Alibaba Group Holding Limited announced Thursday that it can invest about $1 billion to extend its stake in e-commerce startup Lazada Group from 51% to about 83%, in response to a press release. Lazada, founded in 2012 in Singapore, also operates e-commerce marketplaces in Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
Similar to its initial $1 billion investment in the corporate last yr—its largest overseas investment on the time—the move reflects each Alibaba’s deep pockets and its interest within the region’s growing markets. “With just 3% of the region’s total retail sales being online, Southeast Asia is expected to offer huge growth potential,” Alibaba noted in an organization press release.
Alibaba will buy shares of some Lazada shareholders at an alleged valuation of $3.15 billion. Reuters reported that German enterprise builder Rocket Internet and Swedish investment firm Kinnevik were among the many shareholders selling their shares. Lazada will proceed to operate under the identical brand.
The six countries where Lazada operates have a combined population of about 560 million people and an online user base of about 200 million, in response to Internet Live Stats. Only 3% of retail sales in Southeast Asia are online, and Alibaba says it sees huge growth potential there.
In a press release Thursday, Alibaba CEO Daniel Zhang said the past yr had been productive. Since Alibaba’s initial investment, the businesses have worked to expand e-commerce within the region, including establishing an e-fulfillment center in Malaysia as a part of Alibaba’s Electronic World Trading Platform strategy, promoting “Thailand 4.0” and launching Taobao collections in Singapore and Malaysia, enabling local customers to buy high-quality products from China, the businesses said.
“As a market leader, Lazada has demonstrated its ability to execute and continue to lead the region in products and services with the best consumer experience in Southeast Asia, while developing a strong ecosystem that supports small businesses moving online,” said Zhang. “The e-commerce markets in the region are still relatively untapped and we see a very positive growth trajectory ahead. We will continue to leverage our resources in Southeast Asia through Lazada to capitalize on these growth opportunities.”
As China’s runaway growth has calmed down and retail and e-commerce markets within the U.S. and Europe have matured, retailers and types of all stripes have turned to overseas markets, particularly India, for faster growth. EBay, Amazon, and Alibaba have made significant investments there, and Amazon has built its own operations.
Amazon was rumored to be entering Southeast Asia last yr, with plans to launch services in Singapore in the primary quarter of this yr. Initial plans called for the move to be made via an investment in Redmart, but that company was acquired for about $50 million by Lazada. In March, TechCrunch reported that while Singapore stays a spotlight for Amazon, its entry has been postponed. Some observers imagine Amazon is more likely to expand in larger markets with fewer logistical barriers, as was the case with its March acquisition of Middle Eastern e-commerce marketplace Souq for an undisclosed sum and its recent launch in Australia.
While promising, Southeast Asia has its challenges. The region is home to an uneven number of nations, including many islands and sometimes complex political and physical geographies. In addition, poor infrastructure in lots of areas makes e-commerce logistics difficult, and slower web speeds make it difficult to sell — problems that Alibaba’s investment could go a good distance toward fixing.
Source and reference: retaildive.com | TechCrunch | CNBC | AirCargoWorld
