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August 3, 2015

Amazon faces Indian heat as Snapdeal raises $500m

Ecommerce site reportedly collects cash from Alibaba and Foxconn.

By Jimmy Nicholls

Amazon is facing increased competition from an Eastern rival after the Indian ecommerce site Snapdeal reportedly raised $500m (£320m), leaving the firm valued at $5bn.

Sources familiar with the matter claimed that the iPhone manufacturer Foxconn and Chinese ecommerce site Alibaba had both stumped up cash for the round, according to a report by Re/code.

Both firms are joined by the Japanese telco SoftBank, which put $627m into Snapdeal back in October of last year.

The funds will bolster Snapdeal against rivals in the burgeoning Indian market for ecommerce, whilst also extending the reach of Alibaba, which after this year’s initial public offering is viewed as the biggest rival to Jeff Bezos’ pioneering ecommerce outfit.

Earlier this year Alibaba chief executive Daniel Zhang emphasised the firm’s global ambition, saying: "We will organise a global team and adopt global thinking to manage the business, and achieve the goal of ‘global buy and global sell’."

Joshua Bamfield, director at the Centre for Retail Research, told CBR: "These companies [such as Amazon and Alibaba] that are successful and have lots of money are looking for countries that are near to take off.

"Online in India is growing very quickly, so it’s quite logical for companies like Alibaba to put money into it."

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He added that at present Snapdeal is leading the Indian ecommerce market, followed by Flipkart which has a similar indigenous advantage, and then Amazon, which is based in Seattle in the US.

Like Amazon and Alibaba, Snapdeal has shown interested in broadening its reach beyond merely selling products online, having bought the comparison site RupeePower and the prepaid-services firm FreeCharge during the last year.

India is viewed by many observers as a potential goldmine for ecommerce due to its large and youthful population, the United Nations estimating that the country has 356 million 10-to-24-year-olds out of a total headcount of 1.25 billion.

Amazon invested some $2bn in the country last July only a year after it first launched there, with Bezos’ saying: "We see huge potential in the Indian economy and for the growth of e-commerce in India.

"At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales."

Jim Clark, senior analyst at Econsultancy, estimated that there are 40 million people actively buying things online in India, a fraction of the 300 million who use the Internet.

He added that the investment would probably increase competition in the country’s ecommerce market, with Amazon expected to raise investment in the region later this year and all firms expected to focus more on customer experience.

"Amazon is a bit different than Alibaba in the sense it is investing a lot in warehouses and logistics," he said. "[But] I don’t think Amazon will be too worried, they have obviously got a presence in India and can continue to innovate."

Snapdeal and Alibaba could not be reached for further comment by CBR at the time of writing. Amazon declined to comment.

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