Depth report

　　

In November last year, Alibaba announced that its sales on the day of the Double 11 Global Carnival reached US$25 billion, which easily surpassed the estimated value of e-commerce transactions in India for the entire year of last year.

    This does not prevent the Chinese technology giant from making India its first major target for overseas expansion, and it is now accelerating its investment in India. In the past week alone, Alibaba has acquired a total of US$200 million in equity in BigBasket, a leading online grocery retailer, and its affiliate Ant Financial, which focuses on payments, has agreed to invest US$200 million in food ordering app Zomato.

    Just before this, Alibaba also recently invested in logistics group XpressBees. Alibaba has developed a three-in-one business model of shopping, payment and distribution in the Chinese domestic market, and the investment in XpressBees fills the last link-distribution.

    “Just like Amazon has laid out its global strategy in India, so does Alibaba,” said Kashyap Deorah, an Indian tech entrepreneur and author.

    Alibaba, founded by Jack Ma, a former English teacher, embarked on an adventure in India in February 2015. It first made an undisclosed investment in the financial technology startup Paytm-and then injected capital again. US$680 million became Paytm's largest investor and later acquired a majority stake in Paytm's e-commerce platform.

    India's e-commerce market is very different from China. India’s competition is fiercer—including competing with the wealthy Amazon, which has little presence in China—infrastructure is more dilapidated and its population is poorer.

    Amitava Saha, the founder of Xpressbees, admits that logistics is also a more serious challenge in India. Online grocery shopping relies on scale-scale allows Alibaba in China to deliver goods to customers within a few hours through a huge network of small local warehouses. He said that India's limited customer base makes similar systems too expensive.

    In addition, Indians have low spending power. According to 2016 data, India's per capita nominal income is US$1,709, which is less than a quarter of China's (US$8,123). The equipment they use to shop online is also poor: According to a study by Omidyar Network, less than a quarter of Indians had a smartphone last year, and a third of them were unable to Make a data connection. In China, half of the population owns smartphones.

    According to Forrester Research, the proportion of e-commerce in the Indian retail industry is still very small-last year e-commerce sales were $19.6 billion, an increase of 20% year-on-year. This figure is significantly slower than the 103% growth rate two years ago, because after e-commerce companies have developed early users among the affluent groups in big cities, it is difficult to continue to expand the user base.

    However, Bernstein Research analyst Bhavtosh Vajpayee said that as more foreign companies enter the Indian market, more deals will be made in the future. While Alibaba is building its ecosystem, its other two major competitors in the technology industry, Tencent and SoftBank (Alibaba’s major shareholder) are strongly supporting India’s local e-commerce group Flipkart. "The China that started 15 to 20 years ago may be India now," he said. Indian e-commerce is currently in its infancy, and time will prove that this is a long game.

    At the same time, Amazon promised to invest US$5 billion in India to establish India as a key overseas market for its development.

    Alibaba puts its strategic focus on Paytm, relying on it to compete with Amazon. The founder of Paytm, Vijay Shekhar Sharma, claimed to be inspired by Jack Ma’s 2011 speech. CFO Madhur Deora said the shopping and payment platform is "very similar" to Alibaba's domestic model, but "there is an important difference in its focus."

    One of the differences is the order in which Alibaba builds its e-commerce ecosystem. In China, it started from the seller's platform and then entered the field of payment and logistics. Paytm is expanding in the reverse order. It is by far the most popular digital payment operator in India, with more than 200 million registered users.

    With the support of Alibaba, Paytm has expanded its full set of financial services, but it is still far from becoming a leader in the field of e-commerce. According to a person familiar with Paytm, one year after Alibaba controlled the platform, Paytm's monthly transaction volume reached almost two-thirds of that of Flipkart or Amazon.

    Last year, the company launched Paytm Mall. The platform adopts a model that is more similar to Alibaba: it provides a virtual market similar to eBay and allows sellers to sell goods on it, instead of taking the heavy investment of Amazon and Flipkart and stacking them in the warehouse. Full inventory model.

    Sanchit Vir Gogia, founder of the consulting firm Greyhound Knowledge Group, said that this development model provides Alibaba with the potential to enable it to operate at a much faster rate than its Indian counterparts. Expand at a lower cost. He said, "Their models are lighter on inventory, so they can focus their investment on building networks."

    He added that Paytm faces huge opportunities especially in small and medium-sized cities in India. Its e-commerce rivals have limited influence in these cities, but these places may provide strong drivers for future growth.

    But Alibaba is also targeting mid- to high-income customers in big cities-its investment in BigBasket proves this. The platform's high-end grocery services are favored by more and more affluent Indian families. This move reflects Alibaba's eagerness to create a deeply integrated comprehensive corporate network that will lead customers from one digital service to another.

    Hari Menon, CEO of BigBasket, said that through the new relationship with Paytm, "we will be exposed to massive amounts of traffic."

    Alibaba shows no signs of relaxation in the expansion of the Indian market, and it is now accelerating its promotion of other advanced services in China to India. Last month, Alibaba entered the game field, allowing Paytm to establish a cooperation with Alibaba’s Hong Kong subsidiary AGTech; it also launched India’s first data center to provide cloud computing services in an attempt to compete from Amazon. Services poached Indian corporate customers.

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