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Alibaba gears up for India game plan, soon to establish office in Mumbai

03-January-2017
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Alibaba gears up for India game plan, soon to establish office in Mumbai

Alibaba’s India game plan will be the most-looked-forward event in the ecommerce landscape of the country for 2017. The Chinese e-commerce major owned by Jack Ma is reported to set up its first India office in Mumbai. Amazon India’s head office also happens to be in the same area. The largest online and mobile commerce company in the world had shared its plan to enter India last year when it said it was evaluating opportunities to build the business organically or through other means.

For the uninitiated, the company’s core commerce business rose 41% year-on-year to 28.49 billion yuan. Sales from the cloud computing business climbed 130% to about 1.5 billion yuan while revenue from the media and entertainment segment surged four-fold to 3.6 billion yuan.

Focus areas in India

Moreover, before its anticipated arrival, the Chinese e-commerce giant had already taken an active interest in India, courtesy its investments in Paytm (where it owns 40 per cent stake) and Snapdeal (where it owns 3 per cent stake). Especially when it comes to Paytm Alibaba has made significant investments over there, at both an $800 million and $3.4 billion valuation. It has definitely hit the bull’s eye as India's digital payments industry is expected to bloom into a robust $500 billion market by just 2020. This definitely gave Alibaba a huge foothold in India.

Earlier Kishore Biyani partnered with Paytm to sell Big Bazaar products on the latter’s site which was part of his long term strategy to build an alliance with Alibaba. Biyani's Future Group is speculated to be a key seller on Alibaba's B2C platform.

Recently it is reported to be in talks with the Apparel Export Promotion Council, India’s nodal agency for promoting business between exporters and buyers to help domestic garment exporters market their products online and educate them about payment gateways, security and privacy issues. According to the parties, the intention behind this partnership is to deliver end-to-end solutions for exporters, especially those who cannot keep huge inventory. If the deal falls through then small exporters will be able to sell their products to companies in other countries since sellers on Alibaba are typically manufacturers and distributors.

Heightened competition

With China’s leading ecommerce player expected to open their office in Mumbai the competition in Indian ecommerce space will heat up even more. Social media platform Twitter saw the signs of it when in last March Flipkart’s executive chairman Sachin Bansal tweeted ‘Alibaba deciding to start operations directly shows how badly their Indian investments have done so far.’ This tweet was with respect to Alibaba’s investment in rival Snapdeal, whose CEO Kunal Bahl was quick to retort, ‘Didn’t Morgan Stanley just flush $5bn worth market cap in Flipkart down the toilet? Focus on (yo)ur business not commentary.’ 

Acquisitions beyond India

Apart from India, Jack Ma’s overseas acquisitions both in and beyond China are also talked about. In early 2016 Alibaba made headlines by taking over a controlling stake in Lazada, the Rocket Internet-backed e-commerce company in Southeast Asia, for $1 billion earlier. It made its biggest investment worth $5 billion through its deal for video-streaming company, Youku Tudou. Alibaba’s backing of the Kuaidi taxi-hailing app, which later merged with Tencent-backed Didi, has set up the company’s push into services beyond e-commerce. Last August, the company now known as Didi Chuxing agreed to acquire Uber Technologies Inc.’s China business. Alibaba’s deal with Suning Commerce, electronics retailer signaled a major expansion of its logistics capability. Then it bought Hong Kong’s oldest English newspaper South China Morning Post, which revealed its interest in traditional media.

The latest announcement is Jack Ma’s decision to pump more than $7 billion on its entertainment division over the next three years according to media reports. Let’s not forget that Amazon has already spent billions of dollars on music and TV content which comes under its rapidly growing Prime membership, recently launched in India.

So there’s no doubt that all eyes will be on Alibaba’s investment strategy in India and abroad as it will diversify the company geographically while fueling its growth at the same time. 

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