Chinese e-commerce giant Alibaba is apparently rewriting its India playbook with a potential shift in strategy to invest in smaller verticals. The world's largest e-commerce firm that is behind online retail market leaders Amazon and Walmart-owned Flipkart in India seems to be rethinking the strategy of large corporate takeovers in favour of smaller investments, a media report says.
The shift in strategy follows Jack Ma-led Alibaba's apparent disappointments from the failure of its large e-commerce bets in India including Snapdeal and Paytm Mall to achieve the intended outcomes. They have lagged behind the e-commerce market dominated by Flipkart and Amazon. Economic Times recently reported that Paytm Mall's strategy of deep discounts and an annual loss of Rs 1,787 crore have triggered Alibaba's rethink. It reckons that Paytm's volumes, driven largely by cash-backs, would not make it a sustainable business.
In sharp contrast, Alibaba's Chinese rival Tencent has adopted a small investments route leading to considerable success. Tencent's Indian investment portfolio includes Flipkart, Ola, Swiggy and Byju's, all of which are among the country's most valuable internet companies.
Alibaba's investments, meanwhile, have stagnated except for the investment in Paytm. The company's portfolio includes app-based grocery delivery firm BigBasket, food delivery firm Zomato and e-commerce logistics firm Xpressbees.
The Indian experience so far has led Alibaba to reconsider its strategy, sources say. "In China as well as other countries, Alibaba has a three-pronged investment strategy of e-commerce, payments and logistics. Now, if e-commerce, the biggest of those, stumbles, it will look for different bets," said a source aware of Alibaba's plans, according to a report in Mint. "Alibaba truly believes that e-commerce can change the lives of millions of people. But after their experience in India, today if an e-commerce firm comes to them, they will be a lot more cautious to see how it will differentiate from every other existing game in town."
Alibaba is betting on its $100-million investment in venture capital fund, BAce Capital, which is anchored by Ant Financial, the payments affiliate of Alibaba for implementing the new strategy. "Alibaba established a separate team for BAce because they needed an independent chain of command and independent valuation procedure to go fast on small deals," the report quotes another source as saying. Such deals would range from $250,000 to $15 million. BAce's first investment was $8-million in Healofy, a Bengaluru-based pregnancy and parenting platform. Alibaba also made a $2-million investment in Noida-based Vidooly in February. Vidooly is an online video analytics and marketing software.
