Alibaba's impending entry to alter India's e-commerce landscape
Jack Ma-owned Alibaba will soon open its first India office in Mumbai's posh business district Bandra-Kurla Complex (BKC), according to a report in a business daily last week. For this purpose, it has rented 3,221 sq ft of office space at Rs 275 per sq ft per month, the report added.
Even on the human resource front, Alibaba has been hiring people in India and quietly creating a team. In September, Priya Cherian, former director, human resources, Flipkart joined Alibaba as HR Head â€“ APAC. She is based out of Bengaluru, according to her LinkedIn profile. Alibaba also roped in Madhur Deep, former McKinsey and Goldman Sachs executive, as senior vice-president to lead its strategy and investment team in India.
With telltale signs of Alibaba's direct presence in India in place, observers believe its entry will change the very contours of the Indian e-commerce industry.
Will it take the plunge?
In 2016, Alibaba more than once indicated its keen interest in the Indian e-commerce market, even saying it was looking at opportunities to build the business organically or through other means for an entry.
"We are planning to enter the e-commerce business in India in 2016. We have been exploring very carefully the e-commerce opportunity in this country, which we think is very exciting on the backdrop of Digital India," Alibaba Group President J Michael Evans had said in March.
Industry observers say Alibaba will alter the e-commerce landscape drastically, regardless of whether it launches a business of its own here or not. An India entry will also extend Alibaba's rivalry with Jeff Bezos-led Amazon to the South Asian nation.
Anil Joshi, managing partner at Unicorn India Ventures, feels Alibaba will start an e-commerce business of its own here. "India is a huge market and they have the experience of operating in a market like China, so India would not be too hard. Digitisation and the push for digitisation has brought grassroot-level changes in e-commerce. They have a strategic plan in mind."
But Sanjeev Krishan, transaction services and private equity leader - PwC India, doesn't agree: "They may create a logistics support or back- and front-end support for Paytm and Snapdeal. They may do things that do not compete with Paytm and Snapdeal. In China, they have a B2B business; their plan may be to go after SKUs (stock keeping units) that don't compete with Snapdeal and Paytm."
"It would not make sense for them to start an e-commerce business. People are already saying four players (Amazon, Snapdeal, Flipkart and Shopclues) are too many. I am not sure they will open another shop and lose more money. We all know how much it (money) takes to do an ecommerce business here," he adds.
Alibaba owns a string of e-commerce properties in China and is the largest online and mobile commerce company in the world in terms of gross merchandise value (GMV). Ant Financial runs Alipay, a mobile payments wallet like Paytm. The Chinese e-commerce titan, however, is looking to expand outside its home market.
9Apps, an Android app marketplace owned by Alibaba, entered the shopping aggregation space in India in August this year. The firm now offers multiple features on its app for users, along with its existing role as provider of Android apps and games.
Stakeholder to competitor?
Although Alibaba has had an India site for years, it hasn't scaled up significantly. Its exposure to the Indian market is limited to making investments. The NYSE-listed Alibaba Group Holding, along with its financial services arm Ant Financial, has invested a significant amount of capital in One97 Communications Pvt Ltd, the company that runs the mobile payment and commerce platform Paytm. In August, Paytm had created two separate entities, christened Paytm E-Commerce Pvt. Ltd and Paytm Payments Bank Ltd, under which its e-commerce and banking services will operate. VCCircle had reported that Alibaba's stake in One97 Communications will be transferred to Paytm E-commerce.
Alibaba also holds a minority stake in another e-commerce company, Snapdeal.
Irrespective of the route Alibaba takes in India, it is clear that it would take significant investments and a long-term strategy for the Chinese firm to grab a substantial market share in the hyper-competitive e-commerce business. That said, the stage is set for a fight to the finish.