Battle for India’s e-Commerce Market Heats Up: 3 Top Picks
India’s tech savvy young demography and improving economic strength have been the primary catalysts fueling the e-Commerce boom. Market research firm Euromonitor expects almost half of India’s population to be online by 2021, with a majority hailing from rural areas and smaller towns. This presents significant growth opportunity for e-Commerce providers.
India’s e-Commerce market is estimated to cross $50 billion by the end of 2018, according to a joint study by Assocham and Deloitte. Per Kotak Institutional Equities, which was quoted by Bloomberg, Indian online market may reach $28 billion by 2020.
Consequently, the global giants have been aggressively investing in India allured by the strong growth potential. While Walmart is reportedly eyeing a majority stake in Flipkart, Chinese e-Commerce giant Alibaba has backed Paytm and software-giant Microsoft MSFT invested in Flipkart.
Amazon-Walmart to Clash Over Flipkart?
Rumors are rife that Amazon is likely to bid for India’s dominant e-commerce provider Flipkart to thwart U.S. retail giant Walmart from taking a majority stake.
According to Bloomberg, which cited a report from the Mint, Walmart is likely to acquire 55% of Flipkart, valuing the company at almost $21 billion. Notably, in 2017, Japan’s Softbank Group, Tencent, Microsoft and eBay (EBAY) invested almost $4 billion in Flipkart. The company also acquired eBay’s India business.
The deal will definitely boost Flipkart’s competitive position against Amazon (both online and offline), given Walmart’s considerable financial strength and expertise in retail.
WalMart already operates in India under 21 wholesale stores. A majority stake at Flipkart will improve the company’s penetration rate into India’s burgeoning e-Commerce market.
Currently, Walmart carries a Zacks Rank #3 (Hold).
Amazon’s Aggressive Investment to Boost India Presence
Amazon’s e-commerce marketplace faces tough competition from Flipkart in India. Hence, chances of getting regulatory approval for the Indian e-Commerce giant is slim, as the combination will create a monopoly.
Nevertheless, Amazon’s aggressive investment of almost $5 billion in India is anticipated to drive growth. The company continues to build infrastructure and logistical network in the country.
According to Business Today report, Amazon India has issued paid up capital of $2.7 billion toward Amazon Seller Services, its marketplace arm. Moreover, Amazon has almost 41 warehouses in India, owns a captive logistics unit and operates a payments arm.
The company will continue with its push into the Indian e-commerce market, making the nation its fifth largest market after the United States, the U.K., Japan and Germany.
That being said, Amazon’s global margins are likely to be under pressure at least for a few years in the future due to this aggressive stance.
Currently, Amazon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alibaba: A Potent Challenger
Alibaba’s $200 million investment in Paytm Mall is an attempt to strengthen its footprint in India, as the Chinese e-Commerce market slows down. The Paytm Mall is modelled on TMall, China’s dominant e-commerce platform.
Alibaba has also invested in online ticketing platform TicketNew. Moreover, along with Paytm, Alibaba is likely to invest $250-$300 million in online grocer, Bigbasket. Further, Aliababa’s payments affiliate Ant Financial has agreed to invest in food-ordering app Zomato.
Currently, Alibaba carries a Zacks Rank #2 (Buy).
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