Quantcast

Alibaba Invests Another $2 Billion in this Online Mall


Alibaba (NYSE: BABA) recently invested another $2 billion into Lazada, a Singapore-based online mall that expanded across Southeast Asia over the past few years. This boosts Alibaba's total investment in Lazada to $4 billion. Lucy Peng, chairwoman of Alibaba's fintech affiliate Ant Financial, will also replace Max Bittner as Lazada's CEO.

Alibaba initially invested $1 billion in Lazada in 2016, then invested an additional $1 billion last year, which boosted its stake to 83%. Alibaba didn't say how much its stake will change after its latest investment. Lazada's other investors include Singapore's Temasek Holdings and Rocket Internet, the German company that founded Lazada in 2011.

Tiny cardboard boxes in a shopping cart on a laptop keyboard.

Image source: Getty Images.

Widening its moat against Amazon

Alibaba's control of Lazada widens its moat in Indonesia, Malaysia, Thailand, Vietnam, the Philippines, and Singapore. All of these countries, which the exception of Singapore, are classified as high-growth emerging markets. The region is home to about 600 million consumers.

Online sales account for less than 5% of all commerce across Southeast Asia, according to Alphabet 's Google and Temasek. However, that report claims that the region's e-commerce market will grow from $5.5 billion in 2015 to $87.8 billion by 2025, fueled by rising incomes and improved internet access.

That's why Amazon (NASDAQ: AMZN) launched its services in Singapore last year and is gearing up for a launch in Vietnam, and why Alibaba is pouring billions of dolalrs into Lazada.

Singapore's skyline.

Image source: Getty Images.

Lazada also acquired Singapore-based web grocer RedMart for about $40 million in late 2016, then partnered with Uber and Netflix (NASDAQ: NFLX) to launch LiveUp, a subscription-based bundle that offers fast or free deliveries from Lazada and Alibaba's Taobao Collection, special offers at Redmart, a free six-month subscription to Netflix, and discounts on Uber rides and UberEats deliveries.

That service was clearly a pre-emptive strike against Amazon's introduction of Prime in Singapore. Alibaba also led a $1.1 billion investment round in Tokopedia, a leading e-commerce platform in Indonesia, last year.

Countering Tencent and JD.com

Tencent (NASDAQOTH: TCEHY) and its main e-commerce ally JD.com (NASDAQ: JD) have also been planting roots across the region. Tencent owns WeChat, the most popular messaging app in China with almost a billion monthly active users. WeChat Pay is also one of the most widely used mobile payment platforms in Asia. JD, China's second largest e-commerce company, tethers its online marketplace to Tencent's WeChat ecosystem.

Tencent owns about a third of Singapore-based online gaming and e-commerce company Sea (NYSE: SE) . Sea's Shopee is Lazada's biggest rival across Southeast Asia, but it's unclear which company is the market leader -- a large portion of Shopee's revenues come from Taiwan, a market which Lazada doesn't operate in.

JD initially entered Southeast Asia in 2015 by expanding into Indonesia. Last year, it invested in Uber's Indonesian rival Go-Jek, then set aside $500 million for e-commerce and fintech joint ventures in Thailand. Earlier this year, it invested in Vietnamese e-commerce firm Tiki.vn.

But who will win this land grab?

The e-commerce market in Southeast Asia is lucrative, but it's also highly fragmented across multiple countries with different economies and spending habits. However, two clear trends have emerged.

First, established e-commerce companies like Alibaba and Amazon are using Singapore, the most developed market in the region, as a launchpad for their expansion into other countries. Second, the general strategy is to invest in local leaders (like Lazada) or strike joint ventures with other established players rather than go at it alone. That arrangement benefits smalelr companies like Lazada, which are burning through cash to fend off the competition.

Alibaba, Tencent, and JD all seem to favor investments over direct expansion, but Amazon seems to be more interested in going at it alone. Time will tell which strategy -- the one with less concentrated risk or the one with more branding power -- pays off.

10 stocks we like better than Alibaba Group Holding Ltd.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Alibaba Group Holding Ltd. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon, JD.com, and Tencent Holdings. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, JD.com, Netflix, and Tencent Holdings. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: BABA , AMZN , TCEHY , JD , SE


More from Motley Fool

Subscribe






Motley Fool
Contributor:

Motley Fool

Market News, Investing








Research Brokers before you trade

Want to trade FX?