Alibaba Group Holding Ltd. is set to enhance its presence in South Korea's burgeoning online retail market through a recently announced joint venture with local e-commerce platform E-Mart Inc. This partnership aims to bolster Alibaba's competitiveness in a sector currently witnessing rapid growth. This move is seen as a critical step for Alibaba as it navigates the challenges of a slowing growth trajectory in its core Chinese market.
The new joint venture will see AliExpress International and Gmarket each holding a 50% stake in the combined entity, creating a platform that is anticipated to have a valuation of approximately $4 billion, as per insider reports referencing confidential discussions. E-Mart disclosed details of this collaboration in a stock exchange filing, highlighting that the two platforms will continue to operate independently even under the joint venture.
Investors responded positively to this announcement, with E-Mart’s shares rising by 5.5% in trading in Seoul, raising its market capitalisation to $1.4 billion. Meanwhile, Alibaba's American depository receipts climbed by 2.1% in New York, contributing to a year-to-date gain of over 11%, resulting in a market cap of $206 billion.
The joint venture is strategically positioned to counter the competition posed by other significant players in South Korea's market, including Naver Corp. and Coupang Inc., amid a challenging economic backdrop characterised by declining consumer confidence, the lowest since the COVID-19 pandemic, impacted by political turbulence and the declaration of martial law by President Yoon Suk Yeol.
Amid these developments, Alibaba is keen to expand its international market presence as it seeks compensation for the lacklustre performance in its primary operations within China, where growth slowed notably during the September quarter. Despite these challenges, the company's cloud computing unit and international segment, including brands like Lazada and AliExpress, have shown promising results.
E-commerce has long been Alibaba’s stronghold; however, it is facing heightened competition from emerging players such as PDD Holdings Inc. and ByteDance Ltd. Under the new CEO Eddie Wu, who took over just over a year ago, Alibaba has consolidated its core operations, shifting its focus to the most promising growth areas, including the integration of domestic and international e-commerce platforms.
Additionally, Alibaba is on a path of divestment, selling off non-essential holdings to streamline its operations. Last week, the company announced a deal to sell its Intime department store business to Younger Fashion Co. for approximately $1 billion, a move that is expected to result in a loss of around 9.3 billion yuan ($1.3 billion) for Alibaba based on its previous investment in the venture.
On the other hand, E-Mart is also expanding its e-commerce capabilities through both organic growth and acquisitions, including a significant purchase of a controlling interest in eBay Inc.’s South Korean online marketplace for roughly $3 billion in 2021. This acquisition has allowed E-Mart to broaden its customer base, improving access in categories such as groceries and general merchandise.
In a related development, Alibaba has recently introduced an AI Search Tool aimed at supporting small businesses, further indicating the company's commitment to leveraging emerging technologies to enhance its business practices. As the landscape of e-commerce continues to evolve, both Alibaba and E-Mart are navigating an intricate web of opportunities in an increasingly competitive arena.
Source: Noah Wire Services