Alibaba To Buy Lazada In a Deal to Control Asia

April 12, 2016, 9:43 AM UTC
Key Speakers At Day Three Of The APEC CEO Summit
Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd., speaks at the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Manila, the Philippines, on Wednesday, Nov. 18, 2015. Businesses and people should be free to trade because it's a human right and represents freedom, Ma told the APEC summit. Photographer: SeongJoon Cho/Bloomberg via Getty Images
Photograph by SeongJoon Cho — Bloomberg via Getty Images

Alibaba said today it will spend $1 billion to buy control of the top e-commerce player in Southeast Asia, signalling a strategy to control the majority of markets around China.

The company said the move expands Alibaba’s footprint, and in effect the Western brands selling on its sites, to six countries in the region comprising 560 million people. Alibaba’s new president Michael Evans, a former Goldman Sachs banker tasked with growing Alibaba internationally, said the deal supported “our ecosystem expansion in Southeast Asia to better serve our customers.”

Lazada, a practical unknown in the West, was started by the Berlin-based Rocket Internet AG in 2011 to take advantage of Amazon’s weak presence in the region. Since then it’s grown via an Amazon-type warehouse model and, latterly, a third party selling site. The company says gross merchandise volume last year passed $1 billion, although it still posted losses due to the costs of expansion. Lazada runs sites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The draw for Alibaba was likely Lazada’s infrastructure investments in delivery and supply chain in the region that has been difficult for any e-commerce sellers because of weak transportation and payment systems.

Jack Ma has said Alibaba’s goal is to get half its revenue from overseas. Right now it has only tiny presences outside China and less than 10% of revenues come from abroad.

With its latest move for Southeast Asia, that should climb.

It’s not yet clear whether the move will face any regulatory or political opposition, against a background of increasing tension between China and its neighbors over territorial disputes in the South China Sea.