"E-Commerce is More About Convenience than Price", Kshitij Karundia, Alibaba Group

With valuation expectations of founders of Internet firms becoming more reasonable, this might actually be the right time to invest in the India, feels Kshitij Karundia, Senior Director at Alibaba Group - Strategic Investments Team.  the former investment banker who now works with China's biggest online commerce company that made history when it became one of the most valuable tech companies in the world after its IPO in the US.

A former investment banker, Kshitij has been responsible for Alibaba’s investments into Paytm and Lazada. He is tasked with finding other strategic assets to fulfil Alibaba’s mission of globalization. Prior to Alibaba, he worked in various investment banks in both Mumbai and Hong Kong. He has previously advised Alibaba on its B2B IPO, several M&As, NYSE IPO, US$8bn debut bond deal and the acquisition and financing for its Yahoo! repurchase.

Kshitij, an ISB alumnus of PGP Co 2004, was back on the campus to interact with the Class of 2017. C Chitti Pantulu, former Editor, ISBInsight and Director, Marketing & Communications, ISB, caught up with the busy but unassuming and amiable ISB alumnus.  

Chitti Pantulu: It is great having you here. How does it feel to work for a former school teacher, that too from China? In the sense, how has it been at Alibaba so far, and compared to your previous jobs, what are the learnings that you have had?
Kshitij Karundia: It’s an interesting question since I have never thought about the fact that I was working for a former school teacher. But I think what you are really asking is how does it feel being part of a Chinese corporation. Currently, there are very few Indians in Chinese corporations and as Chinese companies become global there will naturally be more Indians working within them. Being a pioneer makes me feel proud. It shows that you can fit into a culture, which may look different from the outside but is actually very similar to our own. Barring a slight communication challenge, the working style is quite complementary. It is very interesting to work for a company like Alibaba, as they value your opinion.  Overall the team is very efficient and it is a refreshing experience to work at Alibaba.

Chitti Pantulu: But if you were to think of it and put your finger on the one reason why the Chinese are so successful today, what would it be and how would it differ from the Indian thought process?
Kshitij Karundia: The Chinese, and specifically Alibaba, are geared towards their mission and vision. Even if you have to take a long-winded road rather than a shortcut, you have to get there come what may. Every person who is recruited has to be mission-driven. We prefer team-players because we want to ensure we collectively drive towards the mission.

Chitti Pantulu: Is that a specific Alibaba kind of thing is or is it a general Chinese approach?
Kshitij Karundia: I feel this is particularly prevalent in Alibaba. Unlike India, China didn’t have the boom within its private sector until very recently. Entrepreneurship is a relatively new phenomenon to the country. In Alibaba, we hire ordinary people, and together do extraordinary things together. That has always been our motto.

Chitti Pantulu: To that extent e-commerce seems to have changed the game where distribution, reach, and spreading the markets is actually concerned as we are witnessing in India. So switching gears to e-commerce, valuations seem to be under stress now. People are already talking about a kind of integration in the e-commerce industry and perhaps even a shakeout. How does it look from where you are sitting? How is the e-commerce investment climate in India appearing and is it a good time for investments, given the fact that valuations are somewhat low?
Kshitij Karundia: When e-commerce started in India it began very differently from how it did in China if I have to compare my experience.  China never saw the kind of capital flows for e-commerce as India has. Valuations of e-commerce companies in India are high, primarily because of the focus on a metric called GMV, gross merchandise value, to value such companies. Indian consumer behavior has been shaped to believe that online commerce is cheap, but the reality is that consumers shop online primarily for convenience. Now companies are focused on unit economics and profitability.

Chitti Pantulu: But when you are corrupting them with discounts, freebies and all, they do get used to it right?
Kshitij Karundia: Absolutely. In a market like India, you always start with price. However, companies have to quickly begin to differentiate and create a sustainable value proposition in the long run. Capital is always available for good companies and is not a long-term competitive advantage.

Chitti Pantulu: That is also a great opportunity for companies like Alibaba basically to look at such niches and actually grow.
Kshitij Karundia: I agree, it’s a big opportunity but there are some limitations - primarily infrastructure related. As we all know, e-commerce needs to be built on a good Internet backbone which is only just being deployed in India. While data is relatively cheaper in India compared to global benchmarks, it’s not that cheap when accounting for India’s per capita income. E-commerce success is dependent on a good logistics and payment network, which is what everyone is trying to build. For example, cash on delivery has been instrumental in the growth of e-commerce but it can be expensive due to returns, theft and pilferage. Consumers tend to change their mind since they have not committed payment upfront. So a payment wallet is beneficial when used ubiquitously across all platforms. The other important part is logistics. If goods don't reach you or you are unsatisfied with your purchase, consumers are unlikely to shop again. This makes track and trace, and managing consumer expectations around delivery of their product critical.

Chitti Pantulu: Today Alibaba is more than just an e-commerce company. It is many things to many people.  So if you were to actually describe Alibaba how would you? It is a media company, it is a technology company, it is so many things actually.
Kshitij Karundia: If you ask me how best to describe us, we would certainly want people to consider Alibaba as a data company. With our e-commerce operations, we are generating enormous trove of data which we can share to help our ecosystem participants to refine the way they conduct their businesses. Where it is payment, financial, logistics, marketing services and cloud computing, this infrastructure of commerce are creating insightful data for our ecosystem participants to do business easier anywhere in this fast-changing digital world. I have to say there is no other company like Alibaba in this respect.

This interview that dates back to mid-2017 was originally carried in the ISBInsight and the Alma Maters, the Alumni newsletter of the ISB. The original can be found here: http://www.isb.edu/newsletters/almamatters/april–june-2017/InterviewWithKshitijKarundiya