Why Alibaba invested billions of dollars in 3 specific sectors in India?

With a population of 1.32 billion and a less-developed, but burgeoning economy, India is seen as the next golden market. Chinese smartphone brands have already seized more than half of India’s mobile-phone market and more companies are expanding to India every year. This includes China’s largest e-commerce conglomerate, Ailbaba.

Alibaba dominates the e-commerce, online payments, and logistics sectors in China and is in the process of replicating its domestic success through investments worth billions of US dollars in India.

Alibaba’s e-commerce business in China has claimed a revenue of RMB 133.88 billion (USD 19.75 billion) in the fiscal year of 2017, a 45 percent increase from the previous year. Its mobile Gross Merchandise Volume (GMV) accounts for 82.6 percent of the whole market in China in 2016.

Online payments are essential for online shopping. Alibaba established its third-party payment platform Alipay in 2004 which now dominates more than half of the entire third-party payment market in China. In 2014, Alibaba spun out Ant Financial from Alipay. This financial subsidiary is now valued at more than USD 60 billion.

Logistics plays an important role in e-commerce as well. In 2013, Alibaba lobbied almost all major Chinese logistics enterprises to fund the logistics platform Cainiao. It also left Alibaba in charge, controlling majority of the shares. As much as 70 percent of express deliveries in China are running on the Cainiao platform, a spokeswoman of the company told AllTechAsia.

Alibaba’s success in China provides a guidance for its expansion in India. It has poured more than USD 1 billion into the Indian market through investments.

Photo from Baidu Images

In the online shopping sector, Alibaba led a USD 500 million investment for Indian online shopping site Snapdeal in October 2015. It poured an additional USD 177 million into a similar site, Paytm E-Commerce, in March 2017, picking up a 36.31 percent stake in that company.

Its latest investment attempt involves a USD 200 million deal with India’s largest online grocer BigBasket as reported by Indian media in The Economic Times.

As for online payment services, Alibaba invested USD 680 million into India’s largest online payment company, Paytm, in September 2015 and increased its investment in the company in the beginning of 2017. Alibaba and its associates are the largest shareholders in One97 Communications, which owns Paytm and Paytm E-Commerce.

Alibaba’s actions in Indian logistics are less visible by comparison. In 2015, Alibaba began a partnership with Indian logistics firm Mypacco to develop its B2B business. Moreover, Paytm has started to work with logistics software firm LogiNext, hoping to copy Alibaba’s logistics and supply-chain models in India.

(Top photo from Baidu Images)

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