Can Paytm Mall Drive Revenues For Alibaba In India?

After months of doing the ground work for an e-commerce entry in India, Alibaba (NYSE:BABA) launched its “Paytm Mall” e-commerce business in the country. Designed along the lines of its popular Tmall in China, Paytm Mall is looking to offer a billion products in India by August. Alibaba faces tough competition from Flipkart and Amazon in India, as Amazon has been investing heavily to gain a substantial share of India’s growing e-commerce market.  According to Worldplay projections, India will become the world’s second largest e-commerce market by 2034, overtaking the U.S. in the next two decades. By 2020, the market is expected to reach $64 billion.  Rising internet penetration, economic growth and a relatively young population are likely to be the key drivers of e-commerce growth in the region. Tmall is an extremely successful model in China, and Alibaba is hoping to replicate its success in India.

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Paytm Mall will focus on categories such as electronics, fashion products and fast-moving consumer goods. However it does include a Cash on Delivery (COD) option. Traditionally, COD accounted for nearly 60-70% of the e-commerce business in India, with many consumers preferring to pay cash upon receiving the products rather than online payment. However, with the Indian government now focusing on digital payments and discouraging cash payments, the absence of a cash on delivery option might not prove to be a big issue. Paytm – the digital payments arm in which Alibaba has 40% stake, from which Paytm Mall has been spun off – saw a significant increase in transactions on its platform after the Indian government started incentivizing digital payments. Without a cash on delivery option, Paytm Mall could further boost transactions on the Paytm platform, which would also benefit Alibaba.

With a number of smaller enterprises and consumers already using Paytm in India, Alibaba should be able attract users to its platform. While the competition in the Indian e-commerce market is intense, Alibaba appears well-positioned to establish itself as a strong player in India.

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