reporter | Wang Fujiao editor | Song Jianan
As Alibaba 's most proud "disciple" in Southeast Asia, Southeast Asia's largest e-commerce platform Lazada has completely inherited the essence of Alibaba - festivals, promotions and entertainment marketing.
html The last week of March is an ordinary time for Chinese consumers, but in Southeast Asia, a big promotion carnival similar to Double 11 is taking place. The official website of Lazada, a Southeast Asian e-commerce company, is packed with dizzying promotional advertisements: as many as 24 million discounted products, with discounts of up to 80% and attractive prices as low as RMB 0.15.All of this is desperately trying to attract buyers to press the shopping button. In the advertisement placed by Google, Lazada even claimed that its discounts were more powerful than China's Double 11.
Not only that, Lazada also held an online "Super Party" concert, which was exactly the same as the Double 11 party. Artists present included Dua Lipa, Malaysian Anugerah Juara Lagu 2019 winner Hael Husaini, YouTube sensual singer Ismail Izzani, Southeast Asian rapper and popular musical Urboy TJ, etc. The battle was like putting Cai Xukun, and 101 girl group on In the same place.
Chinese consumers are naturally familiar with all this, but Lazada is different. It took several years of hard work to move this model to the Southeast Asian market.
Since Alibaba took control of this Southeast Asian company in 2016, it has received blood transfusions of US$4 billion and dispatched technical personnel to help Lazada achieve breakthroughs in technology and capabilities. However, Lazada's performance has not been satisfactory.
Poor infrastructure, complex economic and cultural environment have brought Lazada challenges unimaginable in other markets. Looking back at Lazada over the past seven years, it seems that we have seen the difficult journey of recreating an "Alibaba" in Southeast Asia, but at the same time it requires more determination and concentration than Ali in China.
It is not easy for Lazada and Alibaba to break through and defend the base.
Lazada’s reckless era
It was 2012, and Lazada was still affiliated with Rocket Internet, a German incubator company. Although the slogan on the official website of this incubator company is to "enable" entrepreneurs, it is known in the industry for "plagiarism".
Rocket Internet will copy the mature business model of Silicon Valley to other countries, and when the market is mature, it will quickly sell it to the copied company. According to FT reports, at its peak, Rocket Internet had 14 companies in Russia, 4 in India, 5 in Africa, and 7 in the Middle East. The most well-known case of
is that they founded Alando, an online bidding website in Germany that is exactly the same as eBay. Even the website style and logo are carved from the same mold, and then sold it to eBay for US$50 million—— You should know that its original investment was only US$5 million. Other similar cases include copycats of Groupon, the originator of American group buying websites. Everywhere
goes, Rocket Internet will select the most elite entrepreneurial team to quickly develop the situation. With the financial support of Rocket Internet, "copycat products" can often capture the local market with lower prices and better service quality.
Someone once introduced Rocket's three-step method of "cloning entrepreneurship" as follows: The first step is to send the company's internal engineers, marketers, and managers to create e-commerce platforms such as Alando when copying in emerging markets. After the core team is recruited, the staff sent over will immediately evacuate and move on to the next project. Then, they hire CEOs with certain characteristics to run the company, such as smart and brave young people from investment banks or consulting companies.
Among the emerging markets that Rocket Internet focuses on, e-commerce is the track with the fastest monetization and the most likely to be successfully incubated.
has developed since 2007, and Rocket Internet’s performance in e-commerce and emerging markets has been eye-catching. Especially from 2012 to 2013, Rocket Internet had its strongest momentum. It began to copy the e-commerce model to all parts of the world. It owns Zalora, a fashion e-commerce company in Southeast Asia, Jabong, a fashion e-commerce company in India, Jumia, an African e-commerce company, and Jumia, a fashion e-commerce company in Latin America. Linio et al. Now, Jumia is about to go public in New York, becoming the first African technology company to be listed on a major global exchange.
Lazada is the product of the above background.In 2012, Rocket Internet quickly formed an elite team and raised nearly US$1 billion in funds, hoping to build Lazada into "Asia's Amazon ".
Maximilian Bittner is the founder and former CEO of Lazada. After graduating from the University of London in 2001, he worked in investment banks and McKinsey. Bittner's father was an old friend of Rocket Internet founder Oliver Samwer, and was invited by Samwer to copy the Amazon model to Southeast Asia.
Lazada’s current CEO Pierre Poignant is also one of Lazada’s early partners. According to his recollection, the earliest inspiration for e-commerce came from his father-in-law’s neighbor selling watches on eBay. Fifteen years ago, this neighbor had made millions on eBay, which deeply touched Pierre.
Pierre is French and his wife is Singaporean . They first started to get some products from Southeast Asia to sell in France. This experience gave Pierre the inspiration and inspiration to start an e-commerce business.
Many people describe Lazada as the Southeast Asian version of and Taobao . In fact, this statement is not accurate. In the early days of entrepreneurship, it was more like Jingdong , using the procurement and sales model, and products were shipped from the warehouse to users. However, due to the lack of education in the Southeast Asian e-commerce market at that time, users had not yet developed the habit of online shopping. In addition, the e-commerce infrastructure was extremely poor, and the overall service experience was not good. In the first nine months of its launch, this "ambitious" company had sales of only $191 million and a loss of $233 million.
