After not being able to establish itself in China, where Alibaba controls a significant portion of the e-commerce market, Amazon is ensuring that it does not let go of the India opportunity. The company recently announced a $3 billion fresh investment in India, through which the company plans to make its supply chain more efficient. This is a huge investment, almost equal to Amazon’s global marketing costs in 2015. (Read Why Amazon Is Betting Big On India?) While India holds strong growth potential in e-commerce and is being touted as a trillion dollar opportunity, Alibaba is still looking to establish itself in the region. With Amazon’s huge investment, while local players such as Flipkart and Snapdeal will face the heat, Alibaba’s growth ambitions in the region will likely be significantly impacted. Amazon currently holds 15% market share in the Indian e-commerce market while Flipkart and Snapdeal together account for more than 70% share in this market. Alibaba has a stake in Snapdeal and reports suggested that the company is also looking to buy stake in Flipkart. Amazon’s significant investment in India clearly shows the company’s intent to sieze significant share in the e-commerce market in the region. If Alibaba does not take proactive steps to establish itself in this market, it might lose out to Amazon in the region.
Alibaba’s Delayed Start In India Can Impact Its Growth
While Alibaba has been taking strategic stakes in several Indian e-commerce entities, the company recently began setting up its independent e-commerce business in India by hiring its core team. Alibaba is looking to build a prominent consumer facing online commerce business in India. However, Amazon has ensured that this will now be an uphill task for the company. India’s leading e-commerce player Flipkart has raised a total of around $ 3.2 billion since its inception in 2007 and Amazon’s fresh $ 3 billion investment is a clear indication of who the eventual big player will be. Even if Alibaba manages to acquire Flipkart, it will need to invest heavily in the Indian market and ramp up its operations quickly to compete with Amazon, which has already established itself in the region, even as Flipkart appears to be losing steam.
The Indian e-commerce market holds strong growth potential and both Amazon and Alibaba are looking to grab a significant share in this pie. According to a Goldman Sachs report, the Indian e commerce market will be around $ 228 billion by 2030, slightly lower than today’s U.S. ecommerce market of around $ 280 billion, but 10 times as large as India’s current e-commerce market. As the country witnesses economic growth leading to higher per capita income and broader internet penetration, e-commerce in the country can witness exponential growth. Amazon believes that Indian e-commerce is a trillion dollar opportunity and both Amazon and Alibaba are working towards capturing this potential.
While Alibaba still appears to be working on its India strategy, Amazon clearly seems to have won the first round of the long battle which will be fought between these players on the Indian landscape. Whether Alibaba will be able to use its Asian experience and overtake Amazon despite a late entry in the region remains to be seen.