India’s e-commerce market is being raided by multiple players like Amazon.com AMZN, Walmart WMT, eBay EBAY and Chinese e-commerce giant Alibaba BABA.
India’s tech savvy young demography and improving economic strength have been the primary catalysts fueling the e-commerce boom. Per a report from India Brand Equity Foundation, the Internet economy of the country is expected to reach $250 billion by 2020, courtesy of growing popularity of e-commerce.
Further, the report suggests that revenues in the Indian e-commerce space will reach $120 billion by 2020 at a CAGR of 51%. Moreover, a report from Nasscom and PwC reflects that this particular market is currently worth $35 billion and expected to reach $150 by 2022 at a CAGR of 35%.
Allured by this growth potential, the likes of Walmart, eBay and Alibaba are aggressively investing in India.
Amazon's India Expansion Continues
Amazon has bet big on India. In its most recent bid to expand in this country, the company has opened its biggest office in Hyderabad. Reportedly, the new office can hold 15,000 employees across 9.5 acres.
The latest step reaffirms the e-commerce giant’s intention of not retreating from this growing market despite several restrictive changes announced by the Indian government.
In addition, the company continues to build infrastructure and logistical network in the country. Also, the e-grocery market is projected to witness strong growth over the next few years in India as people are now becoming comfortable buying even milk and bread online. Banking on this fact, Amazon has expanded its pantry service to over 110 cities in the country and is spreading out aggressively tothe smaller cities.
The company will continue its push into India, making the nation one of its largest e-commerce markets. That said, Amazon’s global margins are likely feel some pressure for a few years at least.
WMT, BABA & Others in Same Race
Retailers like Walmart and Alibaba have realized the importance of India’s e-commerce market. These companies are continuously revamping initiatives to spread theirfootprint in the global e-commerce space.
Last year, Walmart completed the buyout of the majority stake in India’s online retail giant, Flipkart, making its foray into this potential market. Since this acquisition, Walmart has been making efforts to revolutionize commerce in India with lower prices and more international products.
Additionally, Alibaba is planning to invest $250-$300 million in online grocer, Bigbasket, and trying to strike deals with the Indian giants Reliance and Tata. Apart from this, Alibaba has put its money in a video intelligence platform, to enhance its video services in India. Additionally, it has made a significant investment of $200 million in Paytm Mall to bolster its position in India.
Further, eBay recently bought a 5.5% stake in Paytm Mall to get a slice of the Indian e-commerce market. Per the deal, eBay’s global inventory will be available to over 130 million active users on Paytm Mall, which is expanding its presence in the country. Also, the company has relaunched its India division, eBay India, to reap benefits from the growing opportunities there.
Challenges & Struggles Remain
It is definitely certain that the e-commerce market is on the rise, in India. However, all the above-mentioned retail giants are not immune to regulatory challenges.
The Indian government’s restrictions on foreign-owned ecommerce firms, enacted earlier this year, have hampered and may continue to restrict Amazon and other online retailers’ ability to establish a dominant position in the country.
Alibaba carries a Zacks Rank #1 (Strong Buy), Walmart and eBay flaunt a Zacks Rank #2 (Buy), while Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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