Alibaba, the Chinese e-commerce giant is planning to enter the Indian e-commerce space, later this year. The group president Michael Evans and global managing director K Guru Gowrappan have already approached Tata Sons to discuss a possible partnership, a deal which could shake up the rapidly increasing online retail market in India, ET reports.
“It will take two-quarters for Alibaba to finalize a joint venture partner. It may or may not go with the Tata Group in the end but they are definitely talking. They would have discussed initial deal contours beyond online retail. India is set for a big consolidation in e-commerce,” a person familiar with the meeting told the publication.
The discussion with Tata Group’s chairman Cyrus Mistry would have also covered other areas such as omni-channel, offline stores and logistics for supporting the core e-commerce business of Alibaba Group.
“Several entities have appreciated our model and have expressed interest in it at different points of time. We do not wish to comment any further,” a Tata Sons spokesperson said.
“We have been exploring very carefully the e-commerce opportunity in this country, which we think is very exciting against the backdrop of Digital India,” Evans told reporters after his meeting with Communications and IT Minister Ravi Shankar Prasad, last week on Friday.
While the Indian e-commerce sector does not allow for FDI, there is currently no restriction on foreign funds in online marketplaces that connect sellers with buyers, a model that is adopted by Snapdeal, Flipkart and Amazon.
As of now, the Indian Internet market size stands at $16 billion, but by 2020, Morgan Stanley expects India to emerge as the world’s fastest-growing e-commerce market with Internet market size of $159 billion. While all of India’s e-commerce companies sold goods worth $16 billion in 2015, Alibaba sold goods worth $377 billion, a Morgan Stanley report states.
Alibaba has already made investments in Paytm and Snapdeal, and by expanding its e-commerce business, it aims to have a good footprint in India. Paytm is reportedly planning to decouple its payment business from its marketplace to pave the way for Alibaba’s India entry in the e-commerce play.
Besides launching several brands in India, the Tata Group has a good track record of maintaining cordial relations with its partners. This would probably give Alibaba a good boost in terms of infrastructure.
“Tatas are the best match for Alibaba given the scale and capabilities both these players possess. Alibaba is keen to create a strong back-end network before launching its online portal,” the person cited above added.