- 2018-09-27
Alibaba invests additional US$2 billion in Lazada
China's Alibaba (Alibaba) invested an additional US$2 billion in Lazada and appointed an executive of its own as the chief executive officer of the Southeast Asian e-commerce company, downgrading the company's founder to an advisory role.
This move comes as competition for the Southeast Asian market is heating up, with global companies such as Amazon and Google competing with Chinese technology giants and local competitors such as Sea.
This move is also in line with Alibaba's tightening of controls on Cainiao. In September last year, Alibaba invested an additional US$807 million in the logistics network, increasing its stake from 47% to 51%, and pledged to invest another 100 billion yuan (US$15.2 billion) in the next five years. Both Rookie and Lazada are at a loss.
Alibaba said that the latest investment in Lazada (which brings Alibaba’s total investment in Lazada to US$4 billion) is expected to enable the latter to be more deeply integrated into Alibaba’s ecosystem, which includes shopping, payment, entertainment and cloud services. Currently, it mainly covers China.
"The rising youth groups in Southeast Asia, the high penetration rate of mobile Internet, and the volume of e-commerce accounting for only 3% of total retail sales make us confident in investing more in the Southeast Asian market." One of the 18 founders of Alibaba, Lucy Peng, a member of an elite committee responsible for appointing the company’s directors, said. She will serve as the chief executive officer of Lazada.
However, investors and analysts are less convinced of Alibaba's expansion into more money-burning areas (including physical stores) and departure from its traditional asset-light model. This skepticism has caused its stock price to fall earlier this year, although it has since rebounded.
One person who has tracked the company for a long time cited the example of Intime. Alibaba took a stake in the department store operator in 2014 and later took it into private ownership in January 2017. "That was the first shoe dropped," he said. "People are starting to think, they are introducing asset-heavy, low-margin businesses, bid farewell to (Alibaba) 62% to 63% EBITDA (earnings before interest, taxes, depreciation and amortization) profit margin."
However, Lazada does provide tickets to one of the fastest growing online shopping markets. Alibaba invested in the company for the first time in April 2016, acquiring a 51% stake for US$1 billion.
Subsequently, Alibaba increased its holdings to 83% with an additional investment of US$1 billion in June last year.
Lazada said that the company's founder Max Bittner (Max Bittner) will become Alibaba's senior consultant, "to assist in the handover and future international growth strategy." After Nick Nash announced his plan to leave Sea in February, Bitner became the second CEO to withdraw from the Southeast Asian platform company.
A report published in December by Google and Singapore’s national investment fund Temasek predicted that the value of the Southeast Asian e-commerce market will reach US$88.1 billion by 2025.
Lazada, headquartered in Singapore, was established in 2012 and operates in Indonesia, Vietnam, Malaysia, the Philippines and Thailand. The company claims to serve 560 million people in the region. Alibaba also invested US$1.1 billion in Tokopedia, an online marketplace in Indonesia.