Alibaba has hair-raising business plans for India

Chinese e-commerce group seeks to tap growing demands of the West, including US and UK, for hair extensions and wigs

Chinese e-commerce group Alibaba is betting big on Indian hair to meet the growing demand from the West, including the US and the UK. The privately-owned Hangzhou-based group, which has been in news for its impending IPO, is already sourcing human hair from the southern regions of India and has identified this category as a “big opportunity”, along with others like machinery, agro products, apparel and spices.

Khalid Isar, country general manager, Alibaba.com India, told Business Standard in an interview that “many customers I’ve met have said Indian hair is appealing to a diverse range of users around the world, as Indians use natural remedies for keeping their hair thick, long and beautiful.” Alibaba.com, a business-to-business (B2B) portal, provides a platform for Indian small and medium enterprises to export their products to global buyers. “The opportunity for Indian SMEs with human hair extensions is just one among the many,” Isar said.

WHAT’S ALIBABA?

• A Chinese company; a B2B platform with presence in India; handles sales between importers and exporters from 240 countries
• Alibaba IPO expected in 2014; valuation estimated at $55-120 bn earlier this year
• $170 bn: The company’s portals together handled 1.1-trillion-yuan sales in 2012, competing with Amazon and eBay

WHAT’S HAIR BUSINESS?

• India is the second-largest supplier of hair extensions on Alibaba.com (after China), while the US is the largest buyer
• Among other prominent buyers of Indian hair are Canada, Germany, Brazil, Sweden and Switzerland Rs 2,500 cr a year: Estimated size of India’s hair sale market Rs 200 cr: Estimated annual proceeds from Tirumala Tirupati hair auction

Statistics compiled by Alibaba.com show India is the second-largest supplier market of hair extensions on the portal after China. The country accounted for five per cent of all buyer enquiries for hair extensions in the third quarter of 2013, according to the company. The celebrity culture had made hair extensions more popular in international markets, presenting a growing opportunity for Indian hair suppliers, the study pointed out. While the US is the largest buyer of hair extensions from India, with 50 per cent of the enquiries in this category coming from that country, others like France and the UK are also picking up pace. Canada, Germany, Brazil, South Africa, Sweden and Switzerland are among the other prominent buyer markets.

The size of India’s hair sale and auction market is estimated at around Rs 2,500 crore a year - and growing 10-30 per cent annually. A bulky chunk of revenue for Andhra Pradesh’s Tirumala Tirupati temple, considered the richest temple in the country, comes from e-auction of hair donated by devotees. In 2011-12, the temple raised Rs 200 crore from hair auction; its total revenue that year was Rs 1,949 crore.

Though experts say there is nothing illegal about buying or selling human hair, it's a territory that most e-commerce companies fear to tread. American e-commerce platform eBay, for instance, said it did not deal in hair. A representative of an online platform, when asked about hair trade, told this newspaper the company was not into anything “objectionable”.

Arvind Singhal, founder & chairman of retail consultancy firm Technopak argued trading in hair was legal and that it was a niche export from India. He added there would be terms and conditions attached, such as in the case of regulations for export of agro products.

According to Venkatesan Munuswamy, proprietor, Om SakthiMurugan Enterprises, a manufacturer involved in processing 100 per cent natural human hair, "there has been a demand from key international markets like the US and UK."

Meanwhile, Alibaba.com’s Isar said, India was the largest supplier market (after China) on the portal. “We believe Indian suppliers stand out because of their ability to offer quality products at better price points, as the labour and raw material prices remain low.” The top three supplier categories from India on the portal are machinery (nine per cent), agriculture (eight per cent) and apparel (seven per cent). Other growing categories include automobile components, spices and textiles. As of June 2013, there were more than 3.3 million registered members from India on Alibaba.com's international marketplace.

The group has focused on B2B in India, but it has yet to make a retail foray in the country. Aliexpress.com, which allows small buyers to purchase products at wholesale rates, is part of the Alibaba group. Isar said entry of Aliexpress into the Indian market could not be ruled out, but there was nothing on that yet. Taobao, the leading Chinese consumer portal of the group, too, does not have any presence here. Indian law does not allow FDI in e-commerce companies.