start-up;Xpressbees, another logistics start-up. Overall,Alibaba appears to be taking a slower approach, but they’rekeeping a very long-term mindset as they develop the important pillars to their e-commerce strategy, and that includes, for them, logistics, payments with PayTM, and then grocery.

Closing out ourdiscussion here, I’ll note a few other things about this deal andwhat to look forward to. Brett Biggs, he’sthe Walmart CFO, he mentioned during the investor callregarding the deal thatother parties might actually come in on this investment round.I thought that was interesting to note. I haven’t seen any newsregarding who those investors might be.

But I actually have seen reports about a potential change of heart fromSoftBank and their initial decision to part withtheir entire 21% stake in Flipkart. Apparently, SoftBank said on paper that they’re ready to sell out of their entire stake. That’sa big part of this deal and what drove Walmart to make the announcement. But now,they’re having second thoughts, potentially. But even if they do, andWalmart doesn’t pick up SoftBank’s specific stake, they’llstill be a majority shareholder, but their stake will be closer to 56%. That’sjust something interesting to keep in mind asthat part of the negotiations is finalized. You mentioned, Asit, earlier, that Walmart willhave the option to invest an additional $3 billion more in Flipkart at the same valuation levelwithin a year of closing thecurrent deal. That might bump up itsownership stake as well.

Then,Walmart management was very tight-lipped about this, but there were also some questions and discussionduring the investor call about aneventual Flipkart IPO, and what the timeline for that might be and how the company views that. But themanagement team wasn’t willing to share very much. But it’sdefinitely something that I’m sure the company is looking at as away to harvest on this very large investment for the company.

Wehave a couple more minutes here. Any final thoughts from you on this deal, thevarious competitors, anything before we wrap up?

Sharma:Youdescribed the situation really clearly, Vince. At this point, there are major investors who are now becoming minority investors looking to cash out. It’s interesting. I also read –again, this is not gospel yet –eBayis another early investor, and they’re thinking of getting back into India. So they had invested in Flipkart and let Flipkart grow, and now they’re thinking, “Well, maybewe cash out here and go it alone and become another entrant.” Theycertainly have the muscle.

So yes, competition and concerns about competition are ruling the current market’s reaction to Walmart. But I would urge investors to look ahead. I’m going to read you a couple more statistics fromprobably the same Morgan Stanley report that Vince was referencing earlier. Currently, India has about 800 million mobile users. This is a country which is very young, has a young demographic, and most of the transactions areteenagers and kids who are even younger. Theirlifetimes are going to be conducted over mobile phones. Morgan Stanley believes, in the next ten years,internet access is going to double and that 915 million Indians will be using the internet by 2026. Alarge majority of those will be mobile users. Flipkarthas a great mobile interface.

I will also say,the last thing why I think this is a good dealthe longer that you look out, it’s always good to invest in the local incumbent. Flipkart has ahandle on Indian culture. If you get a chance to look at their site, you’ll see it’s very cleanly laid out, very muchlike a western e-commerce site. But it also has that quirky Indian humor that I love, being ofIndian extraction, andmany would recognize. Their big meme issmall kids dressed up like old people.

They’re called Flipkart Kids. They have somehilarious videos on YouTube that Indians love to watch. I watched a few in preparationfor this episode,and I was chuckling for a long time. But these kids are the brand ambassadors for Flipkart, andthey certainly have a lot of goodwill withIndian consumers. I think that’s smart and a plus for Walmart.

Amazon,on the other hand, is slowly but surely working its way into the Indian psyche.I did have a chance to have a call this weekend with some friends who live inBombay,you know it as Mumbai. Theyorder from both services. These are up-and-coming middle class kids. They love both services. They said that they both deliver on time, they’re great deals. So whileWalmart has a little bit of edge in its entrance intoIndian culture, Amazon, as usual, shows what a tough competitor it is. It’s using print media to wedge its way into the Indian psyche.

So again, near-term, yes, it’s going to cut some of Walmart’sprofitability. Long-term, they have the resources to invest and stay in this market.I’m looking out to where Morgan Stanley is: 2026. If you’re a long-term Walmart shareholder, you should be looking out ten years as well.

Shen:Thanks, Asit.I’ll just add some big takeaways that I saw on my end. One of them is that Indian consumers are going to be benefiting, I think, quite a bitover the next decade as these three companies that we’ve talked about — Walmart, Amazon, and Alibaba, they also happen to have a combined market share of over $1.5 trillion — thesecompanies are going to be duking it out. Low pricing, attractive promotions,better service, faster delivery, more product selection — these are all going to be trotted out andconstantly improved upon by each company, so big benefit for consumers there.

Andfor the American companies, we know Amazon is willing to grit its teeth through significant international losses to expand beyond its more saturated home market. Walmart has beenconsolidating and regaining its footing for years. This is its biggest betin a long time on an internationalmarket.India makes sense to me, given the growth and low e-commercepenetration that was discussed earlier.

Then, Alibaba, closing out, itsfocus on India signals to me that e-commercein China, the growth there is still very strong,I think it’s still coming in with annual double-digit growth,but it’s slowing. And looking out long-term,India is so important,the company probably wants to avoid getting boxed out by entering too late,basically not becoming a victim to what they did to Amazon.

So it’s a really interesting deal to see here andreally timely for our international theme week. Thank you very much for joining us, Asit!

Sharma:Thanks so much, Vince! And thanks, listeners!

Shen:People on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you hear during the program. Thanks for listening, and Fool on!

Leave a Reply

Your email address will not be published. Required fields are marked *