Alibaba Group announced today that it has acquired NetEase’s cross-border e-commerce unit Kaola for approximately $2 billion, and along with Yunfeng Capital will take a minority stake in NetEase Cloud Music for $700 million.
Why it’s important: The acquisition merges the two largest platforms in the landscape, forming a principal player in the cross-border market. The two platforms jointly hold more than half of the country’s cross-border e-commerce market, according to data from research firm Analysys.
- The deal forms a formidable competitor to other platforms in the field, including JD’s cross-border e-commerce unit, VIP.com, and Suning Global.
- China’s cross-border e-commerce market value was RMB 90.83 billion (around $12.70 billion) in the first quarter, according Analysys.
“Alibaba is confident about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential. We welcome Kaola to the Alibaba family and value NetEase’s contributions in incubating an e-commerce platform with strong import capabilities. With Kaola, we will further elevate import service and experience for Chinese consumers through synergies across the Alibaba ecosystem.”
—Daniel Zhang, Chief Executive Officer of Alibaba Group, in an emailed statement.
Details: Alibaba said that Kaola will continue to operate independently under its current brand.
- Tmall Import and Export General Manager Alvin Liu will serve as Kaola’s new CEO.
- Yunfeng Capital, the private equity firm co-founded by Chinese billionaire Jack Ma, will invest along with Alibaba approximately $700 million in NetEase Cloud Music in its latest round of financing.
- NetEase will remain the controlling shareholder of NetEase Cloud Music.
Context: Cross-border commerce has continued to grow in market value as Chinese consumers increasingly seek imported quality goods.
- The impact of the months-long US-China trade war could result in an uptick in demand of goods from non-US trade partners, Michael Norris, research and strategy manager at AgencyChina, told TechNode on Friday. “Historically, political disputes with countries like South Korea and Japan haven’t translated into a decrease in online demand for goods from those countries” on the consumer side, but an increase in prices for US imports could result in demand “spillover to other countries outside the trade war.”
- Alibaba pledged at last year’s China Import Expo in November that it would import $200 billion worth of foreign goods countries over the next five years. NetEase Kaola said it would import RMB 20 billion ($2.8 billion) worth of goods during the event.
This story has been updated to include comments from Michael Norris.