#Asia After Lazada deal, ships will sail in Alibaba’s rising tide

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The move could provide serious infrastructure and culture help in an industry still trying to bring e-commerce to the masses across Asia

Alibaba

During Alibaba’s 2014 run-up towards one of the most media-hyped IPOs in the recent memory, the company showed itself to be a company similar to Futurama’s Nibbler character — gobbling up everything in its sight for no particular rhyme or reason.

Jack Ma’s company was buying into ride-sharing apps (Didi Kuaidi), food delivery portals (Meituan and Dazhong), trip reservation companies like Ctrip and — leaving out a multitude of others — a struggling newspaper in Hong Kong.

So when the news hit yesterday that Alibaba had bought a controlling stake in Lazada, the initial reaction was: did Alibaba just invest US$1 billion dollars to help Rocket Internet offload a company trending in the wrong direction?

It is the top e-commerce company in Southeast Asia, but the gap between number one and the rest of the field is much smaller than in the US (Amazon) and the top players in China (Alibaba, JD.com).

One tech guy told me the deal is like Alibaba sending a lifeboat to a company that Rocket Internet was trying to push off the boat. But this person could be wrong.

“Alibaba’s entry into Southeast Asia is very exciting. It provides the strongest validation for the potential of [the] Southeast Asian e-commerce market,” said John Riady, Lippo Group Director and key figure in Matahari Mall, in a text message to e27.

Jérémy Fichet, Group CEO of Indonesia’s Orami, echoed a similar sentiment with e27, saying it will help the development of the ecosystem as a whole.

When the tide rises, all the boats sail.

Also Read: Hold your breath: Alibaba just acquired controlling stake in Lazada

E-commerce, to generalise for a moment, throughout region is still struggling against a strong bricks and mortar cultural, logistical and infrastructural system. Indonesia being the most obvious example as a country with a massive market that culturally uses traditional payment methods like cash-on-delivery or bank transfers.

In an email to e27, Lazada Group CEO Max Bittner pointed to these fragmented market realities and said the deal validates the track the company has taken over the last four years.

“Southeast Asia is a mobile-driven consumer market that is highly fragmented and diverse with significant barriers to entry, and a nascent modern retail sector that has large headroom for growth,” he said.

As what happened in the US, a cash (and e-commerce experience) infusion from Alibaba may get more people using Lazada. But e-commerce is not a mutually exclusive industry and in the US, niche websites did perfectly fine with the rise of Amazon once users became comfortable buying retail online and began to explore the ecosystem outside of Jeff Bezos’ company.

An example closer to home is an interesting side-effect from the success of Alibaba and JD.com in China. It has helped Australian e-commerce companies take-off because relaxed trade regulations has exposed Australian beauty and food products to a Chinese consumer and created a bit of a trend.

Pulling away from the Lazada deal

For Rocket Internet, yesterday’s news comes in the context of a range of sell-offs, or attempted sell-offs, in the region.

India media started 2016 with a January news cycle about Foodpanda struggling to find buyers, even at a price-tag of US$10-15 million.

Last week, Rocket’s India online furniture store FabFurnish was sold to Future Group for an undisclosed amount. Futhermore, the company was reported in March to have injected US$20 million into fashion company Jabong in an effort to keep the venture alive for another year.

Lazada is far more successful than any of the companies mentioned above and in the Philippines, it is the sixth most visited website after Facebook, Youtube, Google Philippines, Google Worldwide and Yahoo.

But, as Leila Abboud and Chris Hughes put it nicely in a column for Bloomberg’s Gladfy opinion page, an IPO is years away and Rocket Internet has more pressing budget responsibilities in other parts of the company.

“Selling most of its stake in Asian online retailer Lazada to China’s Alibaba can be seen as an admission that the German web investor couldn’t get it in a strong enough shape on its own for a flotation,” they wrote.

Also Read: In Thailand, how does Lazada compare to five of its competitors?

Alibaba just made the biggest move in Southeast Asia’s e-commerce industry so far in 2016. I believe, and so do high-profile Founders, the decision will buoy an industry currently laying the groundwork for the future.

For Rocket Internet, sometimes it is better to hit a single than swing for a home run.

Photo Source: www.alibabagroup.com

 

The post After Lazada deal, ships will sail in Alibaba’s rising tide appeared first on e27.

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