Alibaba makes biggest overseas bet with US$1b Lazada deal

Alibaba Group Holding has agreed to buy a controlling stake in Southeast Asian online retailer Lazada Group for about US$1 billion, its biggest deal overseas, as the Chinese e-commerce giant seeks fertile new turf while growth slows at home.

Lazada, founded by Germany’s Rocket Internet in 2012, is headquartered in Singapore and also operates in Malaysia, Indonesia, the Philippines, Thailand and Vietnam. That affords Alibaba a chance to tap the region’s growth potential, but the market is also competitive and fragmented, with only a fraction of total retail sales currently conducted online.

“Southeast Asia has a lot of overlap with China in terms of consumer habits, intra-regional trade and tastes,” said Duncan Clark, chairman of investment advisory firm BDA China and author of a book on Alibaba. “Rocket in this case has managed to create a successful, multi-market player in a region which needs scale and breadth to be viable. This has obvious appeal to Alibaba.”

Lazada saw revenue jump 81 per cent to US$190 million in the first nine months of 2015, while active customers more than tripled to 7.3 million. However, its adjusted loss before interest, tax, depreciation and amortisation more than doubled to US$212.9 million. Rocket reports 2015 figures on Thursday.