Tag: China

China is no longer the Happy Meal toy making economy it used to be. It has a much bigger vision. And part of that vision includes taking what it’s learned from Western entrepreneurs and beating them at their own game. Few companies represent this better than Alibaba, which is teaming up with Indian start-ups to take on Amazon and the more established domestic e-commerce player Flipkart.

Together, China and India tech will absolutely be a force to be reckoned with in the West.

It all starts with Alibaba’s investment firm, Ant Financial, pumping $500 million for a 25% stake into five year old Indian e-commerce company Paytm. Paytm stands for Pay-through-Mobile. It’s run by Vijay Shekhar Sharma, the man who founded Paytm back in 2010. He and Alibaba’s founder Jack Ma, one of China’s richest men, met earlier last year and had a dream: take China’s e-commerce know-how and the Alibaba brand and go after rivals in India’s $20 billion online retail market.  That market is important to all e-commerce firms. India’s online retail business is likely to grow 15-fold to $300 billion by 2030, according to Goldman Sachs.

The two entrepreneurs are not only symbolic of how India and China now have aligned economic interests, but also a sign of things to come. Asian entrepreneurs, led by the Chinese, are going to disrupt the status quo of many Western powers who were first to arrive on the scene. The new kids on the block are smart, ambitious, and numerous. Very, very numerous.

Since February, executives from Paytm and Alibaba have been travelling between Hangzhou, China and Noida, India where Paytm is based. They’ve been busy developing synergies and strategies to take on Amazon and industry leader Flipkart. “It’s as if Jack Ma is conducting an executive MBA for Paytm executives,” says Vijay Shekhar Sharma, founder, One97 Communications which runs Paytm. “Ma tells us we should build a company that is worth a Nobel Prize,” he told The Economic Times on Tuesday.

Alibaba is also sharing know-how on the challenges of “product discovery” on smartphones and the ability to handle complexity that scale brings. The ET likened relationship between Alibaba and Paytm to a military alliance, both preparing to take large chunks of market share in a rapidly changing industry where future disruptors are getting millions thrown at them in far away places — namely Silicon Valley.

Paytm may be young and a somewhat late entrant to the e-commerce market in India, but industry insiders told the ET that Sharma is the real deal. ”Paytm is a dominant wallet in the country. It has the power to disrupt,” adds Rajesh Sawhney, founder, GSF Accelerator. “I can see Paytm becoming the biggest app in the world with about half-a-billion users.”

Everyone already knows that Alibaba is no joke. It is Amazon’s biggest rival and Jeff Bezos, Amazon’s billionaire CEO knows it. He’s seen what Alibaba can do to other e-commerce players.

In 2002, eBay had seven years of success under its belt in the U.S. and was now setting up shop in China. It was heady days of the commodity boom. China was growing by double digits. Chinese consumers were buying Prada shoes and smart phones, Buicks and apartment buildings. E-Bay looked unstoppable. It launched in China in 2003. By 2005, FORBES estimated that eBay had 50% of China’s puny $1 billion e-commerce market. ” A bunch of small competitors are nipping at our heels,”  said eBay CEO Meg Whitman at the time. Alibaba was one of them. It was being run by Ma in an apartment building. He was focused on business-to-business and launched the eBay rival Taobao to go after consumers. Here’s what’s happened since…

Since the launching of Taobao, China’s e-commerce market has evolved into a vast ocean, writes the authors of the new book “No Ordinary Disruption: The Four Global Forces Breaking All Trends.”  They call Alibaba the great white shark at the top of the food chain. In 2006 , Taobao overtook eBay’s consumer-to-consumer market share and has doubled in size since. Buying a 25% stake in Paytm is par for the course, and a sign of what that shark will take a bite out of next. By the end of 2014, ALibaba’s market cap was $270 billion, four times that of eBay’s.

India is becoming more important to Chinese entrepreneurs. There will be more such allegiances.

As it is, Alibaba gets less than 16% of its revenue from outside China, while Amazon gets about 40% from outside North America. Both are trying to capture global market share and India is the easiest big market to stake a claim in. That’s because there is not one dominant player in the country yet. While Flipkart is the market leader, it still faces stiff competition from Amazon, eBay, Snapdeal and Paytm.

Paytm has 50 million people using its digital wallet product. And it has Sharma running things. “I am a fan Vijay,” says Google’s managing director in India, Rajan Anandan. “He is an incredible entrepreneur with deep understanding of users, markets. He is persistent and has a lot of agility. He is trying to build a company like Alibaba.”

Of course, Sharma won’t be the only Indian entrepreneur to set its sights on traditional rivals. Even though the next big product breakthrough will probably be made in California, India and China have an advantage. Although that advantage depends greatly on their home countries keeping the lid on any brain drain loss to the U.S., it is clear that the U.S. does not have the global skill set at home to do what it wants as easily as it would like, say the McKinsey Global Institute authors behind ”No Ordinary Disruption.” About 30% of U.S. companies say they haven’t exploited international opportunities because they don’t have enough people with the tech skills, let alone the international competencies.

According to the National Science Foundation, using data from 2012, graduation rates in science in technology were three times higher in China than they are in the U.S., though it is worth noting that those numbers are arguably Chinese private schools in the tier one cities. If anyone is to truly believe that bulk of Chinese humanity living on a mere $10,000 a year is going to the equivalent of a U.S. public school in the midwest is probably an inaccuracy. Moreover, many wealthy Chinese and Indians are moving to Canada and the U.S. to study and work at start up and established tech firms.  Still, many of these elites will return to China and India simply because this is where the growth is. And there is no place like home…

Indian companies have long surpassed the scale of their developed world counterparts. Indian telecom giant Bahrti Airtel has over 270 million wireless customers worldwide. AT&T, which has been at this business much longer and has better tech has under 120 million wireless customers globally, according to both companies annual reports. The Tata Group, the parent of the Tata companies from automotive to IT has over 580,000 employees worldwide. It is now one of the largest private sector employers in the U.K., employing over 50,000. Tata Consultancy Services has basically defeated IBM’s consultancy services and its biggest rivals now are mostly all Indian.

China money, Indian start-ups, and a growing tech savvy consumer base in Asia is now a breeding ground for new entrepreneurs, and new brands, that will go head to head with the big boys. Who knows, a Chinese or Indian brand could one day take one of the existing players out of the market through acquisition, or other untimely exit.