Tech analysts are calling it Alibaba’s “one-two punch”. First, Ant Financial Services – which is an Alibaba affiliate that owns the Alipay platform with 800 million+ users worldwide – entered the ring. Aiming to dominate the local digital “payments” market, Ant acquired 45 percent stake in Telenor Microfinance Bank two months back. (For more on that deal, read “Alipay in Pakistan?” published March 15, 2018).
Now it is Alibaba’s turn to deliver the knockout blow by buying out the major “e-commerce” platform. Reportedly, the Chinese e-commerce multinational, which is currently valued at $484 billion, has bought all of Rocket Internet’s shareholding in Daraz, an online shopping platform that was founded in Pakistan back in 2012 but later expanded into Bangladesh, Myanmar, Nepal and Sri Lanka.
Kudos to Rocket; it has successfully courted Alibaba for the second time, following the sale of Lazada, its Daraz-equivalent in six Southeast Asian markets, back in 2016. Daraz’s sale is a milestone for Pakistan’s e-commerce scene; but this sale must also be seen in the context of this region becoming an e-commerce battleground of sorts. Having lost India’s retail e-commerce scene to Amazon (and now to Walmart, with its recent Flipkart deal), Alibaba is wasting no time to stake claim to rest of the region.
With Ant making inroads in “payments” and Alibaba moving into “e-commerce” in Southeast Asia and South Asia (minus India), what is left for Alibaba to make a play for is “logistics”. Alibaba hasn’t yet gone after the leading logistics/warehousing firms in the region; instead it has been investing more in Cainiao, a logistics firm it co-founded back in 2013.
Alibaba’s entry into Pakistan is bound to shake things up. Though growing exponentially, the local e-commerce market size, at less than $1 billion, is still less than one percent of all retail shopping transactions taking place in Pakistan. With Alipay’s payment platform and Alibaba’s online merchandising expertise, Daraz will have the financial and technological muscle to really expand the retail e-commerce landscape.
Perhaps the most promising aspect could be the rollout in Pakistan of what Alibaba has been aggressively pushing in China. Through its “Rural Taobao” programme, Alibaba has not only been building a retail customer base in rural China through its dedicated service centers, it is also helping rural entrepreneurs reach a larger B2B market online. Replication of such a “brick and click” model can unlock talent and ambition residing in the Pakistani countryside.
This transaction, whose value is yet undisclosed, may fuel concerns that Alibaba will eventually dominate the B2B and B2C marketplaces. (It would be a good idea for Alibaba to further open up Daraz by getting it listed on the stock exchange). But the reality is that Pakistan has only scratched the surface vis-à-vis e-commerce. A growing pie can accommodate many players. Besides, this transaction has provided a good exit to a major investor, something which will give other investors comfort while taking exposure in promising local startups.
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