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India has restrictions on foreign direct investment (FDI) in e-commerce, which limits Amazon India to being a marketplace for third-party sellers. Alibaba and Japan’s Rakuten, which opened a development center in India last year, seem wary of following the Amazon path. For now, Alibaba seems content to fight the e-commerce war by proxy, with investments in local rivals of Amazon.
Before investing in Snapdeal, Alibaba had made its first move with a stake in Paytm, a nimble player in the Indian mobile commerce space. Alibaba’s affiliate Ant Financial picked up a 25% stake in Paytm’s parent company One97 earlier this year for $700 million and is reported to be raising its stake to 40%.
What Alibaba brings to the table through its Indian partnerships is access to a vast Chinese market for sellers in India. As Jack Ma pointed out when he was in Delhi, Indian merchants are already the second biggest sellers on the Alibaba.com business-to-business marketplace after the Chinese. Indian tea, spices, and chocolates are hot sellers. The first two he could understand, but “I did not realize Indian chocolates were so popular,” said Ma, adding that it showed India has many great products to offer in the Chinese market.
