With the aim of boosting its stake in Southeast Asian online retailer Lazada, ahead of Amazon’s much-anticipated entry into the region, Chinese e-commerce giant Alibaba is ponying up $1 billion.
Effectively bringing its total investment to over $2 billion, its stake in the company will be increased from 51 percent to about 83 percent, Alibaba said on Wednesday.
And as millions of first-generation internet users embrace online shopping, increased confidence in Southeast Asia’s growing e-commerce market is underscored by the investment.
The region’s internet economy was expected to grow to $200 billion by 2025, primarily driven by growth in e-commerce, according to a commonly cited study conducted in 2016 by Google and the Singapore government’s investment arm, Temasek Holdings.
“The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us. We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities,” said Daniel Zhang, CEO of Alibaba Group, in a prepared statement.
Whether, to tackle Amazon’s eventual entry into the southeast Asian market, the new investment from Alibaba was a pre-emptive measure, was not made clear by Lazada.
Instead Lazada CEO Maximilian Bittner said, “This investment is first and foremost an affirmation of Lazada’s continued success, and of Alibaba’s confidence in Lazada. It is also a commitment to the region.”
Bittner added, “With Southeast Asia’s e-commerce markets still being relatively untapped, we see a very positive upward trajectory ahead of us and Alibaba will continue to put its resources to work in Southeast Asia through Lazada to capture these growth opportunities.”
At an implied valuation of $3.15 billion, it will purchase shares of certain Lazada shareholders, Alibaba said. Partial stakes from Germany’s Rocket Internet and British supermarket giant Tesco was bought by the tech giant last year.
In markets including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, the Alibaba-Lazada deals expand the Chinese e-commerce player’s global footprint. Lazada had approximately 23 million active buyers in the 12 months through the end of March, Alibaba said in a recent report.
By acquiring online grocer RedMart, Lazada has also invested further in the region. Aiming to tap a bigger slice of the region’s online retail market, it also launched a partnership with Unilever.
To create a subscription-based membership program for customers in Singapore, it additionally also teamed up with brand LiveUp, For brands including Netflix, Uber, UberEATS, RedMart and Taobao Collection, the service offers rewards and promotions.
In order to better support shoppers and merchants, many of which are small businesses, further investments in the marketplace, technology, payments and logistics would be possible for Lazada due to the partnership with Alibaba, the Southeast Asian retailer said.
In the first quarter of 2017, Amazon had planned to launch local e-commerce services in Singapore, TechCrunch had reported last year. But Amazon’s much-anticipated entry was postponed, the news site cited sources and said earlier this year.
There were no immediate comments that were available from Alibaba and Amazon.
(Adapted from CNBC)