Schlagwort-Archive: flipkart

Alibaba and Amazon hit India

Source: https://www.economist.com/news/special-report/21730539-e-commerce-giants-are-trying-export-their-success-alibaba-and-amazon-look-go-global

IN SEPTEMBER 2014 Jeff Bezos announced his first big investment in India, hopping aboard a colourful bus in Bangalore. It was the start of a rapid $5bn investment in India, part of Mr Bezos’s plans to take Amazon global. Two months later Alibaba’s Jack Ma appeared in Delhi. “We will invest more in India,” he declared. The following year Alibaba put $500m into Paytm, an Indian digital-payments company. This year it led a fundraising round for Paytm’s e-commerce arm. The two giants seem set for an epic clash in India.

But in their home markets they have so far stayed out of each other’s way. Amazon has only a tiny business in China. Alibaba’s strategy in the United States has been to help American businesses sell in China and vice versa. “People always ask me, when will you go to the US?” says Alibaba’s CEO, Mr Zhang. “And I say, why the US? Amazon did a fantastic job.” The two firms have mostly invested in different foreign markets: Alibaba across South-East Asia and Amazon across Europe. But much of the rest of the world is still up for grabs.

The biggest tussles will probably be over growing economies and cross-border commerce. Alibaba aspires to serve 2bn customers around the world within 20 years—a benevolent empire that supports businesses. In some cases it has begun with digital payments, as in India with Paytm. In others it has invested in e-commerce sites, as with Lazada, in South-East Asia. But it intends to build a broad range of services within each market, including payments, e-commerce and travel services, and then link local platforms with Alibaba’s in China.

Mr Ma wants to enable small firms to operate just as nimbly as big ones on the global stage. Alibaba helps Chinese companies sell in places such as Brazil and Russia, and assists foreign firms with marketing, logistics and customs in China. Eventually it hopes to use its technology to link logistics networks around the world so that any product can reach any buyer anywhere within 72 hours. That is still a long way off, but it gives a glimpse of the company’s staggering ambition.

Amazon already earns more than one-third of its revenue from e-commerce outside North America. Germany is its second-biggest market, followed by Japan and Britain. This year it bought Souq, an e-commerce firm in the Middle East. Its criteria for expansion elsewhere include the size of the population and the economy and the density of internet use, says Russ Grandinetti, head of Amazon’s international business. India has been one of its main testing grounds.

Amazon, like Alibaba, also wants to help suppliers in any country to sell their products abroad. An Amazon shopper in Mexico, for instance, can buy goods from America. Mr Grandinetti sees such cross-border sales as an increasingly important component of Amazon’s value to consumers and sellers alike.

Yet both companies run the risk that strategies which did well in their home countries may not succeed elsewhere. In China, for instance, the popularity of e-commerce relied on a number of special factors. China’s manufacturers often found themselves with excess supplies of clothes and shoes; Alibaba provided a place to sell them. Alipay thrived because few consumers had credit cards. China has also benefited from having cheap labour and lots of big cities—more than 100 of them with over 1m people—creating a density of demand that made it worthwhile for logistics firms to build distribution networks.

As they expand, however, Amazon’s and Alibaba’s business models may shift and, in some markets, start to converge. So far the companies have differed in important ways. Amazon owns inventory and warehouses; Alibaba does not. But Alibaba has a broader reach than Amazon, particularly with Ant Financial’s giant payments business. As Amazon grows, it may become more like Alibaba. In India, for instance, regulations prevent it from owning inventory directly. And Amazon recently won a licence from the Reserve Bank of India for a digital wallet. Alibaba, for its part, may become more like Amazon. As the Chinese firm set its sights on South-East Asia, it invested in SingPost, Singapore’s state postal system. In September it became the majority owner in Cainiao, a Chinese logistics network, and said it plans to spend $15bn on logistics in the next five years.

Their advances may be slowed by other rivals. Smaller firms can flourish in niches. Flipkart, whose backers include Naspers and SoftBank, is competing fiercely with Amazon in India; the two companies routinely bicker over which has the bigger market share. Yoox Net-a-Porter, an online luxury-goods seller, is also expanding around the world.

Among the questions facing the two giants are whether other technology firms will pour more money into e-commerce, and what partnerships might emerge. Tencent’s WeChat Pay is already challenging Alipay in China. About one-third of WeChat’s users in China shop on that platform. Tencent is trying to recruit shops to accept its payment app in other countries, too, and recently took a stake in Flipkart. In deploying its services abroad, Tencent might get a helping hand from Naspers. The South African company owns about one-third of Tencent and has backed e-commerce firms around the world. Facebook is now muscling in on this business by making it easier for its users to buy goods through its messaging service as well as its other platforms, WhatsApp and Instagram.

The A-list still stands

For now, however, Amazon and Alibaba remain each other’s most formidable international rivals. Success in e-commerce requires scale, which needs lots of capital. Local e-commerce firms in India have come under pressure from investors to boost profitability. Amazon has no problems on that score. As Amit Agarwal, head of Amazon India, puts it: “We will invest whatever it takes to make sure we provide a great customer experience.”

