In the world of e-commerce, everyone know Amazon and Alibaba. After winning in many international markets, they now elbow their way into positions of India. But Alibaba is once again well ahead, let’s see why
After being an exclusive service of the middle class, now the internet opens the doors of the market even in the most remote towns. But today in India, the online retail sector represents such new opportunities of business. Actually 40% of the Indian population is digitized and in just a few years has become the second digital market in the world, second only to China.
This country on the rise is embarking on a digital race with unprecedented speed and has thus become the most attractive market for international digital giants, starting from e-commerce companies. Last year, the Indian consulting firm RedSeer estimated a 33% increase in the number of buyers active every month on the e-commerce portals in India, reaching 20 million subjects.
The cake looks tasty. In fact, India has 1.3 billion inhabitants, half under 25 years of age, a GDP increasing at rates of 6-7% per year, a growing middle class, tax reforms and investments in infrastructure for a quick modernization of the country.
For e-commerce, the forecasts are staggering. According to the India Brand Equity Foundation – a research center funded by the Government – the turnover will reach 200 billion dollars within ten years.
Last September, Amazon announced the use of the Hindi language to reach even the part of the population who does not speak English. However, this is not an isolated move by the American colossus in the country. Amazon first entered India in 2013, investing up to $ 5.5 billion to ensure a position in this thriving rising market.
Nevertheless, Jeff Bezos’ company is not the only one to have glimpsed a golden opportunity in India. The first competitor was definitely the American “colleague” Walmart. In fact, the US retailer has announced the purchase of Flipkart, an Indian startup founded in 2007 that has become more and more important in the local e-commerce sector, thanks to the investments of the Chinese company Tencent.
©Ishant Mishra, indian rupee. According to data, the number of active buyers on e-commerce portals in India, is rising year by year.
However, the first big Amazon’s competitor in the country is certainly Alibaba, which after winning in Southeast Asia with Lazada, has found further success in India.
The two international e-commerce giants have launched different strategies in India. In fact, it was the diversified approach and the capillary investments that brought Alibaba ahead of its American counterpart. The Hangzhou – based company aims to replicate the success achieved at home by entering the Indian startup Paytm in 2015, the most used digital payment platform.
Alibaba’s investment strategy has focused on startups of high-frequency use case and of high-level user engagement more than on its local platform. An example is a capital invested in the Indian online payment company, which then gave birth to Paytm Mall.
Thanks to these funds, Paytm acquires the Chinese platform’s most distinctive traits, thus turning the chaotic and developing Indian population into a modern “cashless society”.
Paytm, whose headquarters are in Noida has now reached popularity among Indian users who already use it daily. However, thanks to Alibaba’s experience, the startup is now open to new horizons. As for Chinese WeChat or Alipay, Paytm has become a portal providing access to various services that require payment such as buying train or cinema tickets, or even buying gold and then investing it. It all works through QR code connected to the smartphone and to the bank account, as it happens in the PRC.
From this positive experience and thanks to the access to Chinese expertise, Paytm decided to grow by pursuing the path that the giants of Jeff Bezos and Jack Ma have opened in the country: e-commerce. Noida-based company has thus launched its platform for online shopping: Paytm Mall.
©Diksha Arya, Indian marriage. Today youngs are those “new niches” that will boost Indian economy
The portal follows the Chinese TMall concept of “New Retail” – a term coined by Jack Ma – as a retail that includes personalized experiences on the buyer combined with a strategy that integrates the online with the offline store.
Today, Alibaba is the largest financier of the Indian startup. Since it became an independent platform in 2017, after $200 million funds allocated by the Dragon’s colossus, Jack Ma is now ready to provide another $45 million to the Indian company thus supporting the creation of a growing global “cashless society”.
India, which is the second largest population without a personal bank account, turns out to be a breeding ground for this kind of retail business. Moreover, millennials using their portable device on a daily basis account for one-third of the Indian population. The demographic data and the rapid spread of the Internet represent a huge growth potential for e-commerce in the country.
Alibaba, which with its affiliate Ant Financial now owns 40% of Paytm Mall, does not stop there. Faithful to its investment strategy to fund high-frequency use and high-level of user engagement sectors, it is also supporting the online grocery app BigBasket and the food delivery service Zomato.
Alibaba executive vice-chairman Joe Tsai underlined how “we want to take a very patient approach. Our strategy is to look at high-frequency use cases and build e-commerce business on top of that. We have an investment in Paytm and we are involved in a grocery company because grocery is almost daily.”
Compared to the Chinese market, Indian online commerce is not even close to the Middle Kingdom, since only one-third of the population uses the internet – 450 million people out of 1.33 billion inhabitants. However, despite the penetration rate of e-commerce among the population is still low, the potential is explosive with almost 6 million new e-commerce customers registered monthly.
©Annie Spratt, New Dheli. 40% of the Indian population is digitized and the country has become the second digital market in the world, after China.
In India, the online retail sector represents the new huge frontier of business. According to a study conducted by Morgan Stanley, if the turnover in 2016 has reached nearly $15 billion, in 10 years it will reach $200 billion.
Despite the e-commerce still represents a small part of the local retail market, the precarious condition of Indian infrastructures favor the development of the cashless society. In fact, today’s Indian consumer prefers to buy products with just a click instead of spending hours in Delhi or Mumbai traffic.
The interest of investors is therefore very high. According to the India Brand Equity Foundation, private equity and venture capital investments in Indian e-commerce grow by 41% on an annual basis. Among these, Alibaba was the most forward-looking.
With the control of the mobile payments market through Paytm, the Chinese company was able to diversify its investments also in entertainment, web services, food, and on-demand delivery. Thanks to this stratification of fundings, when the market is mature, Jack Ma‘s company will ensure revenue with nine zeros.
©Shuvro Mojumder, Xiaomi device. Beijing-based smartphone maker Xiaomi, leads Indian market in mobile sector.
Nowadays, as every young Indian who lives in a big city owns a smartphone, the watchword is “go mobile”. With 400 million users, the competition to win the mobile market is high. But even here, China holds the record with the national Xiaomi.
Thanks to UC Browser, Alibaba has again built its own personal road in the Indian market. In fact, Xiaomi uses the browser, as well as the big international names of mobile phones such as iPhone and Samsung.
“New Niches”, “go mobile” and “cashless society” are therefore the three factors that will lead Alibaba to win in the Indian market.
According to scholars, the focus of this “rush to the Indies” seems to be local. However, although the market is already fruitful, winning the leadership also means gaining a sphere of influence not only in the area but also in the global e-commerce landscape. India thus becomes both the last battleground between Amazon and Alibaba, but also the outpost for a potential international expansion.
China and India share a fast digital and technological growth, albeit with different times and own individual ways. With this background, Alibaba has a great advantage over the US competitor and a little extra kick compared to other international players.
In this context, in fact, experts believe that it will not be Amazon and Alibaba to fight over the Indian market. But the company from Hangzhou will rather contend with the other great Chinese giant Tencent. China will thus become the sole interlocutor of the digital conversation in India.
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