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Why Alibaba Is Scaling Back Lazada’s Exposure to Direct Sales

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Main horse in the race for $102 billion revenue opportunity

In the tightening race for e-commerce dollars in Southeast Asia, Alibaba (BABA) is evolving its strategy for Lazada. Toward the end of 2018, Alibaba decided to reduce Lazada’s exposure to direct product sales. The shift affected certain merchandise categories, and Alibaba said the change was intended to better position Lazada for sustainable and scalable growth over the long term. The shift suggests that Alibaba wants to focus more of its attention on developing Lazada’s third-party marketplace business.

Lazada, headquartered in Singapore, is Alibaba’s main horse in the race for the $102 billion revenue opportunity in Southeast Asia’s e-commerce market, according to a report by Google and Temasek on Southeast Asia’s Internet economy.

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700 million consumers across platforms

Alibaba said Lazada recorded a robust increase in its number of active users after it upgraded its technology. Alibaba doesn’t break down Lazada’s customer base, but it says overall it serves nearly 700 million consumers across its various platforms. In China, its home market, Alibaba exited the December quarter with 636 million active consumers on its retail platforms in the country, an increase from 601 million in the September quarter. Pinduoduo (PDD) and JD.com (JD), which have yet to report their December quarter results, had 385.5 million and 305.2 million active consumers on their platforms in the September quarter, respectively. eBay (EBAY) closed the December quarter with 179 million active consumers on its platform worldwide. Amazon (AMZN) doesn’t update on its customer base regularly but revealed in an announcement in 2017 that it reaches more than 300 million consumers worldwide.

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