Alibaba Appeal Prompts Flipkart to Tap Chinese LearningAdi Narayan
Alibaba Group Holding Ltd., China’s largest e-commerce company, has fans in India seeking to script a similar path.
Sachin Bansal, co-founder and chief executive officer of Flipkart.com, India’s biggest online retailer, said yesterday that the Chinese company is a role model.
“Back in 2008, Amazon was the most dominant player in the market and the role model for a lot of people,” Bansal, 32, said in an interview. “India is different. We are going to build it in a different way here. For example, our role model today is actually Alibaba more than Amazon.”
Seven-year-old Flipkart yesterday agreed to acquire Indian clothing retailer Myntra.com in a move that will widen its lead over Amazon.com Inc. in Asia’s third-biggest economy. India’s Internet retail market is estimated to expand sevenfold to $22 billion by 2018, according to CLSA Asia-Pacific Markets, and competition from rivals such as EBay Inc. intensifies.
Flipkart is seeking to emulate Alibaba in going beyond e-commerce to build related businesses that include logistics, Internet payment gateways and mobile shopping solutions, Bansal said in Myntra’s office in Bengaluru, where most walls had illustrations of models in colorful dresses. The two nations’s markets are similar, consumers tend to behave in comparable ways, and e-commerce companies have had to build support infrastructure from scratch, he said.
Size of Market
Unlike counterparts in the U.S. and Europe, Alibaba has “developed the whole ecosystem: they play a large role in payments, they play a large role in seller development,” said Bansal, who was a software engineer at Amazon before starting Flipkart in 2007. “There is a lot of learning from the Chinese e-commerce market that we are looking to take and then apply here,”
The size and scope of the two Asian markets are contrasting.
Flipkart had a 4.9 percent share of the 170 billion rupees ($2.9 billion) of Internet retailing transactions in India in 2013, according to Euromonitor International estimates in a March report.
The value of transactions on Alibaba’s platforms was $248 billion last year. The number of annual active buyers rose 14 percent to 231 million, each placing an average of 49 orders over that period, according to Alibaba’s filing on May 6 in what could become the largest U.S. IPO ever.
China has about 618 million Internet users. In India, the number of Internet users is projected to reach 243 million by June, according to the Internet and Mobile Association of India.
The growth in China’s e-commerce market has been fueled partly by a widespread use of smartphones and a greater willingness of its population to shop online, said Sandeep Ladda, who heads the India technology practice for consultant PricewaterhouseCoopers in Mumbai. India has “a long way to go” before the market becomes comparable to China, he said.
“I don’t think this is an analogy, these are different markets,” Ladda said in a telephone interview. “Chinese consumers are more tech savvy.”
Chinese billionaire Jack Ma started the online marketplace in 1999. Alibaba provides various marketplaces for buyers and sellers, as well as services that help them conduct their businesses. Taobao Marketplace, founded in 2003, enables millions of individuals and small businesses to sell products. Tmall.com operates as a virtual shopping mall, with retailers and brands offering products. Alibaba’s other businesses include Juhuasuan, a flash-sales model, and eTao, a shopping search engine.
Sachin Bansal and Binny Bansal started Flipkart in 2007 as a seller of books and music CDs, where customers had the option to pay cash on delivery. The website now offers products including smartphones, cameras, home furnishings and jewelry.
Later, it switched from being a retailer that holds inventory, to a cheaper marketplace model where individual businesses can sell goods. It now has 3,000 sellers on its system, trailing domestic rivals including EBay-backed Snapdeal.com, which has more than 20,000. Flipkart’s early backers include Silicon Valley-based Accel Venture Partners, which made the biggest profit for any venture firm with its Facebook wager.
“We want to be a leader in every category,” Sachin Bansal said. “We want to be a public company someday, and that’s what we’re working towards. But it’s not at the top of the mind right now.”