India's Tata Group Plans E-Commerce Venture Modelling on Alibaba's Success

Indian business conglomerate Tata Group is foraying into the e-commerce business, taking inspiration from China's Alibaba Group, which recently completed its initial public offering in the US at a mammoth valuation.

India's Economic Times newspaper reported citing two people familiar with the plans that Tata Group is planning to enter into the Indian e-commerce space.

The group is planning an online marketplace model, which helped Alibaba become immensely successful. The company will also take cues from domestic e-commerce majors such as Flipkart, Amazon India and Snapdeal.

Despite having a full-fledged retail unit, the group's plan will be spearheaded by Tata Industries Ltd, a fully owned subsidiary of Tata Sons.

"Tata Industries incubates new businesses as they have done with Tata's entry into auto components and telecom ventures," a source told the newspaper.

"Then such businesses are taken forward by their respective units."

A Tata Sons spokesperson confirmed the plans to Economic Times, without elaborating.

"Suffice it to say that ecommerce is of interest to the Tata Group. We will share more information at the appropriate moment," the person said.

Tata is already running an online portal for its consumer electronic goods business, Croma.

The new marketplace business, modelling on Alibaba's Tmall.com, would allow third-party sellers on the platform. It would help generate revenues by charging a fee or commission from merchants, who will use the platform.

The marketplace business is yet to be named, and is expected to start operating in 2015. It will initially showcase Tata's existing retail chain brands such as Westside, Croma and Star Bazaar. The company is also working to bring in joint venture partner Zara in the new business.

Tata has already started the process of hiring people as well as enrolling vendors for its marketplace, the Economic Times added.

Tata's new move comes as India's online retail market is expected to grow exponentially over the coming years. India's e-commerce sector is expected to surge to between $19bn (£11.6bn, €14.8bn) and $38bn, from about $2.3bn in annual sales now, according to consultancy firm Technopak Advisors.

Market leader Flipkart recently attracted $1bn in its latest funding round giving it a valuation of $7bn. US ecommerce major Amazon earlier said it will invest $2bn in India.