<article>E-commerce unicorn Bukalapak held talks with Alibaba-backed Lazada for a merger in Indonesia, according to several sources aware of the development.</article>

E-commerce unicorn Bukalapak held talks with Alibaba-backed Lazada for a merger in Indonesia, according to several sources aware of the development.
One source told DealStreetAsia that both parties failed to make headway in discussions, leading Bukalapak to raise an undisclosed sum from South Korea&#8217;s Shinhan Group in early October.
Another source said that Lazada is reluctant to acquire Bukalapak at this point of time, even though it has been experiencing slowing growth in Indonesia compared to competitors such as Shopee and Tokopedia.
All sources were unable to confirm if merger talks between Lazada and Bukalapak are still in progress.
&#8220;We are not even aware of any of the above. In our knowledge, we have never had any talks regarding this matter,&#8221; said a Bukalapak spokesperson in response to a DealStreetAsia query.
A Lazada Group spokesperson said: &#8220;There is no truth to the rumour.&#8221;
Tokopedia also in conversations?
Tokopedia, the SoftBank Vision Fund-backed unicorn, is also understood to have evinced interest in acquiring Bukalapak. A source told us that a prominent shareholder of Bukalapak has reached out to Tokopedia&#8217;s investors suggesting a possible merger as well.
Tokopedia said it is unable to comment or confirm these developments, while Alibaba, Lazada and Bukalapak have said that they are untrue and/or inaccurate.
A Tokopedia spokesperson said: &#8220;Unfortunately, regarding your question, we cannot comment nor confirm on market rumors or speculations.&#8221;
The road ahead for Bukalapak
News about Bukalapak veering towards &#8220;cost-efficiency&#8221; first began in September.
The Indonesian e-commerce unicorn confirmed media reports that it was slashing about 10 per cent of its 2,500-strong workforce to cut costs. According to a CNN Indonesia report, Bukalapak&#8217;s engineering, marketing and customer service divisions were affected. Tech in Asia also reported that the company discontinued its smart retail and internet-of-things business units.
In an interview with DealStreetAsia in July, Bukalapak co-founder and president Fajrin Rasyid acknowledged that while e-commerce is still growing in Indonesia, it is <a href="https://www.dealstreetasia.com/stories/bukalapak-indonesia-143075/">unlikely to keep pace moving forward.</a>
&#8220;Yes, there is potential that (e-commerce) growth is not as fast as before. That is why we are expanding into other services, not because we want to leave e-commerce, but because we want to explore areas close to e-commerce so we can help the industry,” said Rasyid on BukaGlobal, a newly launched feature targeting international users.
Stiff competition for e-commerce in Indonesia
Bukalapak faces cut-throat competition in Indonesia. The size of its e-commerce market may be massive &#8211; roughly $21 billion this year and still rapidly growing, according to Google, Temasek and Bain and Co&#8217;s 2019 SEA e-Conomy report &#8212; but there are several large players fighting for a share of the same pie.
Tokopedia, Shopee, Lazada and Bukalapak are all unicorns valued at above $1 billion, making them among the largest tech companies locally and regionally. All four have prominent backers, ranging from institutional investors such as GIC (Bukalapak) to Chinese strategics (Alibaba in Lazada) to venture capital firms such as SoftBank Vision Fund (Tokopedia).
Lazada is majority-owned by Alibaba Group, while Shopee is owned by Nasdaq-listed Sea Ltd. Both parent companies have expressed financial commitments to their subsidiaries to expand across Indonesia and the region.
Tokopedia, on the other hand, enjoys the backing of several well-heeled investors, including Alibaba, Sequoia Capital India and SoftBank Vision Fund, which led its last $1.1 billion round in December, valuing the company at $7 billion.
Little known about Bukalapak&#8217;s fundraising progress and financial position
Bukalapak, meanwhile, has been coy about its fundraising progress.
In January, Bukalapak raised $50 million from South Korean investor Mirae Asset –Naver Asia Growth Fund, a joint venture fund operated by Mirae Asset and Naver, which operates messaging app Line.
More recently in early October, the company announced an undisclosed Series F round backed by South Korean conglomerate Shinhan GIB, Indonesian media conglomerate Emtek, and an unnamed global institutional investor at a $2.5 billion valuation.
In August, Bukalapak told us that the company&#8217;s gross profits for the first half of 2019 were three times that of the same period last year.
In July, Tech in Asia reported that Bukalapak is on track to generate $5 billion in annualised run rate paid Gross Merchandise Value (GMV) in 2019. DealStreetAsia understands that &#8220;annualised run rate paid GMV&#8221; comprises taking the best or most recent month of GMV extrapolated over 12 months, which may not give a complete picture of Bukalapak&#8217;s GMV values.
Little else has been reported about Bukalapak&#8217;s cash burn and revenue figures.
Sharing the same investors
The speculation around consolidation is also driven by the fact that a number of Indonesia&#8217;s e-commerce players share similar investors.
For instance, Chinese e-commerce giant Alibaba has a controlling stake in Lazada, while also holding a stake in Tokopedia. Meanwhile Ant Financial, an Alibaba affiliate, also owns a stake in Bukalapak.
The overlaps in investor base suggest that a transfer of stakes between affiliated parties is a possible route forward if these investors decide that prolonged competition is counterproductive to their projected financial returns on their portfolio companies.
We reached out to Alibaba to verify if such conversations are happening between the investors of Bukalapak, Tokopedia and Lazada. An Alibaba spokesperson said the &#8220;rumours are not true.&#8221;

Bukalapak recently closed an unspecified Series F financing backed by South Korea's Shinhan GIB and Indonesia's Emtek at a $2.5 billion valuation.

Bukalapak said to have held merger talks with Alibaba-backed Lazada

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Bukalapak said to have held merger talks with Alibaba-backed Lazada

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