Alibaba To Buy Rival NetEase’s eCommerce Platform

Sources have revealed that Alibaba will acquire NetEase’s cross-border online shopping platform.

One source told the Financial Times that Alibaba could pay around $2 billion for Kaola, which buys inventory from international brands. As of last year, it worked with more than 4,300 brands from 50 countries, a sharp increase from its more than 5,000 brands six months earlier.

Despite Kaola’s impressive growth, NetEase, known for its gaming and music operations, has been looking to sell its eCommerce unit for most of the year. In fact, Amazon was looking at the platform earlier this year — before it decided to close its Chinese online store.

“Either Amazon would double down [on China] or sell the business to NetEase and NetEase would double down,” one analyst said. “But neither happened, because both of them wanted to sell. It doesn’t make sense for NetEase to keep [Kaola]. Because it’s small scale.” Online sales in China are expected to reach almost $2 trillion this year, according to eMarketer, which expects the figure to rise to $2.4 trillon next year. That compares with $587 billion in the U.S. this year, rising to $668.5 billion in 2020.

Earlier this week Alibaba posted results that topped expectations as the company made strides in tapping consumers in less developed areas of the country. The numbers seem to show that despite economic slowdowns and an ongoing trade war with the United States, the Chinese consumer is still spending.

The overall top line was up 42 percent to 114.9 billion yuan; the Street had expected 111.6 billion yuan. The company revealed that total core eCommerce sales stood at 99.5 billion yuan, which was up 44 percent and was better than the consensus of 95.9 billion yuan. At the end of the June quarter, the firm had 755 million mobile monthly active users (MAUs), which was up from 721 million a year ago. Annual active buyers across Alibaba’s retail operations were 674 million overall, compared to the 654 million seen last year.

In remarks during the conference call with analysts, Co-Founder Joseph Tsai said the consumption trends are in place, including the emergence of a middle class in China’s countryside.