Alibaba Acquires Kaola to Strengthen Cross-Border E-Commerce Dominance
On September 5, Alibaba Group announced its acquisition of cross-border e-commerce business Kaola from Chinese gaming and entertainment company NetEase for $2 billion.
- Kaola, launched by NetEase in 2015, targets shoppers in China by offering apparel, maternity and infant care, household appliances and other products from 9,000 brands from 80 countries.
- Following the acquisition, Alibaba will integrate Kaola into Tmall, and Kaola will continue to operate independently.
- The Kaola acquisition represents a major consolidation within the cross-border e-commerce space in China.
On September 5, Alibaba Group announced its acquisition of cross-border e-commerce business Kaola from Chinese gaming and entertainment company NetEase for $2 billion. Kaola adds a platform that specializes in supplying curated goods from abroad to domestic consumers, as Alibaba seeks to bolster its efforts to cater to local demand for quality imported products. The acquisition announcement follows weeks of media coverage of a potential deal that is said to have stalled in mid-August after both companies reportedly failed to agree on details of the transaction.
Following the acquisition, Alibaba will integrate Kaola into Tmall, creating the largest cross-border e-commerce platform in China. Kaola will continue to operate independently under its own brand, with Tmall Import and Export General Manager Alvin Liu serving as Kaola’s new CEO, replacing Zhang Lei.
Kaola, launched by NetEase in 2015, targets shoppers in China by offering apparel, maternity and infant care, household appliances and other products from 9,000 brands from 80 countries, including top brands such as Gucci , Shisheido and Burberry. It is one of the biggest e-commerce sites focused on selling imported goods in China, alongside Alibaba’s Tmall Global and JD.com’s JD Worldwide.
The Acquisition Represents Consolidation Within China’s Cross-Border E-Commerce
The acquisition would represent major consolidation within the cross-border e-commerce space: NetEase Kaola held a 27.7% market share in China cross-border e-commerce in the first half of 2019, and Alibaba’s Tmall Global marketplace held a 25.1% share, according to research company iiMedia Research Group. The deal is expected to boost Alibaba in its battle against Chinese rivals such as Pinduoduo, which launched cross-border project Duoduo International in February 2019.
The Acquisition Poses Benefits for Both Alibaba and NetEase
Acquiring Kaola will boost Alibaba’s access to affluent Chinese shoppers, and is expected to help it diversify Tmall’s business model, which largely involves inviting foreign brands to launch online shops on its site, while Kaola for the most part purchases a variety of goods directly from foreign merchants in bulk and then resells them to Chinese consumers. According to Alibaba CEO Daniel Zhang, with Kaola, Alibaba will further elevate import service and experience for Chinese consumers through synergies across Alibaba’s ecosystem.
For NetEase, the deal helps Kaola find a strategic fit within Alibaba’s extensive ecosystem, and will enable NetEase to focus on its growth strategy, invest in markets that allow it to best leverage its competitive advantages, according to NetEase CEO William Ding.
The Kaola acquisition represents a meaningful strengthening of Alibaba’s offering in cross-border e-commerce. It will consolidate China’s cross-border e-commerce space, giving Alibaba a dominant share of this market.