When Amazon.com Inc founder and CEO Jeff Bezos announced an additional $3 billion investment in India last week, the aim was not only to compete with local e-commerce players Flipkart and Snapdeal. Amazon was also seeking to gain an upper hand before China’s Alibaba Group establishes its presence in the fast-growing Indian e-commerce giant.
Alibaba, led by billionaire founder Jack Ma, had said in March that the world’s largest e-tailer by gross merchandise value planned to set up a direct presence in India.
This came almost three years after Amazon–the biggest global e-tailer by market value and net revenue–stepped into the country. Amazon has now ramped up its investments in India to $5 billion.
Over the past few months, Alibaba has been quietly preparing for its India play. It has forged a senior management team, according to a recent report in The Times of India. The latest to come on board is Bharati Balakrishnan, the former chief business officer of local services marketplace LocalOye, the report said.
The report also said that Soumitra Sharma, a former associate at IDG Ventures India, joined Alibaba as director of global strategies earlier this year. While Sharma’s mandate is to form a strategy for overall Asia and US operations, his priority will be to ensure a smooth entry for Alibaba into India.
The Chinese titan also plans to set up a data centre in India, The Hindu Business Line reported last month. The report said that cloud computing is one of Alibaba’s most important verticals as it plans to expand its revenue beyond e-commerce.
Alibaba, which has Indian-origin K. Guru Gowrappan as the global managing director, isn’t exactly new to India. It already runs a business-to-business platform in the country, but this hasn’t scaled significantly. It has investments in Jasper Infotech Pvt. Ltd, which runs homegrown e-commerce company Snapdeal. SoftBank, Alibaba’s biggest shareholder, also owns a large stake in Snapdeal.
Also, Alibaba’s financial arm Ant Financial, which runs the Alipay online payment platform, is an investor in Paytm’s parent One97 Communications Ltd.
Alibaba was also looking to invest in the country’s largest e-commerce player Flipkart, according to a Mint report in February.
In March, The Economic Times reported that Alibaba had held talks with the Tata Group for a partnership for online retail. However, the Tata Group last month launched its own e-commerce venture called TataCLiQ.
Industry watchers say Alibaba may be fixated on acquiring interests in Indian e-commerce majors, especially those that directly compete with its global rival Amazon Inc. Another school of thought suggests that Alibaba could look at driving consolidation in the Indian e-commerce market.
“It’s too much of a stretch to say this today, but I wonder whether Alibaba’s interest in Flipkart, Snapdeal and Paytm could one day be the driver of some kind of an alliance / merger between these firms,” Ajeet Khurana, an entrepreneur-turned-angel investor said in February when reports first appeared of Alibaba’s talks with Flipkart.
Alibaba’s direct, though delayed, entry into India may make life difficult for existing domestic players such as Flipkart, which is already reportedly facing difficulties in raising fresh funds at its preferred valuations. But beating Amazon, which has significantly strengthened its war chest in India with the $3 billion planned investment, will not be easy.
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