India is a tasty prospect for foreign investors with India's mission of being a trillion-dollar digital economy by 2022. The Indian retail market - estimated to be worth $600 billion - is one of the top five retail markets in the world by economic value and is one of the fastest growing retail markets in the world.
Eager to taste a slice of the pie that is the Indian retail market, China's internet and e-commerce giant Alibaba has reportedly taken the same route and opened talks with Mukesh Ambani's Reliance Retail Ltd to form a mega Indian retail joint venture (JV), with an investment of at least $5 billion to challenge the dominance of Flipkart and Amazon in India, according to a report on Monday in Indian daily 'Mint'.
Alibaba Group has proposed to acquire a large stake in Reliance Retail to create a large omnichannel retail entity in India, the paper said quoting two unnamed sources.
Omnichannel is the idea to provide the customer with the same experience irrespective of the channel they use to interact with the retailer. In this mode, the customers can access the same products and inventory from different channels. This also benefits retailers since they can view the customer's profile and preferences across the channels to better understand them.
"Alibaba is willing to pick up a significant stake in Reliance Retail, preferably 50 per cent, which will require Alibaba to invest $5-6 billion," one of the two people said. “It could also result in a strategic JV between Alibaba and Reliance Retail, with a smaller stake held by Alibaba.”
Goldman Sachs is advising Alibaba on the proposed venture, the person said. A Goldman Sachs spokesperson declined to comment. Emails sent to Reliance and Alibaba remained unanswered.
The joint venture, if it goes through, will be the largest investment by Alibaba in an Indian company.
Alibaba's Taobao and Tmall are two of the world's largest and most popular online retail marketplaces. Together, they achieved a total transaction volume of $478.6 billion in fiscal 2016, and hope to double the figure to over $900 billion by 2020. As of February 2018, Taobao had at least 580 million monthly active users, while Tmall had 500 million.
Alibaba’s consumer-to-consumer portal Taobao and business-to-consumer portal Tmall, each feature over a billion products and both are among the 20 most visited websites globally.
Reliance Retail, a unit of Reliance Industries Ltd, is the largest retailer in India in terms of revenue. Its retail outlets offer food, groceries, apparels, lifestyle and home-care products, consumer electronics, farm implements and many other products. It crossed $10 billion in sales and became the first Indian company to enter the world's top 200 retail chains.
As on 30 June, Reliance Retail was present in at least 5,200 towns and cities, with 8,533 stores including 4,530 Jio Points, according to a company release.
“Alibaba had picked up the stake in Paytm with the objective of benefiting from Paytm’s successful e-commerce and digital wallet business in India. Reliance Retail is planning a similar model like Paytm, and once that happens, Alibaba will benefit the same way it was gaining from its association with Paytm," 'Mint' said, quoting the second person.
In another such development, Amazon, the world's largest online retailer, is joining hands with Goldman Sachs and homegrown private equity fund Samara Capital to form a consortium for the acquisition of Aditya Birla Group's food and grocery supermarket chain 'More' at an enterprise valuation of Rs 45 billion-50 billion, 'The Economic Times' reported on Monday.
According to the report, the trio is planning to float a separate company or special purpose vehicle in which Amazon will pick up a 49 per cent stake as the "strategic partner".
If the deal goes through, 'More' -- the fourth-largest supermarket chain operator in India -- will be the second direct investment in India's brick-and-mortar retail space by Amazon after it picked a five per cent stake last year in India's Shoppers Stop for Rs 1.8 billion.