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Alibaba-backed Lazada strategically buys out Redmart

Backed by Alibaba, Lazada, an online shopping and selling platform, has acquired Redmart, Singapore’s e-grocer.

According to an article by Techcrunch, Lazada has bought the grocer for US$30-40 million. According to a Lazada press statement, the transaction is expected to be completed in calendar Q4 2016.

“With this move, both the parties will benefit from each other’s cutting-edge technological and operational infrastructure, as well as an extended customer network,” read the press release.  Maximilian Bittner, CEO of Lazada Group said that as part of the company’s growth strategy, the company aims on adding new product categories and improving our service offering.

He added: “RedMart’s strong management team and their relentless focus on putting the customer first has resulted in customers loving them in Singapore.”

Co-founder and CEO of RedMart, Roger Egan said:

“We are partnering with Lazada to serve the customers better. The capital flexibility and 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.”

Earlier this year, Alibaba also acquired Rocket Internet’s 9.1% stake in Lazada for US$137million, along with a transaction including Alibaba’s investment of US$500 million in Lazada. This move makes Alibaba the controlling shareholder of Lazada when complete, equating to an equity valuation of Lazada of US$1.5 billion.

Marketing reached out to a few industry professionals to see what they made of the move.

Linda Locke, creative director and CEO of Godmother, said “Lazada may have made this move to gain more access to Redmart’s efficient logistics and build on its capability. The acquisition may not have been done from the product point of view, she explained.

Agreeing with her was Ken Mandel, president innovation and commerce, Publicis Media. He added:

“This seems to be a big barter between both the companies. With this move, Lazada can build up its logistic capability significantly.” Mandel explained the strategic move will increase Lazada’s frequency of conversation and purchase with the consumers.

“While a e-commerce website like Redmart has weekly and bi-weekly re-vists, it may not be the case for Lazada. This partnership would is very likely to establish a sound ecosystem which streamlines the path to purchase,” he said.

Moreover, news also Tech Crunch also recently broke the news that Amazon is looking to enter Singapore in 2017. At the start of the year, Amazon has also reportedly made an offer to acquire Redmart but the bid was said to be too low. Commenting on this, Mandel said:

This is the beginning of a new battle between Alibaba and Amazon.

He added e-commerce was purely about transaction earlier and platforms only catered to performance marketing, utility and convenience. However, it has now grown to provide experiences that extends beyond just this.

“Market giants have realised this potential. We are going to see this as a trend in the future. With the amalgamation of data and logistics, there will be minimal friction at the point of purchase,” he added.

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