外文标题：Can any Indian e-commerce player replicate the success of Alibaba?
NEW DELHI/BANGALORE: When an online commerce company set up by a former English teacher in China makes a stunning debut on the US bourses, questions are bound to arise as to whether an Indian player can replicate the success.
While success in entrepreneurship is largely due to individual brilliance — as is evident from Alibaba’s and its founder Jack Ma’s spectacular IPO last week — other factors, including investment climate and government regulations, do play a key part.
Hangzhou, China-based Alibaba’s shares soared almost 40% in its first day of trading on New York Stock Exchange as investors fought over a piece of what is expected to be the largest IPO in history
While India ticks all the right boxes when it comes to demand and potential for growth, the jury is out if an Indian ecommerce player would be able to do what Alibaba did within the next few years.
Industry pundits point out that India’s ecommerce sector is at a stage where China was in 2007, but a combination of factors — such as low Internet penetration, supply chain and logistics hurdles and an archaic regulatory regime — act as barriers. “One cannot have this scale if you don’t think of going global.
I don’t see any company in India working toward that right now,” said Rachna Nath, leader of retail and consumer at PricewaterhouseCoopers India. “That is the need of the hour.”
According to a recent report by investment bank Avendus Capital, India’s online commerce sector, currently valued at $3.1 billion (Rs 18,800 crore), is expected to gross about $5 billion (Rs 30,500 crore) by end of the current year, and is projected to hit over $11.8 billion (Rs 71,800 crore) in sales by end of 2015.
Impressive, but still tiny compared with the $542 billion (Rs 33 lakh crore) that China’s ecommerce, which contributes more than 3% to the country’s GDP, is expected to touch by 2015. “It’s unfair to expect that we will produce a company the size of Alibaba right away, given the difference in basic denominators, such as GDP and retail market size of the two countries,” said Kunal Bahl, co-founder and chief executive of Snapdeal.
According to Bahl, the strategy is to build an ecommerce company for the Indian market, and not to ape existing business models. “If you went to China in 2007-08, you would be asking the same questions of them, as you’re asking about India’s ecommerce sector now,” said Bahl.
“It’s not common to see billion- dollar businesses growing 300- 400% year-on-year. It’s an unusual thing. I don’t think there’s any other industry in India growing at that kind of pace.”
Regulatory roadblocks, however, continue to be a cause for concern, with Amazon India’s recent tax issues with the Karnataka government highlighting the dissonance between prevailing tax norms and the demands of growth.
“The Centre needs to address a whole gamut of tax-related issues for retail industry, not just ecommerce. Otherwise, the ecommerce firms will be at the mercy of local tax officials in different states,” said Arvind Singhal, chairman of retail advisory firm Technopak.
High cost of customer acquisition incurred by India’s ecommerce companies, adding to already-significant burn rates, is also a cause for concern. The average aggregate cost of acquiring users is estimated at between Rs 500 and Rs 1,000.
“Establishing ‘stickiness’ is going to be an issue. There will always be margin pressure to keep prices low, given that customers tend to switch easily,” said Ajay Relan, founder and managing partner of private equity firm CX Partners.
On a per-dollar basis, private equity investors earn more from their investments in China than in India.
Barriers notwithstanding, bigger ecommerce ventures in the country such as Bangalore-based Flipkart and Delhi-based Snapdeal, are building up technology platforms investing in infrastructure. “Reach is still limited. What is really desirable is the ability to deliver, manage logistics,” said PwC’s Nath.
In May, Snapdeal launched 40 fulfilment centres or warehouses across 15 cities, and said it plans on launching more over the next few months. Rival Flipkart runs about six such warehouses.