Alibaba (BABA, Financial), the Chinese e-commerce giant, has so far remained extremely focused on growing its business in mainland China, but as growth continues to accelerate in the domestic market, Alibaba now seems more than willing to expand its business interests internationally. Alibaba’s baby steps to become a truly multinational company bode well for the company’s future as no company of size would want to remain tied down to one single market.
Alibaba invested $1 billion last year to take control of Singapore-based e-commerce platform Lazada; and early this year, Alibaba launched a trading and logistics hub in Malaysia, its first hub outside China. After steadily ratcheting up its operations and investments in Southeast Asian markets, Alibaba is slowly expanding its sphere of influence in the second-most populous country in the world: India.
According to reports from Economic Times, Alibaba and PayTM, an Indian e-commerce company where Alibaba is a major investor, are in talks with Big Basket to invest $200 million. Big Basket is one of the leading online grocers in India with an estimated valuation of $1 billion. Bengaluru-based Big Basket has been a top performer in the fragmented Indian grocery market, reporting a 231% spike in sales for fiscal 2016.
Amazon (AMZN, Financial) has already started its grocery operations in India and now serves more than 14 cities across the country. Big Basket already serves 22 cities. Both these companies are just getting started in the Indian grocery market, which is estimated to be worth nearly $40 billion in U.S. currency.
The growth of smartphones and internet penetration, which is expected to double in the next five years, makes the Indian grocery market a great one for disruption, and the war to capture market share has already begun. With Amazon and Big Basket already establishing their credentials and expanding to several cities, it will be difficult for new players to enter. It will most likely remain a two-horse race for a long time.
If the investment goes through, it will give Big Basket the benefit of Alibaba’s deep pockets to help it go head to head against Amazon, which has made India a top-priority market to conquer. For Alibaba, it gives access to one of the fastest-growing markets in the world, balancing out its China-heavy revenue streams.
Although Amazon and Alibaba are yet to come face to face outside of China, India and Southeast Asia are already shaping up to become the next battlegrounds. Amazon is already an established player in the Indian e-commerce market, and now it is pushing hard on the grocery front as well. Alibaba is backing the third-largest e-commerce player in the Indian market, PayTM, and now it is in talks to back Big Basket to take on Amazon on the online grocery market.
Amazon’s No. 1 position in the Indian e-commerce market, though, does make it the favorite to win the Indian online grocery market.
Disclosure: I have no position in the stock mentioned above and no intention to initiate a position in the next 72 hours.
