Alibaba Group Holding Ltd. has agreed to form a joint venture for its South Korean operations with the e-commerce platform E-Mart Inc.
It is expected that the implementation of the mentioned project will help strengthen Alibaba’s competitiveness in the specified Asian country’s online retail sector. It is worth noting separately that this sector is currently at the stage of highly intensive development.
AliExpress International and Gmarket will form a joint venture in which each of the participants in the business project will own 50% of the brand. The relevant information is contained in a stock exchange filing by E-Mart. It is worth noting that the media has already reported on plans to build a joint venture.
The companies intend to make further investments in the joint venture, which will own 100% of Gmarket. It is worth noting separately that Gmarket and AliExpress Korea will continue to operate their platforms independently of each other.
According to media reports, citing insiders, the joint venture could be valued at about $4 billion. The informants of the journalists used the right of anonymity, noting that in this case, it implies an issue that has so far been discussed in an exclusively confidential mode.
Against the background of the news about the joint venture the value of shares of E-Mart in tradings in Seoul showed an increase of 5.5%. The company’s market capitalization reached $1.4 billion. Alibaba’s American depositary receipts increased by 2.1% in trading in New York. Its gains this year amounted to more than 11%, and the market capitalization of the company reached $206 billion.
The joint venture will help the participants of this project to face off against competitors in the South Korean market. In this case, market players such as Naver Corp. and Coupang Inc. are primarily meant. In December, consumer confidence in South Korea fell to its lowest level since the outbreak of the coronavirus. The corresponding dynamic is due to the political turbulence in the country related to the declaration of martial law by President Yoon Suk Yeol and his impeachment.
Alibaba is currently looking to expand its international footprint. To a large extent, the mentioned efforts are related to the desire to make up for the slowdown in the growth of the firm’s core Chinese e-commerce business. Alibaba, a pioneer company in the domestic e-commerce market, recorded weak growth in the September quarter. The firm dragged down financial results and at the same time benefited from progress in its cloud unit and international business, which includes Lazada and the Temu-like AliExpress.
In the past, Alibaba was kind of the unambiguously dominant player in China’s e-commerce area. The company is currently making difficult efforts to continue its growth in the face of increased competition from industry players such as PDD Holdings Inc. and ByteDance Ltd. As part of the mentioned efforts under the leadership of co-founder Eddie Wu, who took on the chief executive officer role more than a year ago, Alibaba consolidated its core business and focused investments in the most promising growth areas.
Currently, under the leadership of Jiang Fan, the company is integrating its domestic and international e-commerce operations. Alibaba is also steadily selling off holdings that it does not consider essential.
Last week, the company agreed to sell its Intime department store business to Younger Fashion Co. The cost of this deal is about $1 billion. The relevant business agreement is Alibaba’s move to offload non-core assets. As a result of the mentioned deal, the Chinese e-commerce giant will record losses of 9.3 billion yuan ($1.3 billion) from its initial investment in Intime.
E-Mart is expanding its e-commerce business both organically and through acquisitions. In 2021, the company acquired a controlling stake in eBay Inc.’s South Korean online marketplace. The cost of this deal was approximately $3 billion. E-Mart has expanded its customer base in categories such as groceries and general merchandise.
As we have reported earlier, Alibaba Launches AI Search Tool for Small Businesses.
