Alibaba’s restructuring can benefit Lazada, analysts say

Lazada’s group CEO James Dong / Photo credit: Lazada

Analysts and investors are responding positively to Alibaba’s plan to reconfigure the company’s structure.

The company’s shares have been up 14.26% since the Chinese tech giant announced the decision to split its empire into six units. The move will affect Lazada, Alibaba’s Southeast Asian ecommerce arm.

Under the new structure, Lazada will fall under the Global Digital Business Group, which also includes AliExpress, Trendyol, and Daraz.

After the change, Lazada’s management could become “more decentralized and thus more agile,” observes Zerlina Zeng, a senior analyst at CreditSights who specializes in Chinese corporations.

“We expect Alibaba to continue to increase the monetization rate and operational efficiency, and reduce operational losses of Lazada,” she tells Tech in Asia. Zeng added that Lazada could go for an IPO, which could funnel outside capital that the company could use to scale.

In its latest earnings report, Alibaba said Lazada has not only improved its order growth and monetization rate, but it has also narrowed losses per order.

Angus Mackintosh, an analyst at CrossASEAN Research who contributes to SmartKarma, tells Tech in Asia that he believes the move also unlocks fundraising ability for Lazada.

“With all this increased scrutiny onshore in China, offshore investments could become more important,” Mackintosh says. Moves like Alibaba pumping US$1.6 billion into Lazada throughout 2022 and Lazada’s investment into Indonesian e-wallet Dana indicate that the ecommerce player is turning into a higher-priority business line for its parent firm.

See also: Why Alibaba should spin off Lazada

Previous analysis from Tech in Asia outlined other reasons more autonomy for Lazada makes sense, including the prospect of giving the platform a boost in valuation.

Tech in Asia has also reached out to Lazada for comment on Alibaba’s restructuring plan.