Alibaba's announcement comes as its rivals such as Chinese e-commerce firm JD.com Inc are expanding operations in South-East Asia and amid media reports that Amazon is eyeing an entry into the region of 600 million people where only a fraction of total retail sales are currently conducted online.
"It is a clear signal from (Alibaba) that, now having learned the market better, that they really believe in the opportunity of ecommerce in southeast Asia," Lazada chief executive Maximilian Bittner told Reuters in an interview.
Alibaba had the option to buy the remaining stakes from some Lazada investors, 12-18 months after the deal closed.
Lazada, founded in 2012, is headquartered in Singapore and also operates in Malaysia, Indonesia, the Philippines, Thailand and Vietnam.
"The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us," Daniel Zhang, CEO of Alibaba, said in a statement.