Chinese Internet titan Alibaba made the headlines recently after announcing its biggest overseas acquisition yet. The deal will see it take control of Lazada, one of the most popular names in ecommerce in Southeast Asia, earning the reputation as the region’s Alibaba or Amazon.
Despite online shopping accounting for only 1 percent of retail sales in the region today, Southeast Asia has seen a rapid climb in ecommerce sales in recent years, and is expected to maintain double-digit growth rates for the next several years.
The agreement comes in the wake of earlier acquisitions that gave Alibaba control of the South China Morning Post, Hong Kong’s biggest English-language newspaper, and Chinese video-streaming service Youku Tuduo.
Alibaba also invested $500 million in Indian ecommerce startup Snapdeal. There are others, but listing them might make you less inclined to read the rest of this post. Suffice to say, the Chinese firm has been on a spending spree for quite a while now, and its latest purchase no doubt makes sense financially and strategically.
Lazada, which sells everything from diapers to sofa to smartphones and operates in the Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam, will essentially allow Alibaba to buy into markets where it has limited traction rather than expand its Taobao and Tmall sites outside of its home market of China. Why risk billions in expansion dollars to build an ecommerce empire from the ground up when you can buy one?
In a statement, Alibaba said it was investing $500 million in newly issued shares, plus an additional $500 million to acquire equity from current shareholders, for a total of $1 billion. Alibaba also said it has the right to buy out the remaining shares from investors after a 12- to 18-month period for an all-out acquisition. Lazada currently has a $1.5 billion valuation, according to its founder, Rocket Internet.
Speaking of the landmark deal, Alibaba president Michael Evans said: “With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation for future growth in one of the most promising regions for ecommerce globally.”
Hopefully for online shoppers in Southeast Asia, Alibaba’s billions will translate into a marketplace that rivals what the Chinese have been enjoying for years now, something Lazada has so far failed to achieve since its founding in 2011.
TechCrunch previously wrote that Lazada generated $191 million in sales over the first nine months of 2015, but shelled out $233 million in operating costs for the said period.
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Nokia touts an ‘asset-light’ approach to smartphone success
It’s actually working!
A lifetime ago, Nokia dominated the entire smartphone industry. From tough-as-nails brick phones to flashy flip phones, everyone carried one of Nokia’s iconic lineup. Suffice to say, we wouldn’t have a flourishing smartphone market today without Nokia’s pioneering.
Sadly, Nokia’s exploits crashed and burned after Apple’s more aggressive marketing. Today, the market consists almost exclusively of thin slab phones. With that, Nokia bowed out to a thinner form factor. The company sold its mobile assets to Microsoft.
After several years, Nokia eventually regained rights to make new phones through a licensing deal with HMD Global. Now, the company is on track to make another killing in the market.
Talking to press in India, HMD Global VP and Country Head Ajey Mehta detailed Nokia’s roadmap for market dominance. Additionally, he explained how his brand got back to a respectable position today.
As opposed to hardware-driven brands like Samsung and Apple, HMD Global prides itself with success “built purely on partnerships.” Tagged as an asset-light approach, Nokia’s phones stand because of hardware from Foxconn and software from Google. Even now, Nokia’s new generation is a champion of Google’s Android One program. Going forward, Mehta sees this approach as a vital key to further success.
Additionally, Nokia’s current lineup runs the whole gamut. Initially, the company resurrected with a plethora of feature phones. Now, they offer a model for all market segments. Despite the free-flowing approach, HMD Global still chooses one or two models as champions for the Nokia brand. With this, Nokia can maintain a wide variety of products while specializing in a specific segment.
In terms of marketing, Nokia understands its distribution streams. Online, the brand sees more short-term spikes in sales because of the specs-dependent consumer. On the other hand, offline selling offers longer-term but slower growth.
Overall, Nokia’s strategy caused an unbelievable growth margin at a recent Counterpoint survey — growing by almost 800 percent. Based on trends alone, Nokia is on track to surpass several brands in the future. Indeed, Mehta claims that the brand will rise as a top three smartphone in the next three to five years. If anything, the company has proven that its asset-light strategy works.
Oh, and it doesn’t hurt that Nokia is the most nostalgic item in the smartphone industry today.
US government will be banned from using Huawei and ZTE tech
Not a total ban, though
The president of the United States has just imposed a major ban against two Chinese tech giants, Huawei and ZTE, from working with the US government. The ban is a component of the Defense Authorization Act which US President Donald Trump has just signed after months of discussions.
We first heard news about the bill earlier this month followed by reports of Huawei spying on people and ZTE getting banned after getting accused of selling merchandise to US rivals. The fiasco hindered Huawei phones from getting sold through US carriers. ZTE, on the other hand, was saved by Trump as confirmed by his tweet.
In the end, though, both Chinese companies now have the same fate. The US Congress worked on a measure that will essentially ban the US government and soon-to-be allies from using components and availing services from Huawei, ZTE, and a number of other Chinese communications companies.
The ban, which will go into effect over the next two years, doesn’t completely cut the ties of the US with Huawei and ZTE. The Chinese companies are not allowed to be part of any “essential” or “critical” systems of the US government, but they can still work with the US government as long as they will not be used to route or view data.
Huawei is not happy about the ban, of course, and calls it a “random addition” to the defense bill which is “ineffective, misguided, and unconstitutional.” The company also said that the ban will increase cost for consumers and businesses.
Via: The Verge
Samsung falls to less than one percent market share in China
Might pull out of Chinese market by next year
Recently, Samsung launched the Galaxy Note 9 to worldwide acclaim. Ironically, despite the positive response, the company is still slogging through one of its most dismal years to date. Previously, the Galaxy S9 opened to tepid, abysmal sales.
Now, with the dawn of more capable competitors, Samsung is falling more drastically than ever before. Formerly a stalwart in China, the company has now fallen to less than one percent market share in one of the world’s biggest markets.
Just a few years ago, Samsung’s phones captured a comfortable market share lead at 20 percent. The huge lead accurately represented Samsung’s grip on the market at the time.
However, with the recent developments (or lack thereof), the balance of power is steadily shifting. This year, gigantic (but more affordable) outings from smaller companies — Huawei, OnePlus, OPPO, Xiaomi — have taken the market by storm.
Besides the downpour of competitive rivals, Samsung has cited the decline of the smartphone market at large as a reason. From the lack of revolutionary features, adoption and upgrade rates have declined, causing an overall plateauing of phone sales.
According to Reuters, Samsung is considering drastic measures to alleviate the slump in sales. Most radically, the company might pull out of the Chinese market entirely.
Specifically, the plan affects Samsung’s Tianjin factory in Northern China. On its own, the facility manufactures 36 million phones per year. Additionally, Samsung has other plants nearby in Huizhou and Vietnam.
Currently, Samsung officials have yet to decide on the Chinese market’s ultimate fate. However, the pull-out is still a tempting move to improve efficiency.
Regardless, Samsung will remain as a global powerhouse even if it withdraws from the Chinese market. If anything, the move will dictate the company’s (and its Chinese competitors’) trajectory for the future.
Besides Samsung, Apple has also fared similarly, bowing out to Chinese brands in multiple markets.
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