India’s e-commerce market, which is currently dominated by homegrown companies like Flipkart and Snapdeal, and an American giant in Amazon, might soon see its biggest shake up yet. Chinese e-commerce behemoth Alibaba is planning to enter India in what could bring increased competition in an already competitive sector.
Alibaba Group president Michael Evans and global managing director K Guru Gowrappan met Communications and IT minister Ravi Shankar Prasad on Friday and underlined the company’s interest in India.
“Alibaba is very keen on coming to India in a very big way, particularly in the ecommerce sector,” a senior government official told Economic Times. “They’re only exploring the way – whether to go on their own or set up shop with someone else.”
Alibaba already has a presence in India through investments in Snapdeal and Paytm. But the company operates at a scale that Indian e-commerce companies can only dream of. On Singles day, the company shipped 278 million orders and recorded $10 billion worth of sales in 24 hours. In comparison, Flipkart, India’s biggest e-commerce company, had sales of $8 billion in all of 2015. Alibaba processes 12 million orders a day; Flipkart does 0.3 million.
And unlike Indian e-commerce companies, which are currently mired in losses, Alibaba is profitable. It recorded profits of $5.5 billion in 2015. Amazon, for comparison, saw losses worth $241 million through its worldwide operations.
But the company’s had a few bad quarters in the recent past. Its stock has fallen significantly over that period and has reached its IPO levels. Chinese economy as a whole is struggling. Its growth is slowing and job losses are on the cards.
This is perhaps why it’s looking at other markets. India with its growing economy and burgeoning middle class still offers scope for companies to grow. Alibaba has tons of experience of operating in a developing market with small order sizes, and it will be in a position to apply its learnings from China to India. Alibaba’s retail website Aliexpress, which has worldwide shipping, is already gaining popularity amongst Indian shoppers.
But at the end of the day, it’s great news for the Indian consumers. Indian companies had been considering rolling back their discounts after a period of sustained losses, but the Chinese giants entry into the sector might usher in a new round of price wars.