Reports indicate that Alibaba has initiated talks with a view to investing in Tokopedia, an Indonesian firm. If the deal comes to fruition it will be the second one aimed at helping the expansion of the Chinese online retailer into the largest economy in Southeast Asia.
According to the reports Alibaba is holding negotiations for a funding round that is expected to raise close to half a billion dollars. Other backers that are participating in the funding round include Sequoia Capital and Softbank Group.
Tokopedia was started in 2009 by William Tanuwijaya. Its business model is like Alibaba’s in that it matches merchants with customers rather than purchasing and then selling its own stock. Three years ago it raised $100 million from Sequoia Capital and Softbank.
If Tokopedia enters into an alliance with Alliance, the move would preclude a JD.com deal. Earlier in May it had been reported that JD.com had been conducting talks with a view to investing in Tokopedia.
The big technology firms from China including Tencent Holdings have been expanding into Southeast Asia in a bid to find new shores after saturating their domestic markets. Alibaba has, however, been the more aggressive one and this has seen the online retail giant set up ecommerce operations as well as digital payments networks in the region before the highly anticipated arrival of Amazon. In Indonesia the online retail sector is expected to be worth $65 billion in three years having grown from the current $8 billion.
A month ago, Alibaba revealed that it had added its investment in Lazada, a startup based in Singapore, by adding another extra billion dollars. Lazada now has operations across the entire region and besides having its own logistics and warehouses, it also partners with third parties.
In Indonesia it has been operating for five years now. Despite stiff competition it has established itself as a market leader in the archipelago. Besides Tokopedia other competitors include local startups such as Sale Stock, Blibli and Bukalapak. There are also international and regional competitors such as Shopee, Zalora and OLX.
If Alibaba manages to make the investment in Tokopedia, it might eventually result in the two companies working together like is the case with Alibaba and Lazada. Brands belonging to Lazada are now on being sold on Alibaba’s Tmall giving Lazada a wider reach. Lazada has also been handling logistics in the region on behalf of Taobao, a unit of Alibaba. Tmall’s brands also available on Lazada.