Lazada, an ecommerce platform in Southeast Asia, has announced plans to enter Europe as a new market.
A subsidiary of Alibaba, Lazada can be said to be the most successful ecommerce platform Alibaba has outside of China.
Alibaba first acquired 51% of Lazada in 2016 for US$1b. Subsequently Alibaba poured an additional US$3b into Lazada by 2018 and now the stake is close to 100%.
Recently, news reported Alibaba invested US$912m into Lazada again.
The media hinted that Alibaba was being forced to grow the markets outside of China due to the regulatory clampdown in the domestic market.
This is not really true. Alibaba has routinely pumped in US$1-2b in the past few years. This US$912m is normal.
The more important question is why not more?
Lazada used to take the pole position in Southeast Asia until Shopee unseated its throne.
Lazada is still trailing and more funds from its parent could give it more firepower to fight Shopee.
Instead of focusing on retaking the throne, Lazada is now distracted with Europe.
A cautionary tale has been told by Shopee – it entered France, Spain and Poland markets in Oct 2021 only to pull out from two of them. Poland presence remained for now.
Ecommerce platforms have already sprung up all over the world. Europe is Amazon’s second most important revenue contributor after North America. Amazon appears to be the leading B2C ecommerce platform in Europe too.
eBay is second and Poland’s Allegro is third. This ranking is based on monthly visits.
While it is not impossible to carve a share from competitors – Shopee proved that it was possible by overtaking Lazada despite coming in later; just that it is going to cost a lot. US$912m doesn’t look sufficient. And is it worth it if more billions have to be invested?
Probably this is what risk-taking in business mean. Instead of looking at the glass half-empty, look at it half full – it is possible even though it is not probable. Lazada takes the chance, Alibaba shareholders pay the price.
