During Indian prime minister Narendra Modi’s visit to Washington D.C., Amazon founder Jeff Bezos pledged to invest $3 billion in its Indian unit over the next couple of years. It is on top of $2 billion the company has already invested in India. It’s a clear indication that the U.S. behemoth is going for a kill in its battle with local rivals Flipkart and Snapdeal. However, the announcement is seen more as a “take that” gesture to Alibaba, which has started laying the ground for India entry later this year.

Amazon's $3 Billion 'Take That' Gesture To Alibaba Group Holding Ltd In India
Source: Flickr

Amazon has the early-mover advantage

Amazon was a late entrant in China, but it is making all the right moves in India. It has used the early-mover advantage to build a large seller base, efficient delivery, and customer service infrastructure. Unlike Indian e-commerce startups Flipkart and Snapdeal, Alibaba has deep pockets to play catchup. The Chinese online retailer hasn’t been idle in India.

Alibaba has invested in online marketplace Snapdeal and mobile payment service provider Paytm. It also operates a B2B platform in India. Reports suggest that the Hangzhou-based company’s online marketplace in India should become operational before the festive season that kicks off in September. Analysts also speculate that Alibaba could consolidate its Indian operations by effecting a merger between Snapdeal and Paytm. Alibaba’s largest shareholder SoftBank also holds a large equity in Snapdeal.

Epic showdown expected between Alibaba and Amazon

The Chinese company’s marketplace will launch three years after that of Amazon, which just celebrated its third anniversary in its fastest growing market. The epic showdown between Amazon and Alibaba is expected to further erode the market share of Flipkart, the largest e-commerce player in India. Flipkart has raised a total of $3.2 billion since its inception in 2007.

Jeff Bezos said Amazon has been beating its own growth targets in India. Amazon is also setting up its largest software development center outside the US in India. It would be interesting to see how Jack Ma tackles Amazon as neither company wants to settle for less in the world’s fastest-growing large economy.