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What Southeast Asian VCs Think of the Latest Alibaba/Lazada Deal

Giants are girding themselves for a final assault on Southeast Asian e-commerce

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BY Marishka M. Cabrera - 20 Mar 2018

What Southeast Asian VCs Think of the Latest Alibaba/Lazada Deal

PHOTO CREDIT: Getty Images

There’s no stopping the e-commerce train in Southeast Asia, a region home to more than 600 million consumers. Chinese e-commerce giant Alibaba will invest another $2 billion in Lazada and install one of its most senior executives, Lucy Peng, to take over as chief executive officer, news reports say.

Alibaba's further stake into Lazada (after putting in $2 billion earlier) brings Alibaba's investment to at least $4 billion.

The deal underscores how Southeast Asia is emerging as the most important global battleground for e-commerce firms, especially with Amazon's entry into Singapore. The biggest and most deep-pocketed industry giants are girding themselves for a final assault on Southeast Asian e-commerce, mirroring the fight currently underway in India with Flipkart and Amazon.

For Southeast Asian VCs, the move is hardly a surprise, given the potential of the e-commerce market in the region.

According to Kee Lock Chua, managing partner of the Vertex Ventures SEA/India fund, the additional $2 billion investment and having one of Alibaba’s key founding members leading the charge affirm the company’s commitment to the Southeast Asian market.

Justin Hall, principal at Golden Gate Ventures, believes that the move does not necessarily represent a shift in strategy for Alibaba. “Southeast Asia has always been an integral part of its global strategy, and we’ve seen that in the way it invests and partners across the region,” Hall says.

If anything, Hall notes investment into Lazada can be construed more as a doubling-down on Southeast Asia. “They're arguably the leading e-commerce retailer (at least for new goods) in the region, and this investment is intended to secure that leadership position,” he adds.

And that leadership position may be a precarious one given that e-commerce giants like Amazon are also eyeing the market.

But for Hall, Alibaba had intentions to grow and dominate Southeast Asia well before Amazon set its sights on the region. Between the two e-commerce behemoths, he believes, Alibaba is clearly geared for battle to win the region.

He explains, “While the relatively recent entry of Amazon Prime might seem impactful, the sheer amount of resources and investment Alibaba is devoting to the region is orders of magnitude greater than Amazon. It conveys a seriousness of purpose and strategic foresight that Amazon frankly lacks.”

Smaller players to face an uphill battle

With Lazada’s fresh funding, what will it mean for smaller players in Southeast Asia?

“For the smaller players who are competing head-on against Alibaba/Lazada, they will face the uphill battle against a player which is substantially better financed. 

For smaller players who offer complementary service to Lazada, they can look forward to growing business in the foreseeable future,” Chua says.

Amit Anand, co-founder of Jungle Ventures, agrees, “If a company is an enabler of e-commerce, then the ease of use for the consumer and seamless and reliable integration for the e-commerce merchants becomes the primary factor for success,” Anand says in an earlier interview with Inc. Southeast Asia.

For Hall, Alibaba's M&A strategy falls into one of two categories: buying for distribution, which could be country-wide, popular consumer-facing platforms with high engagement, retention, and user counts, or specific use-case B2B products or services that solve unique, regional or inter-country problems.

“As an industry, e-commerce is still nascent in Southeast Asia, and we will be laying the foundations for years to come. In this regard, we can continue to expect more investment to come from companies and government bodies to improve and innovate on everything from discovery to last mile delivery,” Anand says.

 

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