Alibaba to wait and watch

Alibaba founder Jack Ma
American e-commerce giant Amazon is not the only multinational entity grappling with policy bottlenecks here. Chinese internet major Alibaba, contemplating a direct India entry in e-commerce, is also learnt to be watching the policy space before it takes a plunge.

Making Alibaba nervous is Press Note 3, latest guideline on e-commerce from the department of industrial policy & promotion. This restricts discounting by sellers on any online marketplace platform.

Also, the high level of cash-on-delivery in Indian e-commerce and return of goods that come with it are another area of concern for the firm.

While permitting 100 per cent foreign direct investment in online marketplaces, the guidelines said e-commerce entities providing a marketplace will not directly or indirectly influence the sale price of goods or services. And, shall maintain a level playing field. The implication is a crackdown on  companies offering discounts, cash-back or other such incentives.

Another guideline in the way is that no e-commerce entity will permit more than 25 per cent of the sales through its marketplace from one vendor or its group company.   

Alibaba, which in India already has investments in Snapdeal and One97 Communications-owned Paytm, did not want to comment on the challenges or hurdles it must cross to enter the India market directly. However, watchers and analysts are listing these. Arvind Singhal, founder of retail consultancy Technopak, says the e-commerce regulation is the single biggest challenge. How a discount is to be defined is also unclear. “It’s arbitrary and not at all transparent.”

An executive at an international analyst research firm said the Jack Ma-led company is trying to iron out issues with the Customs department in India. He says Alibaba is likely to host sellers with a large number of Chinese goods as its unique selling proposition. Since return of goods is common when a customer is making payment after delivery, the company is working out the modalities of shipping back the Chinese merchandise in case of return, he said.

Aamir Jariwala, secretary, E-commerce Coalition, said re-export norms while shipping back products on return could turn out to be a big logistics issue. At times, the cost of return could be as much or more than the price of the product being returned, he pointed out.

Sector estimates peg cash-on-delivery at around 60 per cent of the total in the country. The average rate of return of goods is between five and 10 per cent of the items sold but could be much higher in some regions and pincodes. Experts also say the problem would resolve on its own over time as the market matures.


Alibaba’s India play:
  • Largest investor in One97 Communications, which operates Paytm
  • Investor in Snapdeal
  • Operates wholesale business in the country
  • Planning direct entry into e-commerce
Global presence:
  • Operates services in e-commerce, wholesale, digital payment, price comparison sites, cloud computing, music, print media
  • Founded in 1999 by Jack Ma
  • HQ in Hangzhou, China
  • Biggest IPO at $25 billion in 2014

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