Alibaba is in talks to acquire Snapdeal, the second largest e-commerce firm in India behind Flipkart, Indian news site Factor Daily reported on Thursday.
Alibaba however, has been a little late to the party and its delayed start in India has given Amazon (AMZN - Get Report) the chance to claim a significant portion of the $23 billion e-commerce market. Amazon founder and CEO Jeff Bezos has poured $5 billion into the expansion of Amazon India so far, a move that has caused both Flipkart and Snapdeal to lose steam.
Hangzhou, China-based Alibaba was reported to have been in talks with Flipkart for a potential buyout but it seems like the talks have fallen through as Alibaba takes an interest in acquiring Snapdeal, which has raised over $1.76 billion in 12 funding rounds.
In a rush to establish itself in the region, Alibaba announced in September 2015 that it had acquired a 40% stake in India-based online payments company Paytm, which allows online shoppers to pay for purchases without having to use credit cards or cash much like Alibaba's own Alipay, a strategy likely to work well under India's newly implemented demonetization policy.
As Alibaba builds up its presence in the country through acquisitions and Amazon continues to pour huge investments in the region, experts believe that it will be a long and hard battle among the four big players.
"There is only so much a Flipkart or Snapdeal can fight by reducing costs and lowering margins. I don't see the Indian market as being able to sustain two big domestic players and 1 big international player," said Anindya Ghose, Professor of Marketing at New York University's Leonard N. Stern School of Business.
"They will exist but they will keep bleeding. In about 2 years, I believe the Indian market will consolidate into 1 international and 1 domestic player. So it will be Amazon and either Flipkart or Snapdeal," said Ghose.
A deal between Alibaba and Snapdeal, if reached on consensus of valuation, would add oil on troubled waters for India's largest e-commerce site Flipkart, which just received a 38% slash of its valuation by a Morgan Stanley fund on Wednesday.