Alibaba Adds $1 Billion Into Lazada, Upping Its Stake To 83%

Credit: Bloomberg News

Alibaba Group Holding Ltd. is accelerating its e-commerce play in Southeast Asia, a region that is home to more than 600 million consumers.

The Chinese Internet giant said Wednesday it is investing an additional $1 billion into Southeast Asian e-commerce firm Lazada Group, raising its stake to 83% from 51%.

Alibaba BABA, had paid $1 billion for a controlling stake in the internet shopping platform last year. Based in Singapore, Lazada operates in six markets including Indonesia and the Philippines.

Alibaba, the owner of China’s two most popular online retail sites, Taobao and Tmall, has made globalization a key focus of the firm’s expansion plans as competition at home intensifies. Company founder and Chinese billionaire Jack Ma recently traveled to Detroit to make a pitch alongside celebrities such as Martha Stewart, to attract U.S. businesses to sell on its platforms.

Max Bittner, chief executive officer of Lazada Group, poses for a photograph in Singapore, on Tuesday, Dec. 6, 2016. Photographer: Bryan van der Beek/Bloomberg

Alibaba took control of Lazada last year from Rocket in a $1 billion deal — its largest overseas move to date. The company Bittner started in 2012 is now pivotal to quickening the Chinese online retailer’s forays abroad, fulfilling billionaire co-founder Jack Ma’s ambitions of becoming a truly global business.

Lazada’s home turf is shaping up to be the next battleground for Alibaba and main Chinese rival JD.com Inc., and Amazon.com Inc. down the road. While still lacking the transport and payments infrastructure crucial to the widespread adoption of e-commerce, the region has become the world’s fastest-growing internet arena, with a populace of more than 600 million getting more comfortable with online shopping and payments.

“Obviously this allows Alibaba to expand its global footprint, giving them unrivaled access to users,” Bittner said in an interview. “E-commerce penetration in Southeast Asia is only roughly 3 percent, so the partnership is a great step change.”

Amazon hasn’t yet voiced its intentions for Southeast Asia, but the industry expectation is that its constant quest for growth will lead it there as early as this year. Now that Alibaba’s established its dominance of China and Amazon has taken the lead in the U.S., both are looking to make their mark overseas. JD, whose preference for building its own distribution more closely mirrors Amazon’s, is also said to be in talks to invest hundreds of millions of dollars in Indonesian online marketplace Tokopedia.

Alibaba — which despite its sheer scale still derives most of its revenue from China — has been the most aggressive thus far. It’s amassing a regional presence in anticipation of Amazon’s eventual entry, starting with 51 percent owned Lazada. Ma traveled to Kuala Lumpur in March to declare Malaysia its first logistics hub outside of China, a centralized warehousing and distribution launchpad for the region.

Indonesia, the world’s fourth-most populous nation, is considered among the most promising markets in the region. The country draws comparisons with China a decade ago, with its lack of retail infrastructure, an exploding mobile-user base, and a growing middle-class craving leisure and quality goods, which underpinned the rise of both.

Lazada itself covers six countries — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — and runs about a dozen warehouses and scores of distribution centers from which it conveys goods directly to buyers. The company is competing with well-funded rivals from MatahariMall to Sea Ltd., but Bittner said Lazada can count on Alibaba’s expertise.

Rocket Internet will sell its 8.8 percent stake in Lazada to Ma’s company for $276 million, it said in a statement. Kinnevik, which sold half its Lazada stake when Alibaba took control of the company in April, will get $115 million for its remaining 3.6 percent stake, the Swedish investment company said in a separate announcement.

This year, Lazada introduced Alibaba’s Taobao online bazaar to Singapore via a dedicated website. The Chinese e-commerce giant also helped Lazada create an online loyalty and services program that offers UberEats and Netflix along with free deliveries from Alibaba’s Taobao and online grocer Redmart. It was the first time the U.S. companies have jointly created an online rewards program, Bittner said at the time.

“The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us,” Alibaba Chief Executive Officer Daniel Zhang said in a statement. “We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”

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