Alibaba Strikes $1 Billion Deal With Lazada

Alibaba on the Lookout for E-commerce Expansion

Chinese Internet giant Alibaba Group Holding Ltd. took a big leap in e-commerce by striking a deal with Lazada Group that is worth $1 billion in investment. The big step paves the way for Alibaba to expand its e-commerce business in fast growing Southeast Asia.

The deal includes buying stock from Lazada’s prominent shareholders, including Berlin-based tech incubator Rocket Internet AG, British supermarket operator Tesco, and Kinnevik.

Both Rocket Internet, the founder of Lazada, and Tesco sold some of their Lazada shares to Alibaba. Rocket Internet sold a 9.1 percent stake for $137 million to the Chinese e-commerce company. Tesco sold an 8.6 percent stake for $129 million to Alibaba as well. Thus with this transaction, Alibaba now owns about half as many Lazada shares as it used to.

Looking for Future growth

Billionaire Alibaba Chairman Jack Ma is determined to expand his business. That is why looking for some place for future growth is the best option. Southeast Asia is the best place to start the expansion. The region is one of the most promising e-commerce markets in the world. But this goal was best realized by striking a deal with the online retailer Lazada.

A Bloomberg report says, the Lazada deal can add sales of clothing and electronics in six Southeast Asian markets.

Alibaba has made it big in e-commerce in its home market. However, it remains dependent on China for its major business. Thus, the e-commerce giant needed to find some other place for future growth, preferably Southeast Asia.

Why New deal with Lazada can Boost Alibaba’s Future Growth

Lazada made a name in the e-commerce business model that dominantly attracts online shopping consumers in major Southeast Asian markets, including Indonesia, Philippines, Malaysia, Vietnam, Thailand and Singapore.

Lazada dominates Indonesia with its 256 million people amid rivals, including Tokopedia and MatahariMall. But, the goal for overseas expansion for the Chinese e-commerce giant was not easy to do because it needed bigger investment in logistics and would take much longer for Alibaba to start a business from the ground up in the region.

So there was a better solution. And that was to integrate the businesses and introduce more existing merchants to Lazada to export their products overseas. This effective scheme was also affirmed by Michael Evans, Alibaba President.

 An entrepreneur in Alibaba online.
An entrepreneur in Alibaba online.

In a press statement, Alibaba president Michael Evans said, “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 e-commerce globally.”

Mina Fabulous
Mina Fabulous follows the news, especially what is going on in the US State Department. Mina turns State Department waffle into plain English. Mina Fabulous is the pen name of Carmen Avalino, the NewsBlaze production editor. When she isn't preparing stories for NewsBlaze writers, she writes stories, but to separate her editing and writing identities, she uses the name given by her family and friends.