At a time when the online marketplace is nearing saturation in terms of innovation, Alibaba (BABA) is taking things to the next level as it explores new avenues in the Russian market. In a deal that could revolutionize the fast-growing digital retail market in Russia, Alibaba has joined hands with local players to form an all-in-one digital hub, with e-commerce as the base. The joint venture includes telecom company MegaFon, government-supported wealth fund the Russian Direct Investment Fund and technology conglomerate Mail.ru.
The partners will make strategic investments in the joint venture and will also share assets, talent and resources, creating significant value for both businesses and customers. It will allow the partners to serve users of each of their distinctive platforms while enjoying seamless exposure to a wider market and cost-related benefits.
The joint venture includes telecom company MegaFon, wealth fund Russian Direct Investment Fund and tech firm Mail.ru
More importantly, the tie-up will serve as a milestone in the region’s rapid adoption of mobile internet and e-commerce, in which users from the neighboring countries are also taking part in a big way. It is expected that the vastness of the new digital ecosystem will enhance commercial ties between Russian and China, thereby contributing to their economic growth. The new equations will be of great significance considering the growing tension between Washington and its trade partners, including China.
Alibaba’s main contribution to the partnership will be its digital retail platform AliExpress, the local unit of which was launched a few years ago. As per the terms of the deal, Alibaba will reduce the stake in its Russian arm to below 50%, and forgo control over it.
The unique partnership, which aims to integrate the country’s e-commerce sector and consumer internet space, will operate on Russia-based payment service provider Mir. It will allow internet users in Russian and the CIS to network, communicate, play games and do commercial transactions without leaving the joint platform.
Alibaba started 2018 on a high note, scaling a new peak in January, but failed to sustain the momentum in the following months. The stock lost about 15% so far this year and hit a yearly-low Tuesday, after closing the last trading session sharply lower.