Home Latest Insights | News Alibaba Consumes $2 Billion Kaola, Expanding the Forest; Moments for Jumia and Konga

Alibaba Consumes $2 Billion Kaola, Expanding the Forest; Moments for Jumia and Konga

Alibaba Consumes $2 Billion Kaola, Expanding the Forest; Moments for Jumia and Konga
HONG KONG - 2018/11/21: In this photo illustration, the Chinese online shopping website owned by Alibaba Group, Tmall, company logo is seen displayed on an Android mobile device with a Christmas wrapped gifts in the background. (Photo Illustration by Miguel Candela/SOPA Images/LightRocket via Getty Images)

Alibaba Group acquired rival cross-border e-commerce site Kaola, operated by game developer NetEase, for $2 billion. Alvin Liu, the general manager of Tmall Import and Exports, will replace Kaola’s current CEO, Zhang Lei. Kaola will continue to operate under its own brand but will also be integrated into Tmall, creating the world’s single largest cross-border shopping platform (Fortune).

Alibaba Group has acquired NetEase  Kaola for $2 billion, the two companies said …, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China. The announcement follows weeks of media reports about a potential deal, which was said to have stalled in the middle of August after the companies reportedly disagreed on transaction details.

Tmall Import and Export general manager Alvin Liu has been named as Kaola’s new CEO, replacing Zhang Lei, but Kaola will continue to operate independently under its own brand.

Tmall Global and Kaola are China’s largest and second-largest cross-border e-commerce platforms, respectively, holding 31.7% and 24.5% of the market, and their union means they will create a business that will far outstrip in size rivals like JD Worldwide, VIP International and Amazon China. (Earlier this year, NetEase was reportedly in talks to merge Kaola with Amazon China.)

This is a massive consolidation in China. There is something there that activated this deal: Alibaba needs a competitor out, and the competitor wants to go home because it cannot predict tomorrow. That government will allow this deal to go through is surprising.

Typically, the Chinese dynamics partly mirrors Africa; Jumia may need to look at a new game plan to drive growth: buy small pieces of ecommerce companies across nations and integrate where possible. Of course, not many have the scale that may move the needle in the Jumia world.

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But we need to watch carefully – MallforAfrica, Jumia, Konga and other leaders in Nigeria may be having evening talks. With what happened in China a few days ago with the opening of Costco, it seems the love of physical store is coming back in China. If the items you buy across border is sold by a trusted chain back home, a minor disintermediation will take place. 

For the Alibaba forest, it has a really big animal in Kaola to deal with. This may not be the last especially if the Chinese economy continues to cool, and the global economy shows more signs of fatigue.

There is no data to draw any direct correlation that the recent consolidation in Chinese ecommerce is attributable to the slower growth in the economy. But if that hypothesis happens to be true, it may be a really bad trajectory: yes, slower growth means lesser ecommerce platforms because possibly people are focusing on physical stores. The challenge there is that investors may see ecommerce as not integral to living but a kind of “luxury” lifestyle in emerging economies which is not sustainable during downtime economic cyclical phase. No ecommerce player will like that scenario!


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1 THOUGHT ON Alibaba Consumes $2 Billion Kaola, Expanding the Forest; Moments for Jumia and Konga

  1. Modern conglomerates are largely built on acquisitions, anything on the way, whether direct, adjacent or tangential; you can acquire them to enlarge your coast.

    I would also like know how many RPA and AI start-ups Dangote has acquired, because industrials in the knowledge economy acquire tech start-ups too, and our own corporations have done much in that respect.

    For ecommerce with known brands, they can also acquire those that serve a particular niche, rather than allowing them to keep eating their market share; it’s about being strategic when it comes to investments.

    Tekedia is back for good.

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