Kaola sells imported products in China that include clothes, consumer electronics, and sports accessories. It is one of the biggest Chinese e-commerce sites focused on selling imported goods in the country, alongside Alibaba's Tmall Global and JD.com's JD Worldwide.
Alibaba said it plans for Kaola to continue operating independently under its current brand, but it will have a new leader at the helm. Tmall Import and Export General Manager, Alvin Liu, will take over as CEO.
With Tmall Global and Kaola, Alibaba will have a massive market presence in the cross-border e-commerce sector.
With Alibaba's acquisition of Kaola and its investment into NetEase Cloud Music, NetEase can "further optimize its costs while Alibaba strengthens its leadership in cross border ecommerce," Jefferies analysts wrote in a note on Friday.
China is one of the largest e-commerce markets in the world, with research firm eMarketer predicting in a June report that in 2019 the country will have $1.935 trillion in e-commerce sales, about three times more than the United States.
Daniel Zhang, chief executive officer of Alibaba Group, said in a statement that the company is confident about the future of China's import e-commerce market which he said, "remains in its infancy with great growth potential."
"With Kaola, we will further elevate import service and experience for Chinese consumers," he added in a statement.
Last month, Alibaba reported better-than-expected revenue and earnings for its June quarter but sales growth had slowed.
The company's core commerce business, which includes its Tmall and Taobao shopping platforms, and its booming cloud division contributed to growth. Annual active consumers on Alibaba's China retail marketplaces reached 674 million, a jump of 20 million and most of those new consumers were said to be from less-developed cities.
Alibaba, together with Yunfeng, will also invest about $700 million in NetEase's music streaming service, NetEase Cloud Music, the companies said.