 "Jack Ma")
Chinese e-commerce giant Alibaba has decided to play it big in India. In doing so, it has chosen the route it is best at - business to business.
In particular, Alibaba is betting big on what is emerging as the flavour of the season: the small and medium enterprises. Whether it is Amazon, Flipkart or Facebook, the small and medium businesses are increasingly gaining importance in their scheme of things.
| ALIBABA IN INDIA |
SOURCE: Industry |
In another sign of what's to come, the Alibaba group has also invested in the Vijay Shekhar Sharma-led e-wallet company Paytm and Kunal Bahl's Snapdeal. By investing in these prominent e-commerce companies, Alibaba is ensuring an indirect presence in the growing internet business in the country so that, if it feels the need, it can look at a more serious engagement in this space at a later date.
However, for now, Alibaba, which has long been anticipated to take a plunge into the Indian e-commerce world directly, has made it clear that it is putting all its strength behind the small and medium businesses.
Alibaba has taken its time to thrash out its strategy. In a teaser of sorts, Jack Ma, founder and executive chairman of Alibaba, met Prime Minister Narendra Modi both in India and overseas a few times, talking about the potential of small and medium businesses online and partnership with the government for Digital India, before firming up his plans.
Going after wholesale
Over the next few months, Alibaba, through its subsidiary Alibaba.com, plans to more than double the count of Indian merchants on its platform. From 4.5 million now, the number is set to rise to 10 million, says Timothy Leung, in charge of global business development for Alibaba. Globally, there are around 40 million merchants on the Alibaba platform.
To connect with this segment, the company has also created an online platform called SMILE, or Small and Medium Industries Leveraging Export, to provide these small businessmen a global network. Other related services, such as credit facility through banks as well as logistics solutions, are also being provided through the platform. The company is also planning a Hindi portal for its B2B business.
"We are the number one B2B platform in the world. In India, our goal is to reach out to 10 million small and medium enterprises and help them trade on our website. We will help them in getting trained, give them the exposure they need and help them grow," Leung had told Business Standard in an interview earlier.
The platform has buyers and suppliers from 190 countries. From India, the popular categories of trading would be gems and jewellery, textiles and food & beverages. "'We want Indian small and medium enterprises (estimated to be 45 million) to make in India and export to the world," explained Leung.
A recipe for success?
Indeed, the potential to do business in the wholesale space in India is huge. "India continues to have old-style inefficient wholesale markets, and the opportunity is big in this space,'' says Arvind Singhal, founder, Technopak, a retail consultancy.
According to Singhal, the Indian B2B market is estimated at close to $400 billion (Rs 26 lakh crore) with medium and small enterprises enjoying a substantial share of it. Given that the market is largely unorganised, any attempt to bring together buyers and sellers on an e-commerce platform could immediately shift 10-20 per cent of the business online. In the near-term, he believes 50 per cent of the total wholesale business will become internet-based.
It's an opportunity many brick and mortar retailers have set their sights on too. Walmart, for example, which entered India to be a big player in multi-brand retail, changed its course midway to focus exclusively on wholesale business. While its decision was partly driven by the uncertainty on the country's retail policy, business exigencies had a role to play too.
Others are paying attention to this segment as well. In April, Amazon launched a website for small business owners and traders in India to procure supplies. Facebook has set up what it calls a SME Council to enable its 2 million Indian small and medium businessmen on its platform to share feedback and discuss ideas around leveraging technology to grow their enterprise, and players like Flipkart and Snapdeal are helping sellers (mainly small and medium enterprises) on their platforms access loans.
The government policies are supportive in this space: 100 per cent foreign investment is allowed in wholesale retail and the restriction on small manufacturers on selling goods online has been recently lifted.
The timing might be just right for Alibaba to look to India for growth. As the company fights on various fronts at home, including allegations of counterfeit products being sold on its site, it may find comfort in aiming for a stronger base in India. In the year ended March 2015, Alibaba.com reported a 14 per cent drop in revenue from commissions at Rs 18 crore, even though for the full year it managed to post a profit of Rs 1.3 crore.
