India is the world’s third-largest Internet user base, and the Chinese ecommerce giant, Alibaba (BABA, Financial), that just about created a ripple at Wall Street when it listed its stock last year is about to take a plunge into India. India has been long destined to be the hotspot of several ecommerce firms who have collaborated with Indian partners to set their internet platform in the country. Rumors are in the air that Alibaba is about to take such a measure for gaining easy access to the Indian buyers who want to go window shopping from the net instead of visiting the malls. Let’s quickly dive into the article and find out what are the plans of this ecommerce player for India as information is still under wrap and how India happens to be a promising destination for Alibaba’s growing sales chart.
India holds huge potential
India is the second largest population base and holds enormous potential for Internet growth. India’s ecommerce industry is still in a nascent stage, and according to estimates given by Nomura in July last year has been forecasted to quadruple in the next five years to over $43 billion. In fact, several investments in this industry have taken shape in the past as well. Investments have come in from Japan’s Softbank Corp. (SFTBY, Financial), Amazon.com (AMZN, Financial), and others highlighting the growth in online shopping in India that is expected to enter a booming phase in the pursuant years. In October last year, Softbank had announced that it would be investing about $10 billion in the booming Indian sector and soon after purchased a $627 million stake in online marketplace Snapdeal.
Hence, if Alibaba invests in India, it will signify that India is gradually growing to become a sure destination for ecommerce giants who urge to enter the country and improve their sales chart further in the upcoming years. Also entry into an emerging market such as India would serve as a positive signal for global investors who are presently betting on medium to long term growth of this market as more people show interest in transacting online.
Alibaba’s game plan
Reuters has shared in a news article that Alibaba and its unit Alipay are currently in advanced talks with India’s One97 Communications to buy stake for about $550 million as the latter owns an online payment platform. If this investment is announced by the end of the month, it would mark Alibaba’s first significant investment in India’s growing online business segment.
As per the terms of the deal as shared in Reuters, Alibaba and Alipay would hold between 30-40% stake of One97 Communication after the stated investment. As One97 runs the Paytm platform which consumers can easily access using their mobile apps, such a venture would aid Alibaba to easily gain popularity in the Indian arena and offer tough competition to rivals such as Amazon already operating in the market.
The investment would also expand Paytm services, with a view to dominate the online payment business model in India which is predicted to show phenomenal growth within the next few years.
If the deal goes through it will largely benefit both the ecommerce companies by allowing Indian buyers to shop on Alibaba’s platform and have their payments processed through Paytm. Also Chinese customers will be able to shop on Paytm’s platform and have their payments processed through AliPay.
Final word
As the ecommerce ground is gaining quick ground in India, ecommerce giants are trying to invade the space and build their own brand in the emerging market. The same approach is now being taken by Alibaba and time will suggest whether the Chinese player is able to emerge a winner in the Indian soil. Until then, let’s stay tuned and keep watching!
