The Chinese giant Alibaba Group Holding is in the process of finalizing a deal to integrate its operations in South Korea with the e-commerce platform E-Mart, giving life to a new company with an estimated value of approximately 4 billion dollars. As reported by the Bloomberg agency, AliExpress International and Gmarket will form a joint venture with equal shares (50-50). Furthermore, the two companies plan to make further investments in the JV, which will have total control over Gmarket.
Alibaba’s difficulties and the reasons for the merger
Alibaba aims to strengthen its international presence to offset the slow growth of its core e-commerce business in China, penalized by the decline of the national economic boom. The merger with E-Mart in South Korea would represent a strategic opportunity for both companies, allowing them to face competition from local players such as Naver and Coupang, as well as Chinese competitors such as Temu. South Korea, despite a population of only 52 million, positions itself as the fourth largest e-commerce market in the worldaccording to Euromonitor estimates. A less surprising result considering the high broadband penetration, thanks to one of the fastest internet networks in the world.
Once the undisputed ruler of Chinese e-commerce, Alibaba is taking on difficulty in maintaining previous growth rates, thanks to the rise of new competitors such as Pinduoduo (PDD) and ByteDance. Added to this is the slowdown in the Chinese economy, which has pushed the company to reorganize its activities, consolidating the core business, integrating national and international operations in e-commerce and concentrating investments in sectors with margin prospects higher.
The decision, announced last week, to sell the Intime department store chain for around 1 billion dollars (around 950 million euros at current exchange rates) to Youngor Fashion, a company active in the textile and clothing sector, is in this direction. clothing. The operation will result in a loss of approximately 1.3 billion dollars (1.2 billion euros) for the e-commerce giant compared to the initial investment in Intime.
Furthermore, Alibaba may soon create a joint venture with the South Korean group Shinsegae. Under the terms of the agreement, Shinsegae will invest its 100% stake in South Korean e-commerce platform Gmarket. AliExpress Korea and Gmarket will be integrated into the joint venture, which will be established in 2025. However, the two platforms will continue to be operated independently.
What is E-Mart
Over the years, E-Mart has expanded its e-commerce business through both organic growth and strategic acquisitions. In 2021, the company acquired a controlling stake in eBay’s South Korean branch for around $3 billion, thus expanding its customer base and diversifying its offering into new product categories.
E-Mart shares recorded a 5.45% increase on the Seoul Stock Exchange, bringing the company’s capitalization to 1.4 billion dollars, while Alibaba shares listed on the Hong Kong Stock Exchange rose by 2.65%.
The consolidation of the South Korean e-commerce market comes amid declining consumer confidence, which has fallen to its lowest level since the pandemic began, due to recent political tensions linked to the attempted coup against President Yoon Suk Yeol.