Big firms also have a natural advantage as they expand, because technologies developed for one market can be introduced across many. “It’s like a Lego set,” says Lazada’s chief executive, Maximilian Bittner. He can use pieces of Alibaba’s model, such as algorithms for product recommendations, to improve Lazada’s operations. Amazon’s investments in machine learning have myriad applications anywhere in the world.

That does not mean that Amazon and Alibaba will dominate every country around the world, nor that they will crush every competitor. Bob Van Dijk, chief executive of Naspers, maintains there is room for many operators: “I don’t believe in absolute hegemony.” But given the two giants’ ambitions and the benefits of scale, they are bound to become more powerful and compete directly in more places. That has implications for all sorts of industries, but particularly the retail sector.

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Amazon will continue to invest heavily in India

Amazon.com     Inc.     will     continue      investing  heavily  in  India,  the  chief   of its local operations said, dispelling  concerns of slower spending by the  US  e-commerce  company  after  its   chief financial officer Brian Olsavsky  said that while the India investments  were  starting  to  show  results,  they   had   hit   margins,   contributing   to    lower-than-expected  results  in  the   third quarter. “Not   at   all,”   Amazon’s   India   chief    Amit  Agarwal  said  in  an  interview   on   Monday   when   asked   whether    Amazon       would       slow       down        investments     in     India.     Amazon,      which  initially  said  it  would  invest   $2  billion  in  India,  had  said  in  June   that it would invest an additional $3  billion in the country. That investment is on track, Agarwal  said,  adding  that  the  company  is   “excited  about  the  momentum  that   we see in India”. “India is very early in its e-commerce  trajectory. Amazon is very early in its  e-commerce  trajectory  in  India.  To   transform how India buys is going  to take a long time; it will take a lot  of investment and… for many years.  This is just the beginning.” Amazon is betting big on its Prime  service in India and expects the  loyalty programme to dominate  sales in the coming months. “Prime continued to be the top seller  in all of October, not just for wave  one (of the Great Indian Festival).  Prime membership continues to  be a top seller and it is going to be  so going forward every month. My  belief is that Prime membership will  be the top seller every month based  on the trends that we are seeing,”  said Agarwal. On Monday, Amazon also said that  it witnessed record numbers during  its month-long Diwali sale event,  the Great Indian Festival, with sales  jumping 2.7 times from last year. This year’s Diwali sale has proven  to be the biggest showdown in the  history of Indian e-commerce, with  Amazon India and rival Flipkart  going all out to woo shoppers. While Flipkart claimed to outsell  Amazon India during the first leg of  the sale season, Amazon claims it  came back strongly during the latter  half of the sale season, with bigger  discounts in key categories such as  smartphones and large appliances. “October this year for us was 2.7  times of last year’s October—which  is incredible because last year was  4 times the October before,” said  Agarwal, adding that this growth  came even as “conversations”  suggested growth in India’s  e-commerce business was going to  be flat. Agarwal said that October could be  an inflection point for e-commerce  in India. “We had categories from  phones to Amazon Fashion to  appliances growing three to 11  times; even newer categories such  as luxury and beauty grew 46 times;  grocery and everyday consumables,  7.1 times; furniture, 11.8 times; gold  jewellery, eight times—so a lot of  these categories are showing robust  growth.” Agarwal said that 70% of the  company’s new customers in  October came from tier-II and tier-III  cities, adding that it was confident  of carrying the momentum from its  Diwali sale well into November and  December. Mint couldn’t independently verify  the numbers, but, in general,  all e-commerce marketplaces  (including Snapdeal, Amazon and  Flipkart’s smaller rival) did well in  October, carrying forward their  momentum from their annual sales. “When I look at the gaps between  the waves, our growth rates in those  gaps continued to the same extent.  We’re growing at 150% year-over- year. At peacetime, the growth rate  is still what I’m telling you. And as  we exit out of wave three (the third  sale event in October), we don’t see  a slowdown,” Agarwal said. “The broader e-commerce story is  not just a Flipkart-Amazon battle. Of  course, both Flipkart and Amazon  are trying to get a fair share of the pie  in key categories such as electronics,  fashion and large appliances. And  despite drags on margins, nobody is  going to reduce investments in India.  What you will see, however, is that  they will focus on innovation. For  example, during the festive season,  smartphone sales shot up and a lot  of the sales jumped due to things  like product exchanges. Another  new innovation was something like  Amazon Prime. So, you’ll see a lot of  that going forward,” said Sreedhar  Prasad, partner-e-commerce at  KPMG

5 sectors in India that are most innovative

Every few months, headhunting firms and recruitment consultants release surveys about hiring trends in the country and in the recent past, every survey has something for the Non Resident Indian.
India today, offers better employment opportunities as compared to some of its global peers.
But while landing a job in itself might not be difficult, there are some sectors that are keenly looking out to hire those with global experience. “Some sectors require a certain level of skill and experience that are not available within India Companies in these sectors look at hiring from outside India. And if you are an NRI, with these sought after skills, you might just be the right person the company is looking for,” says Aseem Juneja, a cross border talent expert and founder of Indbound.com.
And while the salaries in India tend to be around 40-70% of dollar salaries, because these skills are much in demand, salaries can be much higher. Kris Lakshmikanth Founder CEO of The Head Hunters India Pvt Ltd.
Says, “Salaries could go up to 100% of dollar salaries in a lot of these cases.”
So which are these sectors? Let’s take a look.

