Alibaba Spearheads Chinese Investment into India’s e-Commerce Market

November 28, 2014 Posted by India Briefing Reading Time: 4 minutes

DELHI – Jack Ma, founder and chairman of the Alibaba Group and the richest person in China, has indicated that Alibaba is looking to invest more in India as it continues to expand its services. The company’s recent IPO in September raised a massive US $25 billion; funds which could be used for it to expand its operations further outside of China.

Ma this week concluded a visit to India as part of a Chinese business delegation and said he was looking to, “work with Indian entrepreneurs and technologists to improve the relationship of the two nations”. China recently became India’s largest trading partner, and Xi Jinping said on an earlier visit to Delhi that China would invest $20 billion in India over the next five years.

With over 1.3 million suppliers listed on Alibaba’s Indian website, India is the largest sourcing destination for the company outside of mainland China; second only to China’s 8.2 million. Approximately 400,000 consumers in China buy products from Indian businesses, including chocolate, spices and teas.

Geographical proximity to China and a disorganized distribution network make India a compelling market for Alibaba. Although India does not allow foreign investment in online retail, the impact of this law on Alibaba will be minimal. This is because the e-commerce giant only provides a marketplace without owning any inventory itself.

Alibaba could enter India as a joint venture partner with one of India’s smaller e-commerce sites. The most likely partner is Snapdeal, which has the most users of any Indian e-commerce site. Kunal Bahl, a co-founder of Snapdeal, has already met with Jack Ma and Bahl has openly stated that its business model closely resembles Alibaba’s.

In addition, the Japanese corporation Softbank is a common investor in both Alibaba and Snapdeal. Softbank recently invested $627 million in the Indian company and, with a 32 percent stake, is also the largest shareholder of Alibaba. Bahl said: “That’s why Softbank invested. They understand the Alibaba model really well. And they saw that in the Indian context we are closer to that model than anyone else”.

However, Amazon may also be trying to create a joint partnership with an Indian e-commerce site called Jabong. If these deals go through it could put Amazon in competition with Alibaba in India. It is also an interesting parallel for Chinese companies competing with Western companies in emerging economies.

Trade between India and China has been increasing quickly. The value of bilateral trade has surged from under US $3 billion in 2000 to nearly US $52 billion in 2008. China-India trade is growing nearly three times as fast as US-China trade.

However, levels of investment between China and India are still relatively low as companies from each are still learning to operate in the other’s economies. Alibaba’s interest in India shows that this may be changing for the better.

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