Alibaba Group Agrees to Merge South Korean Operations with E-Mart’s E-commerce Platform
Alibaba Group has agreed to merge its South Korean operations with E-Mart’s e-commerce platform to better compete in the country’s fast-paced online retail sector. The deal will create a 50-50 joint venture, with Alibaba’s AliExpress International and Gmarket combining to own 100% of Gmarket.
Partnership to Create New Entity Valued at $4 Billion
According to a stock exchange filing by E-Mart, the companies plan to make further investments in the joint venture. The new entity could be valued at around $4 billion, people familiar with the matter told Bloomberg.
E-Mart Shares Rise 5.5% on News
E-Mart shares rose 5.5% in Seoul, giving the company a market value of $1.4 billion. Alibaba’s Hong Kong-listed stock has gained around 11% this year, valuing the firm at over $200 billion.
Deal to Help Compete with Local Rivals
The deal will help the companies compete against local rivals, including Naver Corp and Coupang. This month, South Korea’s consumer confidence dropped by the most since the outbreak of Covid-19, battered by the political turmoil triggered by President Yoon Suk Yeol’s declaration of martial law and his impeachment.
Alibaba Seeks to Expand International Footprint
Alibaba has been seeking to expand its international footprint to make up for slower growth in its core Chinese e-commerce business.
Background on Alibaba’s Domestic E-commerce Operations
The internet pioneer’s domestic e-commerce operations reported anaemic growth in the September quarter, dragging down financial results that benefited from progress in its cloud division and international business, which encompasses Lazada and the Temu-like AliExpress.
Challenges Facing Alibaba
Once a dominant player in China’s e-commerce field, Alibaba is struggling to grow amid competition from rising rivals like PDD Holdings and ByteDance. This has forced a hard pivot under the leadership of co-founder Eddie Wu, who took on the CEO role more than a year ago, toward consolidating its core businesses and focusing investment into the most promising growth areas.
Alibaba’s Strategy
Alibaba is now integrating its domestic and international e-commerce operations, under the leadership of Jiang Fan, and has been steadily selling off non-core assets.
Recent Deal
Alibaba last week agreed to sell its Intime department store business to Youngor Fashion for around $1 billion in a move to offload non-core assets. The deal will see the Chinese e-commerce giant record a loss of $1.3 billion on its initial investment in Intime.
Background on E-Mart
E-Mart has been expanding its e-commerce business both organically and via acquisitions. In 2021, it acquired a controlling stake in eBay’s South Korean online marketplace for about $3 billion, expanding its customer base in categories such as groceries and general merchandise.
Conclusion
The partnership between Alibaba and E-Mart is a significant development in the South Korean e-commerce market, offering a competitive advantage in a rapidly growing market. The deal will help both companies to strengthen their positions and compete more effectively against local rivals.
Frequently Asked Questions
Q: What is the value of the new entity?
A: The new entity could be valued at around $4 billion.
Q: What is the ownership structure of the joint venture?
A: AliExpress International and Gmarket will own 100% of Gmarket.
Q: What are the plans for the joint venture?
A: The companies plan to make further investments in the joint venture to strengthen its position in the South Korean e-commerce market.
Q: What are the implications of this deal for Alibaba?
A: The deal will help Alibaba to expand its international footprint and strengthen its position in the South Korean e-commerce market, which is a key growth area for the company.
