NEW DELHI: Amazon India is looking to move into online food retailing while Alibaba is investing in local m-commerce and payments business Paytm, as the two e-commerce giants edge towards a battle in the subcontinent.

Last week it was reported that Amazon was taking advantage of a relaxation of FDI rules and seeking approval to invest $500m in a wholly owned venture selling locally produced food items online.

The business has invested heavily in India in the past couple of years and during a quarterly earnings call last week, Brian T. Olsavasky, chief financial officer at Amazon, said the retailer was "bullish" on its long-term prospects in India. "It's early," he said, "but we like the initial engagement we're seeing.

"We continue to develop new functionality for that country, " he added, "whether it's delivery, whether it's seller features."

It's also targeting specific categories, such as children's fashions. "While young population is important, our share of buyers in the mid-30 years bracket is high, who are also likely to be parents," Arun Sirdeshmukh, head, Amazon Fashion India, told the Economic Times.

"The percentage of these people shopping with us on other verticals is high and this is a natural extension."

Alibaba, meanwhile, has not set up itself in India, preferring to take stakes in Snapdeal and Paytm E-commerce, the online retail arm of Paytm which is expected to launch Paytm Mall, an Indian version of Alibaba's Tmall online marketplace in China.

But observers have questioned whether Tmall's success can be replicated in India. Part of its business model involves the vertical integration of mobile payment facilities within what is effectively a walled garden, but that doesn't exist in India, where consumers are have become accustomed to searching for bargains across multiple sites.

"If Paytm users hadn't heard of Amazon, it would work, but that's not the case in India," ," said K Vaitheeswaran, a veteran of Indian e-commerce. "The smartest guy here is the Indian consumer," he told Tech in Asia.

"Whatever Alibaba brings, Amazon can match," he added. "The only way to win this is to provide superior customer experience – and Amazon holds the gold standard in that."

Data sourced from Economic Times, Times of India, Seeking Alpha, Tech in Asia; additional content by Warc staff