The Chinese e-commerce giant Alibaba Group and Indian associate PayTM are reportedly in advanced talks to invest around $200 million in India’s BigBasket, a person with direct knowledge of the negotiations told Bloomberg.
Interest in BigBasket is widespread. Another source that spoke to Bloomberg said that Amazon was also engaging with the market-leading online grocery site. For whoever dominates the Indian market, the rewards will be great. India’s grocery sector is currently the third largest in the world, after China and the US.
BigBasket has been shrewdly pitched at busy urban Indians, with the offer of allowing customers to shop for essential goods via smartphone, and with an express delivery feature, to receive goods in just 60 minutes.
The move would constitute something of a reprisal of a past ambition for PayTM, whose online grocery business shut shop in 2015 after struggling to attract enough customers. For Alibaba, the Economic Times suggested, an investment in BigBasket would add more muscle to take on Amazon.
Meanwhile, Alibaba’s Chinese rival, Tencent, has added to its Indian investment portfolio in the last few days, with financial backing for online education service BYJU’s, TechCrunch reported.
Though it has been less prolific than Alibaba, Tencent’s portfolio includes stakes in ecommerce giant Flipkart; Practo, a healthcare company; and Hike, a chat app.
But online grocery appears to be the key target for all players. According to the FT, the Indian grocery market currently sees $428 billion worth of sales. For Amazon, grocery is “a very strategic business” globally, said Saurabh Srivastava, director of Amazon’s consumables business in India.
Amazon has not been shy about its ambitions in the country, with particular emphasis on grocery sales, Srivastava added. Since “the very beginning we have been planning to build this grocery business.”
However, the challenges to expansion are large, observed Satish Meena of Forrester, notably due to the heat, as there are currently very few refrigerated vans in the country.
“The upside is big – but it’s going to be a very, very slow process because of many challenges in the market.”
Data sourced from Bloomberg, Financial Times, Economic Times, TechCrunch; additional content by WARC staff