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Could Alibaba Gain from Partnership with Russian Companies?

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What are Alibaba and its Russian partners gaining in the deal?

Today, September 11, Alibaba Group Holding (BABA) announced an e-commerce venture with Russian technology company Mail.Ru. The new company is called AliExpress Russia, in which Alibaba has a 48% stake. It could serve as the foundation for Russia’s digital transformation.

Russian investors will jointly hold a 52% stake in the venture, which has been rumored to be worth $2 billion. Other stakeholders include telecommunications operator MegaFon, Mail.Ru, and Russian Direct Investment Fund. MegaFon has agreed to sell its minority stake in Mail.Ru to Alibaba. The collaboration will run on Russian payment system Mir and will enable Russian partners to have access to Alibaba’s 600 million global users.

Russian consumers will also gain entry through the partnership to the markets in Southeast Asia, India, and Turkey. Alibaba’s chairman Jack Ma will depart in September 2019.

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One online ecosystem

The venture will bring Russian e-commerce, social media, and gaming platforms under one online ecosystem for consumers and broaden the market horizons of small and medium businesses. Alibaba intends to lend its local-e-commerce arm to the initiative to get access to Russia’s Internet user base of 100 million. The venture is expected to close by the first quarter of 2019.

Alibaba launched its online b2c (business-to-consumer) marketplace Tmall in Russia in October 2017 on which competitors such as Amazon hardly have a presence. Mail.Ru launched Pandao in 2017 for the sale of Chinese goods to Russia. The Russian coast is clear for Alibaba. Its e-commerce competitor JD.com (JD) and gaming company Tencent Holdings (TCEHY) are focused on southern and southeast Asia. JD.com has already allied with Google (GOOG) to compete with Amazon (AMZN) and Alibaba. Tencent has a stake in JD.com and continues to co-invest with JD.com and Google.

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