Alibaba-Lazada deal pumps another US$1 billion into S.E. Asian e-commerce

Alibaba Group will invest an additional US$1 billion in Lazada Group, increasing its stake in the Singapore-based e-commerce retailer to 83 percent, in a bid to capture more business in Southeast Asian markets.

The latest transaction increases Alibaba’s investment in Lazada to over $2 billion. Lazada’s well-developed warehouse and delivery business allows Alibaba to expand rapidly into Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Lazada’s markets are critical to Alibaba’s growth strategies, given their low extant e-commerce penetration at 3 percent, overall strong growth rates and combined market size of $560 million. “The e-commerce markets in the region are still relatively untapped,” explained Daniel Zhang, CEO of Alibaba Group. “We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”

Indonesia, in particular, is expected to be one of the biggest e-commerce markets in Asia, reaching $130 billion by 2020, according to the local government. With so much at stake, Alibaba isn’t the only multinational trying to get its foot in the door. French retailer Carrefour, as well as Softbank and Sequoia Capital, are just some of the companies investing in the country’s e-commerce market.

With assistance from Alibaba, Lazada established an e-fulfillment center in Malaysia as part of Alibaba’s Electronic World Trading Platform. Lazada also launched Taobao Collection in Singapore and Malaysia.

The largest competitor is Bhinneka, a homegrown e-commerce player that is especially popular in the computers-and-gadgets department. Bhinneka is growing quickly, and expanding into other product lines. If Alibaba wants to command a meaningful share of the market, it will have to move fast.