APR 20180 ALIBABA AND WHAT IT MEANS FOR E-COMMERCE
Today there are 2 ways you can meet someone- Either Physically or Online. Although, meeting someone online is the more subtle and shy way, nowadays it is also very modern and strategic. That’s exactly what Alibaba is doing. It is meeting Indian consumers indirectly through its various investments in Snapdeal, Paytm and now BigBasket! Think of it like testing the waters first, before diving deep into it. Alibaba entered India with its investments in Snapdeal and Paytm. Although, Snapdeal wasn’t much of a success, Paytm has been great for Alibaba (thanks to demonetization!) And recently it even increased its investment putting in $200 million in Paytm Mall. That’s not all, in the beginning of this year Alibaba also invested$300 million in BigBasket becoming its largest stakeholder and paving a way for a strategic partnership between the two.
All this great for e-commerce sellers in many ways. Right from giving them a taste of its success models to providing a sustainable platform to sell their products Alibaba will make a difference to E-commerce retailers in India in the following ways:
1. The concept of New Retail to India:
Alibaba CEO, Daniel Zhang in November, stated that the model followed by Paytm Mall – Omnichannel model (connecting Paytms users to offline retailers in the locality) has the pre-condition of the New Retail model- one of Alibaba’s core strategies. This strategy uses data and tech to improve and enhance offline retail operations- including customer experience, inventory management, and retail spaces. Under this concept, Alibaba launched ‘Hema’ in China bringing customer’s fresh food, eat in and home delivery facilities. If this model is brought to India through Bigbasket then it is likely to beat its rival Amazon Now.
The New Retail model will bring an online-offline connection, drive traffic to both online and offline retail stores and improve real value for customers and businesses. This February, PaytmMall introduced this New Retail model whereby customers can walk into physical stores, scan product QR codes, browse information and make purchases on the Paytm Mall app. If this model is a success it could be a game changer for e-commerce in India.
2. Bringing Smart Stores:
Using Alibaba’s data intelligence around 100,000 psychical stores, about a thousand brands, and FMCG outlets in China have been transformed to ‘Smart Stores’. These give businesses smarter insights about their customers. On the other hand Alibaba’s online ‘Tmall Stores’ use’s retail solutions with one-stop B2B supply, logistics, promotion, and other value-added services. If all this is brought to India it would only grow customer confidence and boost e-commerce.
With Alibaba’s entry into India, possibilities to join hands with them have opened up. A joint venture partnership with them could help Indian e-commerce companies to a great extent because until 2014 our biggest e-commerce companies only accounted for a fraction of what was Alibaba’s size. Even domestic companies will benefit if they are looking for a strategic investment from Alibaba. And finally, investors in Indian e-commerce companies that find it difficult to compete would be glad to sell a stake of their company to Alibaba.
Apart from investments and acquisitions, in-commerce and associated segments like logistics, it will also bridge the gap between offline-online stores. Along with Alibaba, Amazon too is open to investments but they will slightly more conservative than Alibaba. In the end, it’s all good news for e-commerce companies who are looking for funding or exits.
4. Giving groceries an edge over mobiles and fashion:
While Amazon and Flipkart have dominated the sale of mobile phones and fashion in retail e-commerce in India, Alibaba has decided to focus on groceries since it is a category that gives repeatedly. And, although Amazon started selling groceries Alibaba has an edge over them since it has over 20 years of global experience in this segment. Moreover, if Alibaba brings New Retail Model to BigBasket then it will be a major winner.
5. Continuing the discounts trend:
Amazon and Flipkart established their names in the Indian market by offering huge discounts and services. They spent heavily on marketing, logistics, storage, and transport to gain India’s attention and have made sales worth billions of dollars. But they still haven’t captured the entire online retail market in India. Since Alibaba has just entered Indian markets and hasn’t quite exhausted their budgets, they can afford to spend heavily on marketing and discount offers. This will also make other e-commerce companies continue giving offers and discounts to level with new entrant Alibaba. Apart from discounts, these e-commerce websites will also have to come up with new strategies like the New Retail model to improve e-commerce efficiency in India.
E-commerce in India is only growing year by year and becoming everyone’s favorite. With the government’s support, this segment only stands to grow further. Let’s hope giants like Alibaba continue seeing India’s potential making it the largest e-commerce market in the world.