Alibaba Running Into Expansion Troubles In India

Alibaba, China’s largest eCommerce marketplace, is facing problems in its native land as it deals with sluggish expansion due to a maturing population and user saturation.

But Alibaba is also facing problems elsewhere as it eyes an ambitious expansion strategy capped by an aggressive push into the world’s second most populous country, India (China is slightly ahead in terms of population with an estimated 1.383 billion people living inside its borders in 2016, while India has an estimated population of 1.329 billion people).

Alibaba’s been on an acquisition spree over the past two years — of which about a fourth of the companies it has acquired were based in India — but the Chinese eCommerce giant is still facing substantial barriers to establish a foothold in the lucrative Indian market, according to Seeking Alpha’s Ravi Thakkar.

In 2014, Alibaba invested $500 million into Paytm, Indian’s largest mobile payments platform, and invested another $500 million into Snapdeal, either India’s third or fourth largest online retailer depending on the figures. However, it has seen only “modest inroads” into the country as a result of these costly investments, according to Thakkar, a U.K.-based investor.

Rumors have also begun to swirl that Alibaba has had talks to acquire the online marketplace ShopClues and merge it with the Paytm online marketplace as a way to shore up its presence in India.

Still, all these acquisitions and investments still do not leave Alibaba with a relatively large share of the Indian market.

Amazon, one of Alibaba’s true global competitors, has already become India’s second-largest online marketplace and is beginning to threaten market leader Flipkart, with neither looking like they would be amenable to any type of partnership or investment from Alibaba anytime soon.

“Alibaba’s strategy for India looks like a patient, broad-based strategy,” said Thakkar, but he still doubts how successful it will be because the company faces substantial hurdles in India in terms of logistics, poor internet connections (except in major cities), unfamiliar government regulations and lower purchasing power.