Alibaba Spreads its Wings

The battle goes on for the prime position in the e-commerce world.
The Chinese Alibaba Group, which until now has placed much emphasis on the Chinese domestic market, is now spreading its wings into so far largely untapped Southeast Asian markets.

Lazada is now part of Alibaba’s empire….
Lazada is now part of Alibaba’s empire….

A giant US$1 billion stake in Lazada
Alibaba will take a controlling stake in Lazada, amounting to what is reported as being a US$1 billion investment.
The Lazada Group, which was founded in 2012 by the Frankfurt-based Rocket Internet is a privately owned e-commerce company headquartered in Singapore.
The original business model was mirrored on that of Amazon.
Since its foundation, Lazada has raised around US$650 million from investors such as Tesco Supermarkets, Temaseh Holdings and JPMorgan Chase.
The present Lazada business model is based on selling inventory to customers from its own warehouses.

Alibaba’s investment is said to be made up of US$500 million for buying new shares and a further US$500 million by buying shares from existing investors.
The Tesco supermarket group has in the meantime confirmed selling their 8.6% interest in Lazada to Alibaba for US$129 million.

….managed from Alibaba’s Chinese HQ
….managed from Alibaba’s Chinese HQ

Alibaba expands their Southeast Asian reach
The Chinese e-commerce market is pretty well much covered by Alibaba, so the next logical step was to decide where to expand and invest in the Asian arena.
The step to take over Lazada seems to be a wise one for the future.

 

Lazada now has established e-commerce platforms in six Southeast Asian countries.
They are: Indonesia, Malaysia, Singapore, the Philippines, Thailand and Vietnam.
These six countries have a total population of 560 million and an estimated internet user base of 200 million people.
Alibaba sees a huge growth potential in this area, as presently it seems that a meagre 3 percent of total regional sales in the region are conducted via internet.

Almost 15 percent of the Singapore Post shares are also now under the control of Alibaba. The latest share increase in Sin-Post was effected in mid-2015.
Lazada reported that the first nine months of 2015 showed an 81 percent rise in revenues to US$190 million.
However, there was a reported loss in the same period of US$212 million.

This does not seem to unduly worry Alibaba as the new majority owner.

John Mc Donagh

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