While it will be tough to crack the market which is well penetrated, opportunity may lie in going after a new segment or introducing a new business model

China’s dominance in the Indian market is on an upward trajectory — with the likes of Alibaba investing billions of dollars in tech companies such as Paytm, and handset companies seizing a huge marketshare in the mobile handset space. It is unlikely that this clout will end in the foreseeable future.

However, a new trend seems to be emerging — Indian tech companies, which until now had set their eyes on developed markets in the West for expansion, have now added China into the list. Some companies have already ventured into China.

For instance, OYO, the SoftBank-backed Indian budget hotel aggregator, announced its entry into China. The company bets big on China’s growing tourism industry. According to Founder and CEO Ritesh Agarwal, China’s tourism industry is on the cusp of booming and flourishing wherein it enjoys a strong influx of both domestic and international tourists. Also, the market is as fragmented as the Indian hotel market.

Days after OYO’s announcement, another Indian company, Capillary Technologies, announced its entry into  China. Capillary provides AI-based omni-channel consumer loyalty, engagement and analytics to businesses globally. Its China operations will be headquartered in Shanghai, with additional offices in Guangzhou and Changsha.

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Capillary has developed a new range of in-store solutions that help offline stores collect data. According to Amit Haralalka, General Manager, Capillary, Greater China, this is going to realise O2O commerce in China by providing customers and retailers with connected experience across all channels.

Being the largest and fastest growing market in the globe with 1.38 billion population and a massive mobile phone penetration, China is any company’s dream destination. However, the protectionist nature of the market makes it difficult for companies to make an entry, let alone survival. This is furthered impeded by language and cultural barriers.

So, does it really make sense for Indian companies to expand in China? And can they be successful there?

“It is natural for B2B software companies like Capillary to go to and explore China because there is a long pool of customers they can go after in this country. China’s retail industry is four times that of India. They will get acceptability in this market if they customise the product to suit the local requirements. So from a growth point of view, it makes sense,” said Hiren Doshi, a consultant with a non-profit working in the edtech domain and former Business Development Head, Amazon media group.

“However, for internet companies like OYO, it is going to be very difficult. China is at least 10 years ahead of India in terms of maturity, funding level, and knowledge level. Maybe, it is the pressure form investors to diversify and explore new high-volume markets. While it will be tough to crack the market which is well penetrated, opportunity may lie in going after a new segment or introducing a new business model,” he added.

Nonetheless, it’s really heartening to see Indian startups venturing outside India. They will pave the way for more startups armed with more knowledge venturing there, he shared.

However, the reality is different. Many global tech companies, including Uber, which toiled in China trying to gain market share in the first three years of launch, had to vacate the market following a fierce battle with local competitor Didi. Indian internet companies are also likely to face similar situations, as China follows a protectionist policy favouring local companies.

K Vaitheeswaran, a veteran internet entrepreneur and author of Failing to Succeed – the story of India’s first e-commerce company, believes that these moves (launch in China) are aimed at increasing valuations. If a company is present in India and China, the world’s top 2 fastest growing economies with huge untapped potential, valuations can soar.

“The real question is how successful can these companies be in China,” he said. “China is very different from India as a market — language, culture, the rhythms of doing business and most importantly, it is a protected market unlike India. My assessment is that launching in China may be easy, succeeding there over time may be quite challenging,” said Vaitheeswaran.

Experts feel that it is too early to call it a definite trend. However, China is an interesting market from a diversity point of view and is a large market worth going after.

Says K Ganesh, a serial entrepreneur and investor and Founder of startup accelerator Growth Story. “Definitely, Chinese market is of interest, given the large size of the market, proven use of mobile phone, digital technology-based product and services, comfort with internet commerce amongst mass population, and success of Chinese internet companies in terms of scale, revenue, market cap. However, language and government control and restrictions are a challenge.”

“It is always a debatable question, when should a company venture outside India, given that India itself is a large market. But at macro level, it will mean additional scale, size and valuation than what one can just achieve in India,” Ganesh noted.

Photo by Matthew Fassnacht on Unsplash

 

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