Will it be Alibaba-BigBasket vs Amazon-Grofers in online grocery?

Online grocers BigBasket and Grofers could find themselves becoming a part of the larger designs of Chinese e-tailer Alibaba and US-based online retail giant Amazon to win the Indian ecommerce market. Even as the Alibaba-Paytm combine moves ahead with plans to pick a sizable stake in BigBasket, Amazon is looking to align with its rival Grofers, according to media reports.

Paytm Mall and Alibaba have extended exclusivity period of their negotiations with BigBasket for two weeks, The Economic Times reported. Meanwhile, Amazon has shown interest in picking up a minority stake in Grofers, which is backed by Japan’s SoftBank, The Times of India reported, quoting sources it didn’t name.

Messages sent to Grofers co-founder Albinder Dhindsa did not elicit a response at the time of publishing this report. Email queries sent to Paytm also didn’t elicit a response. An Amazon spokesperson termed the report as “rumour and speculation.”

Amazon's early-stage talks with Grofers for an equity funding come on the back of Chinese e-tailing giant Alibaba’s plans to invest $200-million in BigBasket. According to a person privy to the development, Alibaba’s investment in BigBasket is “just a matter of time.”

Amazon had earlier held talks with BigBasket for a buyout. However, the talks failed as the online grocer rejected the $450 million offer made by Amazon, another person aware of the development told VCCircle. BigBasket could still engage with multiple strategic investors, including Amazon and, potentially, Flipkart, besides the Alibaba-Paytm combine, according to the person. Also, whoever picks up the stake in BigBasket may eventually buy out the company.

A possible investment in BigBasket will give Paytm the firepower to fight Amazon, which has received the government’s nod to invest $500 million in India’s food retail sector. The development also assumes significance against the backdrop of Paytm’s larger connections with Alibaba, which has been spearheading consolidation in the e-commerce space.

“It’s going to be an Alibaba versus Amazon play in the long run,” Ankur Bisen, senior vice president at Technopak Advisors, had told VCCircle in an earlier interview.

Jeff Bezos-led Amazon plans to open brick-and-mortar outlets, apart from a portal, to sell grocery in the country. The new business unit will sell third-party or Amazon’s private labels of locally-produced and packaged food products, which would give Amazon a significant mileage in a segment that’s predicted to drive e-commerce growth in future. As per foreign direct investment regulations, multinationals can set up wholly-owned subsidiaries in India to retail food products as long as the items are produced, processed or manufactured in the country.

Amazon already offers online delivery of grocery and daily essentials through its app Amazon Now and its online supermarket service Amazon Pantry. However, BigBasket is the segment leader by a distance and, perhaps, the only player that has been able to scale its business at a brisk pace in a sector that recorded at least 20 casualties over the past two years.

Bengaluru-headquartered BigBasket has raised nearly $250 million so far and registered an over three-fold increase in revenues to Rs 563 crore for the financial year ended 31 March 2016. It has expanded operations to over 30 cities from six last year and signed up Bollywood actor Shah Rukh Khan as brand ambassador. It is betting big on its private-label business and expects to become profitable by March 2018.

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