Chinese ecommerce giant Alibaba has approached Tata Sons for a possible partnership as it looks to set up shop in India later this year in a development that looks set to shake up the country’s rapidly growing online retail market. Alibaba Group president Michael Evans and global managing director K Guru Gowrappan met Tata Group’s Chairman Cyrus Mistry recently to discuss a partnership possibility. “It will take two quarters for Alibaba to finalise a joint venture partner. It may or may not go with the Tata Group in the end but they are definitely talking,” said a person with knowledge of the meeting. “They would have discussed initial deal contours beyond online retail.” The discussion would have also covered areas such as logistics, offline stores and omni-channel to support Alibaba’s core ecommerce business, the person said. Alibaba could have approached others, including another ecommerce company. “India is set for a big consolidation in ecommerce,” said the person. An Alibaba spokesperson said it does not comment on speculation as a matter of policy. A Tata Sons spokesperson said, “Several entities have appreciated our model and have expressed interest in it at different points of time. We do not wish to comment any further.” Evans had said in Delhi on Friday that the company plans to enter India’s ecommerce segment this year. “We have been exploring very carefully the ecommerce opportunity in this country, which we think is very exciting against the backdrop of Digital India,” Evans told reporters after meeting Communications and IT Minister Ravi Shankar Prasad. FDI is still not allowed in the ecommerce sector but there are no restrictions on foreign funds in online marketplaces—the model adopted by the big three of Amazon, Flipkart and Snapdeal— that connect sellers with buyers. Morgan Stanley estimates the total Indian internet market size will grow to $159 billion by 2020 to emerge as the fastest-growing ecommerce market globally, from $16 billion now. To put things in perspective, Alibaba sold goods worth $377 billion in 2015, compared with around $16 billion by all of India’s ecommerce companies put together, according to Morgan Stanley. Tata Group, a salt-to-steel conglomerate with combined sales of $108.78 billion, has been a launch pad for several marquee consumer brands in the country. Retail arm Trent has two major partnerships— with the world’s largest apparel firm Inditex to sell its Zara brand and an equal joint venture with UK’s Tesco, the world’s second largest retailer. The biggest coffee chain Starbucks has entered India through an alliance with Tata Global Beverages. “Tatas are the best match for Alibaba given the scale and capabilities both these players possess,” said the person cited above. “Alibaba is keen to create a strong back-end network before launching its online portal.” Unlike Amazon, which relies on third-party service provider for most of its logistics, Alibaba owns a consortium of companies connecting a network of logistics providers, warehouses and distribution centres to create a platform that serves smaller towns and the hinterland well. In China, its arm Cainiao works with 15 strategic partners, collectively operating 1,800 distribution centres, 1 million delivery stations and 25,000 pickup spots.
Source: Economic TimesAlibaba may tieup with Tatas to venture into online retail market in India
Industry: Retail 2016-03-21
