No limit to investments in India, says Alibaba chief

Happy families are all alike; every unhappy family is unhappy in its own way. David Wei, chief executive officer, Alibaba.com, may not have been thinking about Leo Tolstoy when he was interacting with a group of Indian journalists in Hangzhou, China, but he seemed to have paraphrased this famous line in a rather unique way. “Small companies are all the same, it is big companies which are different,” says the man who heads a portal which has made its mark by connecting small businesses to their buyers. Excerpts from the interaction:

How is the small and medium enterprises (SME) segment in India placed in comparison to its global peers?
There are more similarities than differences among SMEs whether they are from Brazil or India. They need orders and they need capital. E-commerce offers all SMEs, including micro small businesses, an equal opportunity to compete for a share of the global pie. We cover more than 40 different sectors with more than 6,000 sub-categories.

Among these, I believe, India’s strengths lie in textiles, jewellery, metal works and manufacturing & processing machinery. 

What kind of investments do you plan to make in India?
Four countries that have always been important for Alibaba.com are China, Japan, US and India. India is one of the few countries for which Alibaba.com has not set any limits for investments.

Hence, we will invest as much as required to help Indian SMEs grow their businesses. We have just invested in India, with the launch of local customer service operations. With a service office in Mumbai, Alibaba.com will primarily focus on providing dedicated customer service to its Indian Gold Supplier members.

Alibaba.com’s Indian arm will house a core customer service team including a dedicated staff that will focus on customer training programmes. This team will eventually grow and expand to multiple offices across India to provide local, hands-on support to Alibaba.com’s rapidly-growing member-base.

Do you have any specific plans to target markets outside the metros, what are the issues that you face with your business model in India?
In China, most of our users come from tier 2, 3 cities. There is very little business that we do from Beijing, or for that matter large cities elsewhere like New York.

One issue is the availability of broadband internet. It is very important to have broadband for businesses to be able to maintain their online presence through activities like uploading pictures. We are looking at initiatives to provide internet infrastructure so that businesses can build an online presence. We are currently helping some Indian exporters to do so.

Mobile phone penetration in India is much larger than the internet penetration. Is there an opportunity to make use of that?
E-commerce is a difficult activity on the mobile phone from the perspective of the business-to-business segment. Mobile phones have small screens, otherwise they wouldn’t be very mobile. This makes it almost impossible to manage your online store. This is why the amount of e-commerce done through mobile phones is almost zero, even in China.

How difficult is conducting business through the internet as compared to brick and mortar stores? Wouldn’t there be some goods that the customers would prefer to examine physically?
This was a question that we pondered in our early days and one of the items which we thought we may have the most difficulty selling was clothes. Another was food. Today both are among the goods which generate the highest volumes. Everybody, and especially women, likes to try out clothes before they buy anything. But last year alone more than 200 million pieces of clothes were sold to the Chinese consumers and women’s apparels more than any other. Although we have logistical challenges with many food items such as fresh meat or vegetables due to damage and rotting, beverages and other such food stuffs are sold in large quantities. This is because the younger generation trust online portals more than the older generations. And also Alibaba.com has introduced AliPay, an escrow service that allows you to transfer money to a third-party account and approve the payment only once you are satisfied with the goods. So once  you get the delivery, you can check it  out yourself before approving the payment.

Where do you see the Indian economy 5 years from now?
One cannot depend only on big companies like the Tatas to drive the growth of the Indian economy. Such growth will not be sustainable.  Growth should be more balanced. Every bicycle needs two wheels on which to move, similarly there must be a mix of big and small businesses to drive growth. China recently overtook Germany as the biggest exporter in the world. But if you take the biggest German company and its Chinese counterpart, there will be no comparison. The German company will be larger.

This is because the economy is spread wider—a model India could also look at. It should let conglomerates grow on their own and leave the public resources to small businesses. India also could look at more manufacturing. Manufacturing can produce more jobs than the software and allied industries because they are more accessible to everyone.