After establishing a dominant presence in the Indian market, Chinese e-commerce behemoth Alibaba is now eyeing expansion into the South-East Asian region. The firm has acquired a controlling stake worth a ballooning $1 billion in Lazada, one of the biggest eCommerce platforms in Southeast Asia.
The deal comprises of $500 million worth of new equity shares issued by Lazada and remaining $500 million bought from the existing shareholders namely the founder company Rocket Internet, Tesco, and Kinnevik.
Rocket Internet has sold its 9.1 % stake for $137 million retaining 8.8%, bringing in munch needed respite for the firm. Tesco has sold 8.6% stake for $129 million while retaining 8.3%. Kinnevik sold its 3.8% stake for $57 million and retained the remaining 3.6%.
Overall, according to Rocket Internet, the deal has valued Lazada at $1.5 billion. Through this deal, Alibaba expects to help the local merchants and brands and distributors on its platform to access the Southeast Asian consumer market.
With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation for future growth in one of the most promising regions for eCommerce globally.
said Michael Evans, President of Alibaba.
Rocket Internet, like its previous ventures based on replication of successful business models, had founded Lazada in 2011 with an aim to develop it into Amazon of the Southeast Asia.
Since then Lazarus has grown into a one-stop e-commerce destination achieving high sales in major Southeast Asian markets namely Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
However, like many other eCommerce ventures around the world, it is also facing the issues of profitability and increasing net operating losses despite increasing revenues. With the investment from Alibaba, Lazarus will be able to fund its operations as well as further expand its presence.
Commenting on their partnership with Alibaba, Max Bittner, CEO of Lazada Group said,
The transaction will help us to accelerate our goal to provide the 560 million consumers in the region access to the broadest and most unique assortment of products. Furthermore, leveraging Alibaba’s unique know how and technology will allow us to rapidly improve our services and provide an even more effortless shopping and selling experience.
Investing in the Southeast Asian market is also promising for Alibaba due to the tremendous growth potential in the region.
According to Internet Live Stats, the major Southeast Asian markets of Lazada have a combined population of approximately 560 million and an estimated Internet user base of 200 million.
Moreover, at present, only 3% of the sales conducted in these regions are through online channel which is expected to rise exponentially with growing internet penetration, thus offering a huge market potential to Alibaba to grow its presence in the region.