The battle for Indian e-commerce crown has been playing out between Amazon and the rest (primarily Flipkart, Paytm and its backers) for over four years. Amazon with its $260 billion cash reserve is fighting alone in India against the anti brigade led by SoftBank, Alibaba, Tencent, and Naspers.
Observers emphasise that ongoing war for winning fledgling online retail is all about the Amazon versus and Alibaba brigade. The war has just begun, and it will be interesting to see who will be the last man standing in the fray.
However, besides the fierce battle for supremacy in e-tail space, a different kind of antagonism is prevailing between arch-rivals Alibaba and Tencent.
The new battleground for the duo has turned out to be ‘food delivery and ordering’ space on Indian turf. Within a week of Alibaba $200 million investment in Zomato, Tencent-backed Dianping along with Naspers (an early backer of Tencent) led a $100 million round in Swiggy this month.
On the lines of home turf (China), the top spot for food ordering and delivery market in India has shrunk between the two – Alibaba and Tencent. Before delving into the duo rivalry in Indian food tech space, let’s understand how they have been fighting tooth and nail in China.
Alibaba and Tencent have invested over multi-billion dollars in Ele.me and Meituan-Dianping, respectively.
While Alibaba pumped in $1 billion in Ele.me in May last year, three months ago Tencent along with US-based travel giant Priceline and Sequoia invested massive $4 billion in Meituan-Dianping.
Interestingly, Alibaba was one of the early backers of Meituan. Later in 2015, Meituan and the Tencent-funded Dianping merged to form Meituan-Dianping. Post-merger, Alibaba’s holding in the merged entity fell considerably.
Why Alibaba and Tencent have backed Zomato and Swiggy
Both Chinese juggernauts are eying for deeper impact as well as penetration in India. Since, they have placed their bets across verticals such as ride-hailing, e-commerce, digital payment, social network healthcare, and grocery, now they want to dominate overall on-demand O2O space in India.
Currently, instant food delivery, grocery, and home services are some of the largest verticals in offline to online (O2O) space in India. Alibaba wants to develop various use cases for its Indian vehicle Paytm as it did in China (through Alipay) while driven by FOMO (fear of missing out) Tencent is looking to double down its investments in India.
Since both have been fighting closely in their home market in food delivery segment through Meituan-Dianping and Ele.me, placing bets against each other in India is quite obvious.
Tencent had also invested in Indonesian ride-hailing and food delivery service – Go-Jek. The first Unicorn in the country started with on-demand cab, but in 2015 it forayed into food delivery space followed by grocery and home services.
At present, it does more orders than Swiggy, Zomato and Foodpanda collectively. “Tencent tends to see Swiggy and Ola (after foodpanda acquisition) as Indian peers of Go-Jek. In fact, with a combination of foodpanda and Swiggy, Tencent eyes to create anti-alliance against Alibaba-backed Zomato.
Are Alibaba & Tencent drawing similarities between two markets?
While we don’t know whether the duo expects Indian foodtech market to pan out like China or not. But in reality, the Indian market is far away from China in terms of scale and consumer behaviour.
While Zomato, Swiggy, and foodpanda collectively do about 9-10 million deliveries a month, multiple media and industry estimate show that top three online food ordering players including ‘Baidu Waima’ deliver over 150-180 million orders a month. In China, about 260 million people order food via app-based services.
In comparison, India hasn’t more than 10-15 million people ordering food from home and offices. Besides scale, consumer behaviour in India is very different in China. India is still predominantly a saving economy while China is spending one. Investee companies in India can leverage the strength of Meituan-Dianping and Ele.me but repeating or copying their playbook is not feasible yet.
Despite drawing inspiration from Chinese peers, Indian foodtech majors require to take some serious cue from Indonesian market and Go-Jek that has created an incredible scale in less than three years. Like India, Indonesia is diverse and multilingual (it has over 300 recorded distinct languages) nation.