When the whole retail world is busy reckoning India housing the second-largest population of the world and probable customers, how can Alibaba (BABA, Financial), the latest etail maverick boy, stay away from putting India into its global expansion plan. From Amazon (AMZN, Financial) to Walmart (WMT, Financial) everyone has started looking into options of participating in the Indian subcontinent in some or the other way. Amazon, the global etail leader, has already started making it big in India. This global initiative to look towards India is obviously driven by the factors that India is undergoing rapid urbanization process and hence a paradigm shift in lifestyle is underway and that it houses the second largest population of the world after China which presents etailers and retailers with immense opportunity of sales growth. The story with Alibaba the recent emerging blue eyed boy of the ecommerce sector is no different. Obviously it had the home turf advantage of catering to the largest population of the world, but since its blockbuster performance at the Wall Street in September this year it is no longer a Chinese company but has set foot as a global player.
In keeping with the global trends Jack Ma has expressed his interest in taking India into Alibaba’s foray. So let us get the details of the Alibaba – India combo that is cooking up at Alibaba’s boardrooms.
Alibaba and India
Though Jack Ma has not disclosed much about what is on his mind about the Indian chapter but his statements at the FICCI even in New Delhi, the capital of India does raise certain indications and speculations in the direction. Will he, won't he? Will an Indian arm of Alibaba sprout up? Chairman Jack Ma did not answer persistent media queries on this subject, though in his keynote address at a FICCI conference in New Delhi, he did exhort India and China to deepen their engagement.
He also declared Alibaba’s next three years strategy which would focus mainly on globalization beyond China and that India is one of the focal points of the next three year strategy. So was this the ringing of the starting bell of Alibaba India?
In India Amazon, the global leader and Alibaba’s closest competitor is making rapid inroads to encash the enthusiastic ecommerce market here. Due to FDI restrictions in ecommerce, unlike the U.S. or other developed economies, Amazon operates in India by adopting the marketplace model where it provides a platform to different Indian sellers willing to go online. However the point to be considered in this respect is that Alababa’s core model of operation in its home turf or anywhere else is basically the marketplace model hence it already has a management setup to take advantage of the Indian ecommerce ambience and hence how wise would it be for Alibaba to stay away from India when its biggest competitor is making rapid growth in the subcontinent.
The Indian e-commerce business itself is expanding exponentially. And as DIPP Secretary Amitabh Kant pointed out in his own address at the same FICCI conference, “India allows 100% FDI in B2B e-commerce.”
"This is how China also opened up gradually," Kant added. “In short, Alibaba cannot afford to ignore India for long even though we do not allow foreign e-commerce players to have B2C access” Kant was quoted as saying. As of now, Alibaba only has a sourcing operation in India.
India’s current stakes in Alibaba
“India is already a significant stakeholder in Alibaba's stupendous success,” Ma said. “Indian merchants are the second biggest sellers on Alibaba after the Chinese.” He also added that more than four lakh Chinese consumers are buying spices, chocolates and tea from India.
"I did not realise Indian chocolates were so popular....India has more great products which it can sell on Alibaba," Ma was quoted as saying.
In an interaction with the press, Ma stated that he wants to take Indian goods to China instead of focusing on bringing Chinese goods into India.
Going by the current equations between the two Asian economic superpowers, the bilateral trade between India and China has rapidly grown to $65.8 billion in FY14. But there is a huge trade imbalance. While we export just $15 billion worth of goods to China, we import $51 billion worth of stuff from China. This means more of Chinese sales and Indian consuming and less of Indian sales.
So when Jack Ma says he will take Indian goods to China instead of choosing the easy path of bringing Chinese goods into India, it creates an environment of balanced trade between the two Asian economies and India should also be able to clock its sales meter through Alibaba. But when this will start is still a matter of question.
According to unconfirmed reports the Alibaba team including Jack Ma which is currently visiting India would also meet Kunal Bahl the promoter of Snapdeal, India’s second largest ecommerce player. So the speculations are rip that is Alibaba and Snapdeal entering into some kind of liaison in India? because if that happens it will be a huge boost for Snapdeal having the global giant to support it and might soon claim the top slot in Indian ecommerce currently held by Flipkart.
Our take
One thing is crystal clear from the ongoing activities; that is ecommerce is going to be the next big thing in India and is currently revolutionizing the whole process in the sub-continent. This was the similar kind of air way back in the early 2000s in India when IT and ITES made it big in the Indian economy and is currently the global hub for outsourcing business. With the global ecommerce giants and retail honchos setting their eye on India as their next favored destination it would not be difficult to see the Indian economy rising up to the global platforms and in such a scenario quite a number of Indian companies might open doors for global investors. Owing to the buoyancy of the Indian economy and ecommerce in particular it would be wise as investors to keep an eye on the movement of the ecommerce sector in India in order to encash any future opportunity arising from the Asian subcontinent.
