What will happen to Lazada when Alibaba splits into 6?

Analysts and investors have responded positively to Alibaba’s latest restructuring plan. Accordingly, this hundred billion dollar corporation will split into 6 entities, with each entity having its own CEO and board of directors and will pursue its own IPO deals in the future. The purpose of this is for Alibaba to become more agile and able to compete in an increasingly crowded market like China.

Alibaba shares have since risen 14.26% since announcing the decision. Of course, this move will affect Lazada – their Southeast Asian e-commerce arm.

Under the new structure, Lazada will be part of the Global Digital Business Group, which includes AliExpress, Trendyol and Daraz.

After making the change, Lazada’s management will become “more focused and agile”, according to Zerlina Zeng, Senior Analyst at CreditSights.

“ We expect Alibaba to continue to increase operational efficiency and reduce losses at Lazada ,” Ms. Zeng told Tech in Asia. Zeng also added that Lazada could IPO – a good option for the company to have more capital to scale.

In its latest earnings report, Alibaba said that Lazada not only improved order growth and operational efficiency, but also narrowed its loss per order.

Angus Mackintosh, an analyst at CrossASEAN Research, said he believes this move will also open up the possibility of raising capital for Lazada.

“With all the increased domestic scrutiny in China, overseas investments could become more important,” Mackintosh said, with moves like Alibaba pumping $1.6 billion into Lazada throughout. 2022 and Lazada’s investment in Indonesia’s Dana e-wallet shows that the company is moving into higher priority businesses for the parent company.

Lazada, which Alibaba took over in 2016, is the Chinese group’s main e-commerce business in the booming Southeast Asian market. Its importance has grown since Beijing launched a broad effort to rein in the influence of internet giants, boosting the likes of Alibaba and Tencent Holdings Ltd. develop their international business activities. This month, Tencent launched a new game globally in the face of pressure to tighten regulations on the game business in its home country.

Singapore-based Lazada increased its Gross Merchandise Value (GMV) index to around $21 billion in 2021, after expanding its active consumer base 1.8 times to 130 million from March 2020. until September. However, Lazada is still behind rival Shopee of Sea with more than 56 billion USD in transaction value in the four quarters to the end of September 2021. The Alibaba subsidiary is currently the third largest online retailer in emerging markets in terms of GMV, after Mercado Libre but ahead of Coupang Inc. of Korea and Flipkart of India.

Lazada, Shopee and other internet giants like Grab Holdings and Goto are driving online commerce in Southeast Asia, which is seeing an average growth of around 27% annually. Tencent-backed Sea raised its forecast for annual e-commerce revenue last month for the second time this year, underscoring how the pandemic continues to drive spending online. According to research by Google, Temasek Holdings Pte and Bain & Co, Southeast Asia’s internet economy will double to $363 billion by 2025.

In a presentation to investors in 2021, Alibaba leaders once said that their long-term goal is to increase GMV by five times, the total transaction value on Lazada’s platforms reaches 100 billion USD. . Alibaba also wants Lazada to serve more than 300 million end users.

Source: TechinAsia