Alibaba and NetEase failed to agree on a price and the deal is off. NetEase believes Kaola was “undervalued”
Nevertheless Alibaba was ready to pay about $2bn for Kaola, the two companies failed to agree on a price and the deal is off, multiple Chinese news sites reported this week. During a meeting on Tuesday, NetEase founder and CEO Ding Lei vetoed Alibaba’s offer, according to Tencent News, which cited people familiar with the matter. The talks broke down because NetEase was not satisfied with the valuation of Kaola, the report said.
According to data, Tmall International supported by Alibaba took up 32.3% of China’s cross-border e-commerce market in the first quarter this year, followed by NetEase Kaola with 24.8%. Easy to understand that after the acquisition completed, the total market share would reach 57.1%, securing them a leading position in the industry.
Launched in 2015, NetEase’s Kaola is one of the largest cross-border e-commerce platform in China.
Although both parties involved in the deal declined to comment on the matter, but is not a mystery that NetEase has been trying to sell its online shopping unit to focus on gaming and music operations. NetEase’s Kaola currently cooperates with more than 5,000 brands from 80 countries covering apparel, maternity and infant care, household appliances, personal care, health care and other major categories of products.
The business model of Kaola is direct purchasing with self-operated, or operated by third-party merchants on the platform and in 2016, the platform was ranked first in the survey on users’ satisfaction of China cross-border e-commerce self-operating platforms.
“China is world leader in e-commerce, New Retail and innovation”: eMarketer
Kaola’s competitive edge lies in its unique model. It establishes strong relationships with international brands and directly purchases most of its inventory from brands overseas, bypassing intermediaries and local distributors to lower costs, the benefit of which is passed down to consumers. In addition, Kaola provides a one-stop solution for foreign manufacturers to enter the China’s complex market.
China’s $1.94 trillion e-commerce is the largest in the world, and more than three times that of the number two US market, according to a newly released eMarketer report. And the rise of New Retail there, which blends the best of online and offline commerce to drive higher levels of engagement between brands and consumers, is inspiring innovations in retail across the globe, eMarketer noted. Mobile commerce, mobile payments and cross-border e-commerce are the areas in e-commerce where China is leading.