1) HEALTHCARE
Healthcare here mainly includes biotechnology, contract research and manufacturing, clinical research and pharmaceutics.
According to this E&Y Report , the Indian biotechnology sector was valued at USD 4 billion in 2010 growing at nearly 21%, in value over 2000-2010. It is estimated that as of 2012, the Indian CRAMS sector (Contract Research and Manufacturing) will be valued at USD 7.6 billion growing at a CAGR of 47.2% from 2007 till 2012. Express Pharma envisaged that by 201 India would be conducting 15% of all global clinical trials.

“India is fast becoming a hub for outsourcing in the healthcare sector,” says Kris Lakshmikanth Founder CEO of The Head Hunters India Pvt Ltd, adding, “Multinational companies like Pfizer, Novartis, Eli Lilly etc look at India as a skilled and cost effective hub to outsource certain functions. This includes research in areas like stem cell and vaccinations, contract research and clinical re search. While the employees of these outfits are largely from within India, the leadership team of these units is typically those with global experience.”
“Typically, those with a post doctoral qualification with research experience in the US would fit the bill,” he says.

2) TELECOM
“The telecom sector in India has seen an explosive growth in subscriber base and volumes. However, margins in voice based service are thin and companies are looking beyond voice. They are looking at value added services (VAS) and the availability of high bandwidth, upgrades and rollouts of technologies (3G etc) is making that possible,” Juneja explains.
This report from PriceWaterhouse Coopers states: The mobile tariffs in India are one of the lowest in the world and due to hypercompetition in telecom it is not expected to rise in near future. VAS remains only effective tool to increase the ARPU/share of wallet of subscribers. Multilingual content, application support around languages, killer applications and readiness of handsets could drive over Rs 55,000 crore of VAS revenue by 2015.
With the launch of 3G services and expected launch of high bandwidth BWA services, VAS currently has reached its inflexion point.
The constituents of VAS ecosystem such as mobile operators, content creator, handset manufacturer will need to show greater collaboration to achieve full potential of VAS.
“Companies need people to build applications and bring innovative services to the table. And currently, much of these skill sets are only available in the developed markets like the US,” Juneja says.

3) INFRASTRUCTURE
According to this McKinsey Report India’s Eleventh 5-year plan envisages infrastructure investments of close to USD 500 billion with USD 430 billion of this in the core transport and utility sectors. About one fourth of this is expected to be met through Public Private Partnerships.
As the Government in India slowly opens up the infrastructure sector to private companies, the need for experts in this area is increasing.
“Be it building ports, roads, even nuclear plants, private companies are looking to hire individuals who have the experience in infrastructure development,” Juneja says.
Having said that, Lakshmikanth adds, “In this sector, companies are looking at experts from countries like Australia and not so much the US. The infrastructure development in the US happened a long time back. The more modern developments have happened in countries like Australia.”

4) E-COMMERCE
The entry of Amazon.com in India has cast away any doubts about the future of Ecommerce in India. This report says that some USD 3 billion worth of e-commerce was transacted in 201 And, according to Helion Venture Partners, USD 20 billion worth of e-commerce will be done in five to seven years, with 12-15% of shopping going online in this period.
“As Indian Ecommerce and deal companies like Flipkart, Snapdeal etc become popular there is an increasing need for people who have worked in Ecommerce environments – those who can create infrastructure to handle large traffic, build applications, enhance user experience etc,” says Lakshmikanth.
Companies in the US are far ahead in terms of Ecommerce, so as an NRI who has worked in that sector in the US, you will be much sought after in India.

5) INFORMATION TECHNOLOGY
While India continues to remain a hub for cost effective technology operations, certain niche technology operations still require global expertise.
“Technology companies in India for instance might be building a DNA sequencing program for multinational healthcare companies. The functional support for this program will most likely come from someone who has that kind of research background which is available in developed markets” Lakshmikanth says. Juneja too cites the example of pharma analytics as an area that needs expertise from developed markets.
Another area – large logistics and supply chain companies that use Indian technology companies to build their modules. “These companies typically need global experts to offer functional support,” Juneja says.
In addition to the above, smaller sectors in areas like wine making, gaming etc which are starting to become popular in India are hiring those with global expertise. According to some estimates, wine consumption in India is expected to grow by 25-30% annually between 2009 and 2012 and the Indian Gaming Industry is expected to grow at acompounded annual growth rate of 32% to Rs. 3,100 crore by 2014.

Contact us for further information at innovation@dieIdee.eu
Quelle: India Newsletter 02.2012 published by the Indian Embassy of Vienna