RetailAnalysis
03 November 2016
Alibaba-backed Lazada buys Singapore online grocer RedMart

Lazada, a leading Southeast Asian ecommerce platform backed by Alibaba Group, has confirmed to buy Singapore-based online grocer RedMart, expanding Alibaba's footprint in the region. If the rumors about Amazon's entrance to the region is true, Southeast Asia is going to the next battlefield for the two ecommerce giants.

The transaction

The transaction is expected to be completed this quarter, though the parties didn’t disclose the value of the deal. Led by its current management, RedMart will continue to operate independently after the transaction.

The benefits

For Lazada, RedMart brings in a strong loyal customer base in Singapore, who shop more frequently and potentially spend more. It could also utilise RedMart’s established logistics capability for fresh food items.

Lazada CEO Maximilian Bittner said, "As part of our growth strategy, we are always looking for ways to serve our customers better by adding new product categories and improving our service offering. RedMart's strong management team and their relentless focus on putting the customer first has resulted in customers loving them in Singapore.”

For RedMart, being part of a bigger platform, it could extend its product offering and supplier base and reach more shoppers. Building on Lazada’s presence in six countries in Southeast Asia, it would make it possible to expand into other countries, which would have been difficult for RedMart to tackle alone.

“Through this partnership, we can further scale our logistics and tech platform to extend our product assortment and to offer an even more convenient service for our customers in Singapore. The capital flexibility provided through this deal will go towards innovating to delight our customers,” said co-founder and CEO of RedMart, Roger Egan.

What do we think?

Online grocery is still at its nascent stage in Southeast Asia, though we expect significant growth in the next few years. This acquisition is the biggest move in the market after Alibaba took control of Lazada in April and would definitely boost online grocery shopping. The two companies must have a close look at their operational and logistics structurers as well as supplier base to avoid canablisation and maximise the benefits.  

In the meantime, Amazon is supposedly planning to enter Southeast Asia soon, bringing AmazonFresh to Singapore, with high level of adoption of online shopping and income level as well as a small geography to serve.

These developments will cause a step change in the online grocery scene in Southeast Asia, and significantly improve the penetration, infrastructure, product assortment and service level.

Shirley Zhu, Programme Director, IGD Singapore

Based in Singapore, Shirley heads up all of IGD's research on Southeast Asia. Contact Shirley at shirley.zhu@igd.com for further insight on the region.

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