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India tops global e-commerce proxy war

Update On :09 March 2017

India tops global e-commerce proxy war

Global tech giants are heading for a proxy war in India. Alibaba is leading a USD 200 million investment into Paytm’s marketplace, creating a new Indian unicorn. It confirms the intention of the Chinese behemoth to take on Amazon, which is aggressively ramping up, investing USD 5 billion into its local operation as other homegrown rivals flail. Only one of the tech big boys will emerge victorious.

The USD 255 billion Chinese group and Paytm have already invested together to build a dominant mobile-wallet payment business, now worth around USD 5 billion. Their smaller e-commerce unit is now being separated out to meet Indian regulations. After the latest fundraising, Jack Ma's Alibaba and its own payments affiliate Ant Financial will effectively control the e-commerce company and continue to own a large stake in the payments arm, which must be majority Indian-owned.

Local rivals Flipkart and Snapdeal, backed by New York investment firm Tiger Global and Japan’s SoftBank, respectively, helped to establish the domestic e-commerce industry. But their future roles look uncertain as these global tech giants, with deeper pockets, get stuck into the market.

Privately owned Flipkart is fighting hard to maintain a narrow lead; investors now reckon it is worth as little as one third of its USD 15 billion peak in 2015. Meanwhile, the founders of Snapdeal are cutting costs and headcount; an email to employees admits errors in executing its strategy. Talk of a possible merger between Snapdeal and Paytm keeps surfacing in local media. That makes sense, given SoftBank already owns a near 30 percent stake in Alibaba and could lose a fortune fighting head-to-head to build market share.

For now, Indian e-commerce has become a free-for-all, and a stark contrast to China where foreign companies have struggled. But there isn’t room for everyone to financially succeed. Alibaba’s new commitment to Paytm E-commerce, following its success in building out a local mobile wallet business, puts it in a strong position. Fold in Snapdeal, and Amazon's Jeff Bezos would face a significant obstacle in the road to global domination.

News Source From : http://www.moneycontrol.com/news/business/india-becomes-frontglobal-e-commerce-proxy-war_8604121.html

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