When Walmart bought 77% of Flipkart for over $16 billion, it was not just to get an upper hand on its biggest rival Amazon in India, the world’s second largest internet market by users. As it turns out, it was also to get quick access to technology that takes years to build.

Three sources have confirmed that Walmart is looking at integration of technology – or at least taking technology from Flipkart that will help the world’s largest retailer. “Walmart wants to make India a hub to create global technology innovation… and Flipkart will play a major role in that,” said a Flipkart executive, who is not authorised to talk to the media.

Another top executive with one of the two companies told FactorDaily: “ Walmart to become a lot more thoughtful on how to do ecommerce around the world.” The person also said that Flipkart’s technology and experience in running an ecommerce business is something that Walmart, which turned to India some years ago to build technology doesn’t have.

Walmart has already built in India, for example, the technology that goes into so-called pickup towers, which allows customers to save time on delivery. “There is so much that India, especially Flipkart, can help Walmart with…,” said a third source, aware of developments at the two companies. For instance, he added, “Flipkart is very good in artificial intelligence, machine learning and analytics”.

Flipkart’s growing presence inside the Walmart universe was evident at the Indian subsidiary’s town hall on Monday. That afternoon, Judith McKenna, president and CEO of Walmart International, told a houseful audience that Flipkart’s tech is where the parent will look at collaborating on. Some of the technology that Flipkart has is difficult to find elsewhere, she said, according to the sources quoted earlier.

McKenna’s words are to be taken seriously. She stitched the Flipkart deal and now sits on its board. Also, Walmart International is bigger than Boeing, Coca-Cola, Facebook, and even Alphabet – Google’s parent – in total sales.

An email query sent to Flipkart was not answered. Calls to Hari Vasudev, who heads Walmart Labs in India, were not answered. He is a former senior VP of engineering at Flipkart and played an important role in transforming the ecommerce company’s supply chain. A Walmart spokesperson’s comments can be seen later in this story.

Flipkart, the tech hub

Walmart is fighting a battle of survival with Amazon in the US and elsewhere, which includes giving away profits to attract more customers online. India is no different. In addition to $16 billion to buy out Flipkart shareholders, Walmart will invest another $2 billion to remain at the top.

It’s also perhaps Walmart’s safest bet. “Flipkart is the only company in the world (except in China) that has taken Amazon head-on,” said Siddhant Ujjain, co-founder of SwiftAce, a provider of enterprise solutions based on artificial intelligence and computer vision. “There is something that Flipkart figured out that others couldn’t.”

Technology is one of Flipkart’s strong points. “That was the only way it could have survived Amazon’s rivalry,” said the Flipkart executive quoted earlier without name. Every stage of a purchase made on Flipkart has software – often automated – at work on personalisation, recommendations, logistics, and even anti-fraud. Flipkart has dealt with diverse sets of data – from handling rich customers in Indian cities to reaching deep into the hinterland.

“While we are still at early days, we are impressed by what Flipkart has built and we hope to leverage over time,” said a Walmart spokesperson over email, praising the Indian unit’s entrepreneurial culture. “Flipkart’s talent, technology, customer insights, and agile and innovative culture will benefit Walmart in India and across the globe.”

Here is a detailed story on how Flipkart’s artificial learning and machine learning algorithms have helped in shaping the local ecommerce giant’s business.

Ujjain said that Flipkart also has a tech lab in the US, which is working on AI and machine learning algorithms, as also vision computing. “With millions of products being listed by sellers, cataloguing becomes a huge issue, which can be dealt with only technology,” Ujjain explained.

There are other areas like logistics, where optimisation of delivery time and reducing RTO (short for return to origin), becomes critical. Flipkart has over years built technology in executing these operations.

Early collaboration

Walmart Labs in India has close to 2,000 employees. Recently, it acquired Appsfly, which build a software to host micro apps on any platform. It powers all the technology that goes behind Walmart’s ecommerce business, besides the retailer’s core offline operations.

Flipkart has over 1,300 people in technology. “Both the teams will work together on technologies that can change the future of retail globally,” said the third source.

Already, teams from both the companies have started meeting and spending time to build future technologies. “Flipkart has, over years collected nuanced and diversified data that will help in technology innovations in the ecommerce business,” the second source added.

Flipkart can also handle and process tons and tons of shipments in just days. During its flagship Big Billion Day sale the company is expected to do Rs 11,000 crore of business in just five days, shipping millions of products. The company’s algorithms help it predict, plan and stock accordingly.

Walmart has already started spreading its wings inside Flipkart. McKenna, at the town hall, introduced four new people who will join Flipkart from Walmart — a chief financial officer Emily McNeal (former head of Walmart’s M&A division), a chief ethics and compliance officer Daniel De La Garza, general counsel Grant Coad, and group controller Dawn Ptak.

“What stops them from having a chief technology officer from Walmart next,” asked the first source.

A low-cost affair

Early on, Flipkart, which Sachin and Binny Bansal (they aren’t related) started in 2007, started collecting data. As early as 2013, the company set up a data analytics team. Its importance grew in the coming years.

In fact, Flipkart’s AI for India initiative was run by Sachin, who moved out of Flipkart right after the acquisition by Walmart. Flipkart already has more than 50 data scientists and is training another 100 of them. Hiring, too, is on. It is expected to have more than 250 data scientists and AI experts in the next couple of years.

Some believe that Walmart tapping into Flipkart is no surprise. “This was bound to happen. Talent is incredibly expensive and really hard to come by in the US when you compare it with the way a company as huge as Flipkart has organised, trained, and built its teams,” said Ashwini Asokan, co-founder and CEO of Mad Street Den, an AI company serving the retail industry with its image recognition platform Vue.ai.

Other industry experts, too, pointed to costs. “Talent is cheap… and India has one of the best tech talents if a retail company wants to become tech-driven or even AI-driven,” said Neil Shah, senior analyst with Counterpoint Research.