Amazon, Google, Alibaba are making a beeline to tap Indian retail space

According to the World Bank, India is presently the seventh largest consumer market in the world

The power of the Indian consumer was largely undiscovered by global majors until US retail giant Walmart decided to put its biggest bet in the country in May pumping in as much as $16 billion to pick up a majority stake in Flipkart.

Walmart has been attempting to enter India for years but did not see much success.

Now, with the deal seeing a successful closure, many other large global majors have taken notice and are exploring every possible option to tap the last large open global market.

Warren Buffett’s Berkshire Hathaway already picked up a small stake in Vijay Shekhar Sharma-promoted One97, which owns digital payment firm Paytm. At least half a dozen global firms including Google, Amazon, Alibaba and even Facebook are actively pursuing investment opportunities in the online and even offline commerce space. For Amazon, an investment in Indian retail space can only further its presence in the country given that the Bentonville-headquartered company is already among the top e-commerce firms in the country. For companies such as Google and Facebook, which already have hundreds of millions of users in India, it would be about leveraging their reach to monetise in a variety of ways.

A huge consumer base with disposable income, relatively younger population and free market conditions are some of the factors that are driving them to explore India, which has the potential to become one of the top three consumer markets in the world. “It’s the beginning of the perfect storm,” agrees Satish Meena, senior forecast analyst, Forrester Research. “While this is the start, we will see more such investments from 2019 to 2020, and those could be of much bigger scale. Once food delivery, online retail and cab sharing have a bigger scale by 2020, you’ll see more such investments coming in to the sector.”

After the closure of the Walmart’s investment in Flipkart deal earlier in the month, Amazon is learnt to be actively engaged in conversation with retail majors such as Kishore Biyani’s Future Group and Aditya Birla Group-owned food and grocery supermarket chain More to expand its presence in India.

In September last year, the company had picked up 5 per cent stake in retail chain Shoppers Stop. Amazon is also enhancing its technology capabilities by acquiring companies which will help it bring on board next 100 million customers.

As a part of this, the e-commerce major is learnt to have acquired Tapzo, a personal platform which allows users to access over 35 apps using a single platform, for around $40 million (Rs 2.8 billion).

Google, which initially had showed interest in joining Walmart in making an investment in Flipkart, is also scouting for strategic bets in the Indian retail space. After seeing its first big exit in India through the Flipkart investment, Masayoshi Son managed Japanese investment major Softbank is also doubling down its focus on India’s consumer space.

“Everyone is seeing India as a growth market and is trying to put money. But this is happening at a time, when the online retail is still two per cent of the overall retail. It will take a lot of time to move customers online. Thus, offline gives the opportunity to sell more goods to the same customer,” said Meena of Forrester Research. “You may be buying books online, you may be buying cellphones online but you are not buying grocery or furniture online, and you aren’t buying appliances online.”

According to the World Bank, India is currently the seventh largest consumer market in the world which is led by the United States followed by European Union and China. During his visit to Greece in June this year, President Ram Nath Kovind said that India has the potential to become the third largest consumer market by 2025 when the country is expected to become a $5 trillion economy, almost double its current level.

Although consumer spending in India dropped to Rs 18.99 trillion in the first quarter of 2018, from Rs 19.19 trillion in the previous quarter, disposable personal income was at a steady level. “If you look at companies like Google and Berkshire Hathaway, they are investing for different business opportunities. Google is finding it difficult to sell to customers because the customers are going directly to marketplaces for finding products. At some point of time, retailers or those who are spending on advertising, will spend more on Amazon than on Google. So, there is some kind of cannibalisation happening for Google,” said a senior source who tracks the sector.

This phenomenon already began playing out in markets like the US where Amazon is already seeing a major boost to its revenues from ads. In the quarter ended June 31, 2018, Amazon reported $2.2 billion in advertising revenue, a growth of 129 per cent over the same quarter in the previous year.

“So, commerce is a big focus for Google, both online and offline. It has done that in China with JD.Com. It is working with Walmart in the US market. It also wanted to invest in Flipkart but that didn’t work out,” added the source.