Alibaba to invest $1 billion in Lazada as Southeast Asia awaits Amazon

Key Points
  • Alibaba said it will invest $1 billion into Lazada to increase its share in the e-commerce player from 51 percent to 83 percent.
  • This will bring Alibaba's total investments into Lazada to over $2 billion.
  • Alibaba said it will buy stakes of certain Lazada shareholders at an implied valuation of $3.15 billion.

Chinese e-commerce giant Alibaba is ponying up $1 billion to boost its stake in Southeast Asian online retailer Lazada, ahead of Amazon's much-anticipated entry into the region.

On Wednesday, Alibaba said it will increase its stake in the company from 51 percent to about 83 percent, bringing its total investment to over $2 billion.

Krisztian Bocsi | Bloomberg | Getty Images

The investment underscores increased confidence in Southeast Asia's growing e-commerce market, as millions of first-generation internet users embrace online shopping.

A commonly cited study conducted in 2016 by Google and the Singapore government's investment arm, Temasek Holdings, predicted the region's internet economy was expected to grow to $200 billion by 2025, primarily driven by growth in e-commerce.

"The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us. We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities," said Daniel Zhang, CEO of Alibaba Group, in a prepared statement.

Lazada did not say if the new investment from Alibaba was a pre-emptive measure to tackle Amazon's eventual entry into the southeast Asian market. Instead, in an emailed response, Lazada CEO Maximilian Bittner said, "This investment is first and foremost an affirmation of Lazada's continued success, and of Alibaba's confidence in Lazada. It is also a commitment to the region."

Bittner added, "With Southeast Asia's e-commerce markets still being relatively untapped, we see a very positive upward trajectory ahead of us and Alibaba will continue to put its resources to work in Southeast Asia through Lazada to capture these growth opportunities."

Alibaba said it will purchase shares of certain Lazada shareholders at an implied valuation of $3.15 billion. Last year, the tech giant bought partial stakes from Germany's Rocket Internet and British supermarket giant Tesco.

The Alibaba-Lazada deals expand the Chinese e-commerce player's global footprint in markets including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. In a recent report, Alibaba said in the 12 months through the end of March, Lazada had approximately 23 million active buyers.

Lazada has also invested further in the region by acquiring online grocer RedMart. It also launched a partnership with Unilever, aiming to tap a bigger slice of the region's online retail market.

Additionally, it teamed up with brands to create a subscription-based membership program, LiveUp, for customers in Singapore. The service offers rewards and promotions from brands including Netflix, Uber, UberEATS, RedMart and Taobao Collection.

The Southeast Asian retailer said the partnership with Alibaba would allow Lazada to invest further in the marketplace, technology, payments and logistics to better support shoppers and merchants, many of which are small businesses.

Last year, TechCrunch reported that Amazon had planned to launch local e-commerce services in Singapore in the first quarter of 2017. But earlier this year, the news site cited sources and said Amazon's much-anticipated entry was postponed.

Alibaba and Amazon didn't immediately respond to CNBC's emailed requests for comment.