uploads/2019/03/3-43.jpg

Lazada Business Lending Could Tick Many Boxes for Alibaba

By

Updated

Amazon wants to reach 2.0 billion consumers globally

Alibaba’s (BABA) Lazada subsidiary is exploring going deeper into the financial services business, according to a report from CNBC. Among other things, Lazada is looking to expand in the business lending space. For Alibaba, Lazada going deeper into business lending could check many boxes in its goal to serve 2.0 billion consumers, empower ten million businesses, and create 100 million jobs around the world by 2036. Alibaba currently serves 636 million consumers across China. Pinduoduo (PDD), JD.com (JD), and eBay (EBAY) exited 2018 with 418 million, 305 million, and 179 million consumers in their marketplaces, respectively. Amazon (AMZN) serves more than 300 million consumers worldwide.

Ripple effect of business lending

First, marketplace lenders use the loans to keep merchants glued to their platforms, which is certainly one of Lazada’s targets as it ponders doing more business lending.

Second, merchants put the loans they obtain from marketplace operators into a variety of uses, including increasing their inventory and promoting their products. All these possible effects have the potential to yield benefits for marketplace operators. More inventory means a broader product selection for shoppers and can translate to more sales for the merchants and more transaction revenue for marketplace operators.

When merchants use loans to promote their products like through advertising on the marketplace where they have their listings, the marketplace operator earns advertising revenue. When merchants use their loans to fund discounts, marketplace operators also stand to gain from a potential increase in sales due to lower prices and also increased traffic flow from shoppers seeking discount prices.

More funds to invest in expansion

If lending to businesses leads to more revenue at Lazada, Alibaba would have more funds to invest in broadening its product offering and international expansion as it pursues its 2036 vision.

More From Market Realist