Jack Ma, the iconic founder of Alibaba, the Chinese e-commerce company, is more a kind of a deceptive boxer that always stands up in the ring every time the opponent thinks he has been punched to knock out. He has a never say die approach. He wanted to be in Harvard, but rejected not once, twice or thrice, but 10 times.
Finally, he was not selected, but it actually helped him. He made a global e-commerce empire. His latest obsession is to enter in India and for that he is ready to have a fierce fight with Amazon’s Jeff Bezos.
He is trying hard to enter in rings. In one of his statements, Jack Ma, Chairman of Alibaba Group, had said that India is a crucial market and Alibaba must have a strategy to crack it
The battle will be really interesting with the entry of this e-commerce dragon. Other three players Amazon, Flipkart, Snapdeal now will have to recalibrate their moves and strategies according to how Alibaba plans its plots.
What has been the scenario for Aibaba in India?
Alibaba has been in the B2B segment so far competing with homegrown Indiamart. It has been trying to enter B2B space for a long time. It tied up with Paytm to add 1 million Chinese sellers on its payment platform. In B2B space it has 4.5 million sellers on board in India.
Its attempt to enter in the B2C space has foiled so far. All this seems to change when Alibaba Group president Michael Evans and global managing director K Guru Gowrappan met Communication minister Ravishankar Prasad.
Alibaba is very keen to enter India to exploit the lucrative e-commerce market which according to Assocham, reached $38 billion. It has emerged as a significant battlefield for the world’s largest e-commerce companies.Electronics and fashion category were increasing at the rate of 3-5 percent in 2014, which is now 25-30 percent.
It does not sell anything directly in India. It has bought a stake of 40 percent in Paytm and has a 5% stake in Snapdeal. In order to seize the opportunity, it can even buy an existing e-commerce company such as Flipkart or Snapdeal.
It understands that it will need a credible Indian partner to penetrate the online commerce market in India. It has reportedly approached Tatas to enter in the online retail segment.
So some big news is seriously awaited in the sector. Though many experts feels that Alibaba is late, but it’s not entirely true. They have an indirect presence and understanding of Indian market because of their presence in B2B space.
“Alibaba is familiar with India. They are not late. They have their inherent strengths and a good backend. The only issue in the B2C segment for them is that whether consumers will see it as “China ka maal (product of China)”. says Prof. Pradeep Pendse, Dean of e-business at Welingkar Institute of Management. Industry experts also expect a possible buyout of Flipkart by Alibaba—which will be a good thing for both Alibaba and Flipkart.
Fierce war ahead in India in e-commerce
Though he is from the country of dragons, but he is more like a tiger which waits for long to pounce on its prey at right time. The entry of Alibaba in India will bring an interesting twist in the existing battle. All three major powers US’ Amazon, China’s Alibaba and India’s Flipkart, Snapdeal, Paytm and Shopclues are fighting a fierce battle.
Alibaba will not face infrastructure related problem as it has its own payment wallet, and logistics unit Aliexpress and a well-established technical center. Therefore, it will adopt an Amazon’s marketplace model in which there is no FDI restriction.
“They have their own people, payment gateway, and most importantly their B2B business. The current ecommerce players are highly priced. So, they can come on their own, too,” says Arvind Singhal, Chairman and Managing Director of Technopak, a consultancy firm.
How the battle will rollout
Flipkart’s valuation is around $11 after a markdown by Morgan Stanley, Snapdeal’s is around somewhere between $6.5-$7 billion and Alibaba will be funded by $8 billion, so it’s on stronger footing to take on its rivals.
Amazon’s position in the country has grown strength by strength. It entered in India in 2014 and registered a good response. Since then it has clocked a good seller base and caters to the wide network of sellers.
The company has $2 billion investment plan to ramp up infrastructure and also a $5 billion mobile wallet payment for which it is negotiating with RBI. Amazon will the strongest contender of Alibaba after it’s entry in India.
The real strength of Amazon can be gauged from the fact that unlike its competitors, it has not been raising fund from investors.
Another advantage with Alibaba is that it’s profitable. Amazon, on the other hand, is still not profitable. Alibaba revenue may be low presently, but it is steadily growing. Also, Alibaba revenue is quite diverse compared to Amazon.
This may help them buy an existing big player rather cheaply. As of now India does not allow 100% FDI in B2B e-commerce portal, 51 percent FDI in multi-brand B2B segment. Government in India is another roadblock.
Chinese companies are seen with skepticism in this country. “It will be tough for this Chinese company to come alone. Huawei issue is a good precursor. There are issues related to data and privacy.” says Vivek Srinivasan, co- founder of Prudence Advisors.
The time seems ripe for the entry of Alibaba. It is well poised to take on Amazon, but it will have to take the help of its Indian friends such as Snapdeal and Paytm. The great showdown between United States and China is going to start very soon.
It will be interesting to watch who wins. The crouching tiger must have a few tricks rolled up in his sleeves. He has done many improbables in his life. From being an English teacher to the founder of one of the world’s one of the biggest e-commerce platforms.
Personal traits will play a big role in Amazon vs Alibaba
Amazon’s Jeff Bezos is paranoid about customer experience. This is why he enjoys a formidable reputation among their customers. He said:
“We have so many customers who treat us so well, and we have the right kind of culture that obsesses over the customer.”
If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience and that really does matters.” said Jeff Bezos, the Amazon’s founder.
On the other hand, common consumers are not his strength. Speaking at Stanford in 2013, Ma clearly said:
“Alibaba is not a company for consumers […] I knew that we didn’t have the right DNA to become a consumer company. The world is changing very fast, and it’s hard to gauge consumers’ needs. Small businesses know more about the needs of their customers. We had to empower our power sellers and our SME’s to support their customers”
Alibaba’s strength to understand the small businesses and sellers gives it an unique advantage. Amazon squeezes sellers to pass its benefit to consumers. Alibaba respects its sellers with much more respect. Their sellers earn more than Amazon’s.
“With its strong presence into B2B in India, Alibaba may amaze Amazon, snap the deal from Snapdeal and Flip the cart of Flipkart. “
Alibaba founder does not believe in meticulous planning; Jeff Bezos, on the other hand, is a meticulous planner. Amazon’s founder love science fiction. He invested huge money in space rocket making company Blue Origin. His life revolves around space amusement parks and all types of science fantasies. He is even planning to go in space. Jack Ma, on the other hand, is much more grounded. Ma has started up with Jet Li to start a Tai Chi school. He is an accomplished Chi Master. He has the mantra:
“Today is cruel. Tomorrow is crueler. And the day after tomorrow is beautiful.”
Dragon, in the past, has always a tendency to conceal more than it reveals. Therefore, the rumour of direct entry could be hogwash as well. Whoever wins or loses in the game, but it will be certainly one of the most fascinating and interesting business battles in one of the most complex and unpredictable markets in world.