Smartphones help boost e-commerce

Plans by Alibaba to boost its presence are a sign of vast opportunity

Looking for trustworthy suppliers of agricultural produce in India can be a tough job for Fan Chengliang, a Chinese businessman who exports Indian spices to China. Fan, 40, launched his business in March last year in Hyderabad. During the harvest season, he had to travel hundreds of kilometres everyday to purchase peppers from the local dealers."For newcomers like me, it's difficult to appraise whether a supplier is credible or not. It always takes a long period to establish trustworthy relationships with local businessmen," Fan says.

However, finding reliable suppliers using online business-to-business services is expected to become easier for businessmen like Fan, after Alibaba Group Holding Ltd, China's largest e-commerce company, recently announced plans to boost its investment in India. On November 25, Jack Ma, founder and chairman of Alibaba, while visiting India, said that the nation offered huge potential for e-commerce.

"We will invest more in India and work with Indian entrepreneurs and technology companies," 50-year-old Ma said at the India-China (Zhejiang) Business Co-operation Conference. Alibaba currently has a small presence in the Indian e-commerce market. Ma, whose company is responsible for 80 per cent of online retail sales in China, made the announcement two months after Alibaba's record initial public offering in New York raised $25 billion.

"In the next three years, one of the key strategies for Alibaba is to globalise, to ensure that more small businesses around the world use our services," he said. According to Ma, Indian businesses have already become the second-largest presence on Alibaba after Chinese companies, and roughly 4 lakh Chinese customers buy goods including spices, chocolates and tea from Indian sellers through the online platform.

“There is huge scope for mutual engagement in technology between India and China, which could benefit many small businesses,” Ma added. The Economic Times, a Mumbai-based newspaper, said that during the visit, Ma was scheduled to meet Kunal Bahl, the 31-year-old co-founder of Snapdeal.com, which styles itself as the Indian version of Alibaba.

In October, Japan's Soft-Bank, the largest shareholder in Alibaba, pumped $ 627 million into Snapdeal to become the largest investor in the Indian online company as well. Gu Jianbing, public relations director of Alibaba, did not confirm if a meeting took place between Ma and Bahl. It remains unclear how Alibaba will cooperate with its Indian partners.

The Indian government does not allow foreign direct investment in business-to-consumer e-commerce, but it does so in marketplaces where third-party sellers sell directly to shoppers through e-commerce platforms. The online sales market in India is still at an early stage compared with China. According to Technopak Advisors, a New Delhi-based consulting company, the online trade volume in India was about $2 billion in 2013. The number was $300 billion in China at the same period. However, the large population of young people in India has made the market more promising and attractive for investors like Alibaba.

Mobile shopping

Cheap smartphones that are popular in India are also expected to boost the country's online trade volume. Bahl recently told Tencent Group, one of China's biggest Internet firms, that about 65 percent of Snapdeal's current sales were reached through mobile phones, far more than the 5 percent of only a year ago.

In India, smartphones are being sold in rural areas where "even the safety of purified water could not be guaranteed", Bahl told Tencent. Competition in the Indian e-commerce market has become fiercer with companies like Amazon, which entered India in 2013, stirring up the industry. Wal-Mart India has also taken its cash-and-carry wholesale stores into the virtual space, allowing customers to order online for home delivery.

India's aggressive homegrown companies such as Flipkart, a leading e-commerce website launched in 2007, have also become powerful competitors. In June, Flipkart raised $1 billion in new capital to support its expansion, especially in mobile technology.

Flipkart says it has 22 million registered users and handles 5 million shipments per month. "The number of visitors on Flipkart.com is greater than the population of the top 10 Indian cities," says the introduction on the company's official website.

For Fan, the Chinese businessman, the rapid growth of the Indian e-commerce market means more choices when he selects business partners. "If I can get more information about the suppliers through the internet, I will not have to travel hundreds of kilometers every day during the harvest season, enduring the stimulant smell of peppers," he said.