This comes ahead of Alibaba announcing a major play in India’s online business-to-consumer segment. Recently, Alibaba’s financial arm, Ant Financial, had acquired 25 per cent in Paytm’s parent company, One97 Communications. Sources say the Chinese e-commerce major is likely to invest about $600 million directly into Paytm soon. Alibaba founder Jack Ma is expected to be in India for the announcement.
Alibaba has huge presence in the global business-to-business segment. It claims to serve buyers and sellers across 190 countries.
Friday’s development is an extension of the Alibaba.com global business-to-business e-commerce platform, which seeks to connect manufacturers and wholesale exporters with buyers, bypassing traditional trading channels. The company claims e-commerce cuts costs and delays pertaining to offline trading channels and, therefore, expands the market for small-time exporters and importers.
Through this initiative, the Chinese e-commerce giant will work directly with Indian exporters and manufacturers, akin to its operations in its home market. “We are launching our trade facilitation centre in India to provide support to small and medium businesses with a full suite of export-import services, including logistics, financing and credit support,” Leung said.
Unlike customer-oriented e-commerce companies, which earn through commission on individual sales, Alibaba will earn through listing fee or membership fee from resellers and manufacturers.
“India has one of the largest manufacturing systems in the world, with about 22 million manufacturers of all kinds. Our idea is to open the global trade opportunity to all of them, irrespective of their size,” Leung said.
There was huge customer appetite for ethnic products from India, especially apparel, handicraft, jewellery and food products, he said, adding most small and local manufacturers were missing out on the opportunity either due to lack of awareness or high cost. “The popular way for SMEs to export is to participate in global trade shows such as the Frankfurt Show and work on the leads generated there. But this costs thousands of dollars and might not suit every exporter and manufacturer…For the same money, an SME can list on the B2B platform for five years and access buyers across 190 markets without any incremental cost.”
During the year ended March this year, gems & jewellery, apparel and garments and cereals together accounted for 23.4 per cent of India's overall merchandise exports, valued at 310 billion, according to data from the commerce ministry. Handicraft exports were estimated at $4.5 billion, against $3.8 billion in FY14.
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Alibaba is adopting an incremental approach to cover various manufacturing clusters in India. “In India, the SME sector is concentrated in clusters, with each offering some unique products. So, we are approaching one cluster at a time and appointing partners in each to tap local opportunities,” Leung said.
Alibaba’s new initiative has come at a time when exports from India have been declining, owing to a mix of poor global demand and appreciation in the rupee against competing currencies. In April this year, exports fell 14 per cent to $22 billion, the fifth consecutive monthly decline.