What’s Alibaba Up to in Its Deal with India’s Paytm?
Alibaba pumps $177 million into Paytm
Alibaba (BABA) recently upped its stake in Paytm e-commerce in an escalating competition with Amazon (AMZN) for control of India’s e-commerce industry. Amazon has invested billions of dollars since 2014 to expand its operations in India, and Alibaba is hot on Amazon’s trail.
Alibaba doled out $177.0 million for a 36.3% stake in Paytm, an e-commerce subsidiary. The Indian startup offers digital payment services.
But the slowing pace of India’s e-commerce industry has recently been a matter of concern. The industry rose 12.0% to $14.5 billion in 2016, slowing down from a 13.0% rise in 2015, according to research firm RedSeer Management Consulting.
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The above graph shows the growth rate of India’s e-commerce market.
Alibaba’s influence in India
Alibaba’s stake in Paytm is part of its effort to increase its influence in India, the world’s fastest growing Internet market. Paytm is a perfect fit for Alibaba due to its e-commerce and mobile payments exposure.
Competition in e-commerce means that it’s no longer enough to simply operate a marketplace. E-commerce providers are trying to woo shoppers and increase their sales by offering additional services such as payment processing and order delivery.
Alibaba believes that a close tie with Paytm could boost its efforts to penetrate the Indian e-commerce market by appealing to Indian online shoppers with a seamless digital payment service.
Homegrown startups face tougher competition
The supremacy war between Alibaba and Amazon is threatening to cause havoc for homegrown e-commerce firms such as Snapdeal and Flipkart as they struggle to secure funding and retain talent.