Kotak Mahindra Bank, IDFC Bank and Aditya Birla Finance are the company's new partners in India
Alibaba, largest e-commerce entity in China, is setting up its first India office in Mumbai, apparently an indication that it would step up investment in the country in the coming year, to capture a pie of the growing e-commerce market here.
So far, the Jack Ma-founded enterprise has been a preferred platform for small businesses in India to source industrial goods from China. And, for vendors selling their products to customers globally. Alibaba has invested in Indian e-commerce company Snapdeal, and in Paytm, the mobile payments service platform, through Ant Financials, its payment arm.
It has, though, kept its plan to enter e-commerce in India under wraps. By setting up a office at Platina in the Bandra-Kurla Complex (BKC) in Mumbai, closer to that of US rival Amazon,it appears to now be signalling the intent that it is serious on entering.
“Given the kind of merchant network they have, India is definitely a potential market for them,” says Devangshu Dutta, chief executive of Third Eyesight, a consultancy for e-commerce firms. “There needs to be significant investment from Alibaba because Amazon is on a high and though Flipkart and Snapdeal are on a low, they’ve invested significant money in the delivery network.”
A mail to Alibaba did not elicit a response. Girish Shah, a director at The Wadhwa Group which owns the Platina building, confirmed the development.
“They are one of the most exciting and thriving e-commerce companies that have come to India, and we’re glad to provide them with 3,221 sq ft of a highly professional set-up, at a competitive rental rate, here in BKC,” he said.
Alibaba will pay rent of Rs 275 a sq ft monthly or a little over Rs 1 crore. This is in line with rents in the area, between Rs 250 to Rs 325 a sq ft. US-based Amazon has a 30,000 sq ft head office in the same BKC area.
India’s business to business (B2B) online retail market is estimated to grow by 2.5 times to Rs 45 lakh crore by 2020. In comparison, B2C (business to consumer) e-commerce is estimated to be only Rs 1.86 lakh crore by 2020.
“With Kotak Mahindra Bank, IDFC Bank and Aditya Birla Finance as Alibaba.com’s new partners in India, it was expected that they'd need an office in Mumbai sooner than later. Among other things, these partners will provide banking, transactional services and lending to Alibaba.com’s members. We expect the battle for market share to get more fierce between these firms,” said Raja Seetharaman, director at commercial property analytics firm Propstack.
India's $17-20 billion e-commerce market, expected to grow to $34 bn next year, is dominated by local giant Flipkart, followed by Amazon, which has committed at least $5 bn to bridge the gap. Snapdeal is a distant third.
Analysts say Alibaba might not get a walkover in India's e-commerce market, due to entrenched competition from Amazon and its Indian rivals. "It depends a lot on what strategy they adopt, what money they’re willing to pour in. India is a very different market from China," says Dutta.