India becomes front in global e- commerce proxy war between Alibaba and Amazon

Global tech giants are heading for a proxy war in India. Alibaba is leading a $ 200 million investment into Paytm’s marketplace, creating a new Indian unicorn. It confirms the intention of the Chinese behemoth to take on Amazon, which is aggressively ramping up, investing $ 5 billion into its local operation as other homegrown rivals flail. Only one of the tech big boys will emerge victorious.

The $ 255 billion Chinese group and Paytm have already invested together to build a dominant mobile- wallet payment business, now worth around $ 5 billion. Their smaller e- commerce unit is now being separated out to meet In- dian regulations. After the latest fundraising, Jack Ma’s Alibaba and its own payments affiliate Ant Financial will effectively control the e- commerce company and continue to own a large stake in the payments arm, which must be majority Indian- owned.

Local rivals Flipkart and Snapdeal, backed by New York investment firm Tiger Global and Japan’s SoftBank, respectively, helped to establish the domestic e- commerce industry. But their future roles look uncertain as these global tech giants, with deeper pockets, get stuck into the market.

Privately owned Flipkart is fighting hard to maintain a narrow lead. Inves- tors now reckon the company is worth as little as one third of its $ 15 billion peak in 2015. Meanwhile, the founders of Snapdeal are cutting costs and headcount. In an e- mail to employees the firm admitted to errors in executing its strategy. Talk of a possible merger between Snapdeal and Paytm keeps surfacing in local media. That makes sense, given SoftBank already owns a near 30 percent stake in Alibaba and could lose a fortune fighting head- to- head to build market share.

For now, Indian e- commerce has become a free- for- all, and a stark contrast to China where foreign companies have struggled. But there isn’t room for every- one to financially succeed. Alibaba’s new commitment to Paytm E- commerce, following its success in building out a local mobile wallet business, puts it in a strong position. Fold in Snapdeal, and Amazon’s Jeff Bezos would face a significant obstacle in the road to global domination.