Written by Rehan at OmeBiz
There has been recent talk about many businesses in Asian countries gaining traction within its markets with high profits and perks of low costing labor. So, what’s not to like about such businesses? Accordingly, proving this right, the Chinese online retail giant; Alibaba made a 100% acquisition of Rocket Internet’s Daraz at a global scale on 08/05/2018. Rumors about this acquisition have been floating since March this year. However, it is not out with an official report as to how much this acquisition is worth. But all of us can surely guestimate that the numbers should be in the billions range.
Alibaba Acquires Daraz
Daraz is an online e-commerce platform known for its wide variety of consumer goods such as electronics, cosmetics, and general products. Their main targets are within the countries of Pakistan, Bangladesh, Myanmar, Nepal and Sri Lanka. The brand, however, will run under the same brand following the acquisition.
Daraz first launched its e-commerce platform in Sri Lanka back in 19/10/2016. Its main aim was to tap into the Sri Lankan demographic which was showcasing a rising trend of internet usage and online purchases. Since then the company has seen traction by the emerging market and is pleased with its growth as the number of its e-commerce transaction keep growing.
The Daraz Co-CEO Jonathan Doerr stated that “Together with Alibaba, we are ready to empower entrepreneurs in the region and to fulfill our promise to offer our customers the best selection of products with a high-level of convenience.”
Alibaba’s CEO Daniel Zhang said, “Together with Daraz, we can empower entrepreneurs to better serve consumers in the region through our technology and expertise”. Daraz stated, “This acquisition would help increase growth in its target markets.”
After the acquisition of Daraz.lk Country Manager Bart Van Dijk stated, “We will continue to champion small business. We will continue to offer ever wider choices to consumers. We will continue to build the largest online mall of Sri Lanka. With world-class technology”.
This is not the first time that the giant has acquired a firm from the Rocket Internet nearly two years ago Amazon had also acquired Lazada. Lazada is also another such platform similar to Daraz which catered only to: Singapore, Indonesia, Malaysia, Thailand, Vietnam and the Philippines. Alibaba had acquired the business for about U.S $4 billion over the span of 2 years. Since then Alibaba was able to double up on its investment hence the move to acquiring Daraz.
This strategy by Alibaba is to move into lower profile countries with large populations. With that said the firm has successfully added approximately 98 million more active users which puts it at a total of 552 million users across its multiple marketplaces as of 31st March 2018.
Walmart Acquires India’s Flipkart
Another large acquisition is a recent deal where Walmart has acquired nearly 77% of India’s largest online retailer – Flipkart for nearly U.S$ 16 billion. This has been making the rounds as one of the largest business acquisitions for Walmart and especially for the country since it is an e-commerce platform. However, Walmart’s CEO Doug McMillon had informed the company employees that, “It is our intention to just empower you and let you run-speed matters, decisiveness matters.” This statement echoes that the company is planning on Flipkart keeping its brand separate to that of Walmart.
Coincidence or Sheer Strategy?
These two acquisitions are not of any coincidence as western markets are slowly delving into its own socio-economic issues such as; Brexit and the U.S focusing on building their nation, internally. The focus has now shifted into the Asian market as it is predicted that there is more potential for growth and other investments. Along with the investment also comes the competition aspect. Other multinational competitors such as; tech giant Amazon which is Walmart’s direct competitor in the U.S. Whereas, Alibaba is the East’s version of Amazon. Hence, these acquisitions are in a sense competition to gain market leadership internationally.
As we move more into free trade agreements (FTAs) and alliances with other Asian countries such as the Belt and Road initiative, it is good to keep in mind that the focus from the west is shifting. Keep an eye out for our next article which talks about investing in ASEAN countries and its benefits.