Chinese goods already dominate the Indian market. Now it appears that they could dominate Indian ecommerce too through online marketplace Alibaba. Amazon may have to make way because Indian ecommerce is expecting a new foreign player!
Alibaba may not have set up its online platform as yet in Indian ecommerce however there are traces of them all over. The etailer has investments in Snapdeal and a Paytm owned communications firm One97. Flipkart recently tied up with an Alibaba owned mobile internet company to strengthen its m-commerce approach.
Online marketplace Alibaba showed interest in Indian online retail back in 2014. It was only in March 2016 that ecommerce giant confirmed plans to enter Indian ecommerce. 2016 may just be the year Alibaba makes a direct entry.
So why have they delayed for so long? Well the Chinese ecommerce major has been watching Indian ecommerce to understand it before jumping in. And it may have found a couple of concerning issues.
The new ecommerce guidelines from DIPP have Alibaba second guessing its decision to enter Indian ecommerce. The policy restricts online marketplace seller discounts among other restrictions and requirements.
100% FDI in online marketplaces comes with guidelines that cut down marketplace freedom to a particular degree. In the attempt to maintain a level playing field, the FDI policy restricts online marketplaces from engaging in activities that will directly and indirectly influence product and service prices. This makes it tough for those offering discounts, cash-backs and other similar incentives.
The guideline where a marketplace seller cannot contribute to more than 25% of sales is also making Alibaba nervous.
The high demand for cash on delivery by Indian consumers seems to alarm the Chinese marketplace. Another area of concern for them is the high rate of goods being returned.
Online trend watchers and ecommerce analysts feel Alibaba will experience a number of challenges that could sour its dreams of coming to India. Here are three specialist’s opinions:
Arvind Singhal, the founder of retail consultancy firm, Technopak, say ecommerce regulations will be the biggest obstacle in Alibaba’s way. The definition of discounts is very unclear. This makes it hard for an online marketplace to determine which incentives are acceptable and which are not.
An international analyst research firm executive claims Alibaba is working on issues with India’s customs department. He feels the foreign player will take on sellers with large volumes of Chinese goods as a unique selling strategy. The research analyst also said, with returns being a common trend among Indian consumers, the company will need to work on an efficient way to return Chinese merchandise.
Ecommerce Coalition secretary, Aamir Jariwala pointed out that re-export rules while shipping products back (in case of returns) will cause logistic trouble. The cost of returns could certainly exceed the price of returned products.
At least 60% of online consumers in India opt for COD and the average rate of product returns in India can range from 5-10% in some cases it can go as high as 25%! These figures give Alibaba every right to be concerned. Our country’s ecommerce seems to be becoming rigid from the etailer’s perspective and the lack of clarity on certain concepts makes it even harder to function efficiently!
So what’s it going to be, is Alibaba in or out?
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