Alibaba Acquires NetEase for $2 Billion as Luxury Push Gathers Pace

The e-commerce industry in China has grown at a truly remarkable pace over the last decade and the company that has decisively emerged as the biggest player in the industry is Alibaba. It is one of the biggest e-commerce companies in the world and due to the sheer size of the Chinese market, the company has grown exponentially. However, companies of such size need to continuously find new avenues that could help it in continuing to grow at an impressive rate and staving off keen competitors at the same time. It seems that Alibaba has decided to go into the luxury space in a big way in order to drive its next stage of growth and in a new development, the company has acquired luxury e-commerce platform Kaola.

Alibaba has agreed to pay $2 billion for the acquisition to the gaming firm NetEase, which is the ultimate owner of Kaola. Kaola has managed to carve a niche for itself by supplying a wide range of curated luxury items to all its customers and has grown impressively over the years. NetEase launched the luxury platform around four years ago and has managed to gather a cult following among shoppers by offering products from the biggest brands in the world. Some of the brands on offer include Gucci, Shisheido, and Burberry among others. It procures the products straight from the suppliers and then sells it on the platform. Well-heeled Chinese shoppers are the world’s biggest consumers of luxury goods and according to a global survey; they account for more than 33% of the luxury goods sales. Hence, this particular acquisition will give Alibaba direct access to the wealthiest shoppers in the country.

Although the Chinese economy is currently in the middle of slowdown, it is a deal that has been completed with the long term future of e-commerce in China. Online retail growth was sluggish between January and June this year, as sales grew by 17.8%. In the same period in 2018, it grew by 32.4%. On the other hand, analysts also believe that this is a clever move from Alibaba to be prepared for an onslaught from its rival Pinduoduo. An analyst stated,

Pinduoduo has a will to move toward international brands or cross-border e-commerce, so in the future they would definitely want Kaola. For Alibaba, they’d want to prevent this.

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