The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Sidhartha Sankar Nanda, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
The total Indian internet market size is expected to grow to $159 billion by 2020 to emerge as the fastest-growing e-commerce market globally, from $16 billion now, as reported by Morgan Stanley. So it’s not so surprising if Alibaba, the biggest Chinese e-retailer, expressed its interest in the Indian e-commerce market. It is not something which Alibaba has decided to come up with, but rather the preparation work for the same has started the preparation work for the entry since early 2015. Starting from early 2015, it has gradually expanded its presence by investing in payment solutions company Paytm, ecommerce company Snapdeal, logistics company Mypacco, launching reseller platform and seller initiative for small & medium enterprises.
Now, the company feels that 2016 is the right year to think beyond investments and enter the market in a full-fledged manner. Paytm is reportedly planning to decouple its payment business from its marketplace to pave the way for Alibaba’s India entry in the e-commerce play.
There has been rumours that the Chinese e-retailer is in talks with Tata Group to grab a partnership deal. But Why Tatas? Because Alibaba wants to support its e-commerce venture by setting up an omni-channel retail network with offline & online presence along with strong logistical and back-end support. Besides launching several brands in India, the Tata Group has a good track record of maintaining cordial relations with its partners. This would probably give Alibaba a good boost in terms of infrastructure. Again Tatas are the best match for Alibaba given the scale and capabilities both these players possess and again Alibaba is keen to create a strong back-end network before launching its online portal and Tatas are the best in regards to the dominance it has in the Indian market, may it be in any sector.
While all of India’s e-commerce companies sold goods worth $16 billion in 2015, Alibaba sold goods worth $377 billion, a Morgan Stanley report states. Hence it can be concluded that the Chinese e-retailer beats everyone with regards to sales volume. While the industry on the whole and consumers will benefit from a new player entering the market, the existing players especially Amazon will have to be prepared for a tough battle.
We are already nearing the end of first quarter of 2016. So it is doubtful that Alibaba will be able to setup the ecommerce business before the end of this year. Amazon has about 3 quarters to do what it can to change the game and gain advantage before Jack Ma, executive chairman of Alibaba Group, comes out all guns blazing.