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How to Invest in India's Hot E-Commerce Economy

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  • (0:30) - India's Market: E-commerce and Mobile Payments
  • (3:30) - E-commerce: Amazon vs. Flipkart
  • (11:00) - India's Population, Mobile Phones, Drones and Grocery Delivery
  • (15:00) - Amazon Prime in India
  • (17:40) - Mobile Payment Sector
  • (24:00) - Takeaways On Investing In India's Future
  • (30:00) - Episode Roundup:

Welcome to Episode #110 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Neena Mishra, Zacks Director of ETF Research, to discuss developments in India’s e-commerce and mobile payment markets in 2017.

By 2026, India’s e-commerce market is expected to be $200 billion. It’s become a key market for the big online technology players. But a market of that size also creates challenges for those trying to get into the game.

Who Is Winning?

It looks more and more likely that 2 names will emerge in the online retail space: Amazon and FlipKart. In 2015, Amazon pledged to spend $5 billion to build out the infrastructure to provide next day delivery.

FlipKart has also been liberally spending. It just got a $1.4 billion cash infusion from Microsoft, eBay and Tencent. This was its largest round of funding in its 10-year history.

Mobile Payments Surge

But you can’t have online shopping without a method to pay. India has historically been a cash-using country but mobile payment has started to make a dent in that.

Alibaba now owns a 40% stake in PayTM, India’s largest mobile payment processor. Alibaba also uses PayTM Mall to sell merchandise, which offers cash back to the PayTM Wallet.

Facebook’s What’s App is also popular. Soon, Facebook is expected to launch an online payment feature through the App. How much market share will it take?

How Can You Invest in the India E-Commerce Market?

Most of the players, outside of India’s own FlipKart, are American or Chinese tech giants. You already know their names:

1.      Tencent (TCEHY - Free Report) is getting in on the action by buying stakes in various Indian companies. It put $700 million into FlipKart earlier this year.

2.      Amazon (AMZN - Free Report) announced in 2013 that it was going to go all in on India. Does it matter that it was first in?

3.      Alibaba (BABA - Free Report) appears to have fallen behind, compared to competitors, as FlipKart and Amazon controlled as much as 80% of the recent festive season sales (those are similar to Black Friday, Prime Day and Singles Days type promotions). Will PayTM Mall make inroads in 2018?

4.      Google (GOOGL - Free Report) launched Tez, its new digital payment app, in September 2017 and apparently already has 12 million users. It now has online utility bill paying capabilities. Android phones are the most popular in the country. Will having a built-in app given them an advantage?

5.      Microsoft (MSFT - Free Report) has a lot of cash on hand so it’s choosing to get into India by supporting the Indian companies. It was among those who recently funded FlipKart for $1.4 billion. Can it leverage its cloud business to get into the Indian e-commerce game?

Things are moving fast in India’s e-commerce market. Neena and Tracey will definitely be addressing developments in the new year.

Additionally, 2018 is expected to be a stronger year economically for India. After 5 quarters of weaker growth, GDP is picking up again. 2018 is likely going to be critical for all of these companies battling it out.

What else should you know about what is going on in India?

Find out on this week’s podcast.

[In full disclosure, the author of this article owns TCEHY, AMZN, GOOGL and FB in her personal portfolio.]

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