Move to create new growth point for Internet giant: experts
E-commerce giant Alibaba Group Holding announced Tuesday that it has signed agreements to buy a controlling stake in Singapore-based e-commerce platform Lazada Group SA, a move that could help Alibaba expand into Southeast Asia.
Alibaba said it will invest about $1 billion in Lazada, with about $500 million going to purchase new shares and the rest to buy stakes from Lazada's existing shareholders, including British retailer Tesco Plc and Germany's Rocket Internet SE - the founder of Lazada, according to a statement Alibaba sent to the Global Times Tuesday.
The deal values Lazada at $1.5 billion, according to a press release on the website of Rocket Internet on Tuesday.
Lazada operates in six Southeast Asian markets, including Singapore, Indonesia, Malaysia and the Philippines, that have a total population of 560 million and 200 million Internet users, Alibaba said in the statement.
"Compared with developed markets like the US and Europe, Southeast Asia has more potential in e-commerce," Zhang Yi, CEO of Shenzhen-based Internet research firm iiMedia, told the Global Times Tuesday.
"Also, in those developed markets, Alibaba faces strong rivalry from giants like Amazon and eBay," he said.
In Southeast Asia, only some 3 percent of retail sales are made online, Alibaba said in the statement. In China, the ratio reached 12.8 percent in 2015, according to data from the National Bureau of Statistics.
The closeness between Chinese culture and the cultures in Southeast Asian countries is also a plus for Alibaba to expand in the region, experts said.
Though Alibaba overtook Wal-Mart Stores Inc as the world's largest retailer in the fiscal year ended on March 31, its business is still mostly in the domestic market.
"Its growth in the domestic market is slowing down and new growth points overseas are needed," Liu Dingding, a senior analyst at Beijing-based Internet consultancy Sootoo, told the Global Times Tuesday.
Alibaba Chairman Jack Ma Yun told Bloomberg in an interview in November 2015 that about 50 percent of Alibaba's income is expected to be from overseas markets in 10 years.
To realize the goal, the deep-pocketed giant has made several moves in overseas expansion in the past year. For instance, it invested in US e-commerce platform jet.com in April 2015. In August 2015, it invested $200 million in Indian e-commerce firm Snapdeal. Besides e-commerce, Alibaba also invested in India's payment firm One97 Communications.
"Compared with building a business from the ground up in an overseas market, acquisition is a more realistic and economical way to set foot into a market," Zhang said.
Alibaba has also laid some groundwork for its expansion in Southeast Asia. As logistics could be a major obstacle for e-commerce growth in the region due to underdeveloped infrastructure, Alibaba increased its investment in Singapore Post in July 2015, taking a 14.51 percent stake in the delivery company.
