Alibaba Group Holding is reportedly to buy e-commerce business Kaola from Chinese gaming company NetEase Inc for US$2 billion, adding a platform that specializes in supplying luxury goods from abroad to Chinese consumers.
According to a Reuters report, the long-discussed deal comes as China’s e-commerce players including Alibaba and JD.com Inc look to niche segments for growth, with the online shopping industry in the country slowing as economic growth eases.
Currently, Alibaba’s Tmall allows overseas brands to launch and manage virtual storefronts on its platform. But Kaola offers a more curated collection to wealthy clients, primarily purchasing goods directly from suppliers to resell to consumers.
“With Kaola, we will further elevate import service and experience for Chinese consumers through synergies across the Alibaba ecosystem,” Alibaba CEO Daniel Zhang said as quoted by Reuters.
Kaola, launched by NetEase in 2015, has been targeting shoppers in China by offering products from brands such as Gucci, Shisheido, and Burberry.
Kaola has an advantage over larger e-commerce players as it specialises in cross-border shopping, according to Ker Zheng, who tracks China’s online retail sector at consultancy Azoya as Reuters reports.
By offering a relatively narrow selection of popular items, it can boost bulk purchases from suppliers and offer low prices.
Ker Zheng said that Kaola does not have to share user time or basket space with cheaper, non-imported products.
Alibaba plans to let the Kaola app continue to operate independently under its current brand, while Tmall import and export general manager Alvin Liu will become Kaola’s new CEO, the companies said in a statement, Reuters said.
Statistics show that Chinese consumers account for more than a third of the luxury goods sector’s worldwide revenues.