Alibaba announced today that they are putting US$2 billion additional investment. While the group maintains its 83% share of Lazada, it replaces CEO Max Bittner with Lucy Peng, Executive Chair of Ant Financial Services.
This happens almost exactly two years after its acquisition of Lazada’s controlling stake, and follows recent movement including announcement of a tech centre in Shenzhen.
In fact, prior to this US$2 investment billion announcement, certain positions within Lazada group have already been filled with Alibaba confidantes.
Here are some of our thoughts:
- This was bound to happen: two years after the acquisition, integration of Lazada into Alibaba group was still a challenge. The cultures of the two are very different – and coordination between the two was probably a constant challenge. It was probably very difficult for Alibaba to push some initiatives through.
- Lucy Peng is a heavy weight – she was one of the original 18 co-founders of Alibaba, and she literally built Alibaba into Ant Financial Services – the behemoth that is probably valued at US$100 billion, and feared by banks. Putting her in charge of Lazada shows how much emphasis, determination, and probably urgency, to make Lazada work for Alibaba.
- This urgency is probably understandable. Shopee, which counted Taiwan as its biggest market in 2016, quickly grew in Indonesia in 2017 and has been topping the charts in Indonesia for weeks. JD.com has also entered Indonesia, but more critically, it has launched operations in Thailand, considered home ground for Lazada.
- Also Alibaba needs to make Lazada work to prove that it can internationalize. Its Indian ambitions, after multiple attempts, is now heavily dependent on PayTM Mall, a highly complex operation that might or might not succeed. In contrast, Amazon has made swift changes to Souq.com, a company it acquired in the Middle East (in addition to doubling down in India). Alibaba should do the same in Southeast Asia.
- Lucy will probably make a lot of swift changes at Lazada, and these changes will be good for the company’s short term growth and long term ambitions. One thing we are not sure is how much of the Lazada senior management will be re-shuffled. As much as Alibaba wants to align Lazada with itself, its growth programme for international cadres is fairly new and it might not have enough of its own people to fill in those ranks.
- Shopee will face a vote of confidence in the public market. The shares of its parent company, SEA, have tumbled on the first day of trading after the Alibaba announcement – however the whole market tumbled, so it is hard to say how much investor confident has really dimmed because of this. As we wrote in a previous blog post, Shopee really did not have a choice but to pursue the current aggressive strategy.
- Tokopedia, the Indonesian C2C ecommerce platform in which Alibaba invested US$1.1 billion last year, is probably safe. Ultimately Softbank, the biggest shareholder of Alibaba, is also a major shareholder of Tokopedia.
- Then Softbank (together with Didi) also holds controlling stake of Grab. It would be interesting to watch how this would impact Grab’s ambitions to be a significant FinTech player in Southeast. In our view, Grab’s announced offerings are pretty pale compared to what Ant Financial has done.
- Bear in mind that Lucy Peng is very, very familiar with Ant Financial. How much synergy will be built between Lazada & Ant’s investees across the region (Mynt in the Philippines, Ascend Money in Thailand, Dana in Indonesia, Touch N Go in Malaysia etc.) is also something worth watching.
- Can anyone do something about SingPost?