Is Walmart’s rejection over acquiring Cornershop that bad after all?

Contxto – By now we should all know the story. If you don’t, perhaps you’re not reading enough tech gossip from us. Anyways, here’s the run-down.

After Mexico’s Federal Economic Competition Commission (Cofece) refused Walmart’s acquisition of Cornershop for US$225 million, you could smell disappointment from Tijuana to La Patagonia. It was as if the ecosystem as a whole received a bucket of cold water to the face. 

But really, was it actually that bad?

Since the event, I’ve been pondering the potential repercussions if this decision was revoked versus what is currently going on. That’s to say, there has been a series of strategic business moves that may have otherwise not been implemented.

After Cofece’s rejection, Cornershop and Walmart parted ways, as if they were a long-distance couple that still loves each other but won’t ever meet again.

Cornershop then started exploring new ways to keep growing, seemingly moving on from the heartbreak rather fast. For instance, the startup started planning an expansion out of its two native countries, Mexico and Chile. On the agenda is Peru, Brazil, as well as Colombia.

The company also jumped north and landed in Canada, as confirmed by an Instagram post from their official account.

This is not as surprising since last January, Cornershop co-founder Daniel Undurraga stated that Canada was next on the roster. This strategic move seems to be a preparatory test before even considering landing in the United States.

In Walmart’s case, it seems like the company might need to improve its internal logistics and do the work in-house. Whatever it was trying to accomplish with Cornershop’s acquisition must now be done internally. And it seems like it’s already starting to do so. 

Apparently, the holding company launched an eCommerce chatbot of Superama, the more handsome, expensive brother of Walmart. Consumers will now be able to interact via Whatsapp with Superama to purchase online, track orders, and even make inquiries. In fact, I tried the service myself – or at least half of it.

In order for users to engage with this service, they should first add a secret number to their contact list (55-5134-0034 for Mexico). It didn’t automatically send me a message as other chatbot services do, so after I typed “Hola,” the response came back.

An automated message from a bot, presumably called Sam, popped up and clarified that under no circumstance it was going to ask for personal information, passwords or financial information. Eventually, it gave me three options including purchasing, tracking orders and asking questions.

Anyways, it seems as if this forbidden love is already flourishing into self-improvement. Both companies are looking to achieve their goals in alternative ways. In the long-run, this might actually benefit consumers more than an acquisition.

Cofece’s decision might have caused an impact in the startup community, specifically due to bureaucratic processes hindering potential exit alternatives for entrepreneurs. Basically, dimming the spark of hope. Yet stop and consider for a minute about the consumers themselves – yes, those that actually use tech products. 

What would’ve happened if Walmart actually acquired the startup? Well, although it wouldn’t have been a monopoly per se, vertical integration also carries some elements of monopolistic market control. In fact, had this operation gone through, the giant corporation would have had more control over competitors, consumers, and even suppliers, by leveraging its market share and position.

Yes, company-wise it was the desired outcome, but market-wise perhaps less so. As entrepreneurs, if we believe in competitive markets, alternatives to corporate products and small companies creating the future, then, integrating to the big corporation wouldn’t have been the most advantageous outcome in terms of promoting competition. It would have ultimately left fewer options for users.

Perhaps it wouldn’t have been the best path to follow since it was that very same vision that got many of us started in the first place.

María Francisca Labbé from Universidad del Desarrollo said: “In my opinion, Mexico was right, which we should be thankful for because let’s not forget that Chile didn’t regard its market with the same strength.” 

Honestly, I only agree with that statement up to a certain extent. I am not a big fan of deep market regulation. However, when it comes to monopolies resulting from big capital capable of acquiring and potentially hurting consumers, there are few alternatives I consider preferable.

My final point is this: yes, let’s ponder, reflect and adapt our business plans to plausible similar future outcomes. All the while, let’s look at the bright side of this event – more features, more ideas, and more market options. Perhaps, it might be time to reconsider our exit alternatives, stake out our regional public market structure, and aim for stock charts instead of M&As.

Based on the outcomes, there’s not much for us to do besides taking this as a positive learning experience while preparing for future worst-case scenarios.

-VC