Lazada's business covers Indonesia , Malaysia , Philippines , Thailand, Vietnam and Singapore. This area has a population of 560 million. This number seems to have great potential, but these people are distributed on thousands of islands, speak more than 10 types of languages, and use 5 different currencies. What's worse is that 90% of people don't have credit cards, let alone mobile payment tools such as , Alipay, , and WeChat. Around 2013, even Chinese people had just begun to have some idea of e-commerce. Not many people bought things on Taobao, let alone the relatively backward e-commerce in Southeast Asia.
Within Lazada, the shortcomings of copying the business model quickly became apparent - it was difficult for the team and business foundation to maintain stable development. Former Lazada Indonesia co-founder and CEO Fung Fuk Lestario once said that in the early days of his business, he had to hire 15 people within two months. At that time, the cultural structure had not yet been established, and excessive team expansion would inevitably lead to internal chaos.
For this reason, Lazada has been controversial and questioned. In addition, the service ecology of e-commerce does not exist at all. Investment and development have become a chicken or egg problem.
But Lazada is not without results. Before Bittner and Pierre founded the company, no one in Southeast Asia believed in e-commerce. When they built a logistics network from scratch, this foresight gave Lazada an advantage in today's competition.
Ali’s arrival
When Lazada was founded, it must have never expected that it would become associated with Ali. Financial data released by
Rocket Internet shows that from fiscal year 2013 to fiscal year 2015, although Lazada's net income has been soaring, reaching US$75.5 million, US$154 million, and US$275 million respectively, its operating profit has continued to suffer losses, which were US$6,790. US$10,000, US$150 million, US$329 million. If there is no timely blood transfusion of external funds, Lazada is likely to go bankrupt due to a broken capital chain.
To a certain extent, the relationship between Alibaba and Lazada is the result of mutual choice, and there is even a hint of helplessness.
At that time, Alibaba was interested in expanding its international business, and Lazada’s target users had many similarities with Taobao’s early users.
According to statistics from Lazada, most users who purchase electronic products online live in rural areas, are between 18 and 30 years old, and are mainly male. Many are part of the region's emerging middle class and are purchasing disposable items, such as mobile phones, for the first time.
Lazada has also extended its tentacles to China. In February 2015, Lazada began to attract investment in China, and by the end of last year, 6,000 Chinese sellers had settled in. Most of the electronic products that account for nearly 40% of Lazada's total sales are purchased from China. Lazada needs to use the Alibaba platform to attract more Chinese merchants to cooperate with it.
Before Alibaba officially took over, although many local e-commerce companies, including Lazada, were in their initial stages of development, the Southeast Asian market had already shown certain development potential. According to forecasts from , Google and Singapore’s sovereign wealth fund Temasek Holdings, total e-commerce sales in Southeast Asia can reach US$88 billion by 2025, an increase of more than 10 times compared with 2015. Countless Chinese companies are flocking to it, and domestic mobile phone manufacturers such as Xiaomi and OnePlus have jumped in, creating a red sea.
With a lot of money in hand, Ali will naturally not miss any expansion opportunities.
Alibaba seems to have many investment targets in the Southeast Asian market, including Lazada’s competitors Shopee, Redmart, Zalora, Qoo10, Tokopedia, Tarad, 11 street, EZBuy, etc., but there are companies with sufficient market scale and financing amounts of tens of millions of dollars. Very few.
Among them, Shopee has lined up with and Tencent . The latter has become Shopee’s largest investor, so Alibaba’s only choice is Lazada. Fortunately, Amazon, Lazada’s biggest competitor in Southeast Asia, was not able to take care of this potential market at that time.
In April 2016, Alibaba decided to acquire a controlling stake in Lazada for US$1 billion, hoping to help local businesses in Southeast Asia, Alibaba platform brands and distributors enter the regional consumer market in Southeast Asia through investment. In March 2018, Alibaba invested an additional US$2 billion, bringing its shareholding ratio to 83%. At the same time, it was announced that Peng Lei, chairman of Ant Financial Group, would serve as Lazada CEO. Maximilian Bittner, the original CEO, stepped down from a specific management position and took on a senior advisory position. Two years later, Bittner quit.
According to Alibaba's approach to acquiring companies, it usually sends its own people and then gradually "Alibabaizes" the acquired company to serve a certain business. But for Lazada, Alibaba did not implement a drastic “replacement”.
Except for Peng Lei’s air landing in 2018, Alibaba has basically retained most of Lazada’s localization team. The reason is simple. The Southeast Asian market is complex and ever-changing, and Alibaba does not have the energy or ability to deploy so many international teams who are familiar with the Southeast Asian market.
In terms of management, when Peng Lei was the chairman of the board of directors of Lazada, she almost handled the company's business personally, and even moved her family to Singapore. She also drove Lazada management and employees to align with Alibaba Group and established its own vision, mission and values. In terms of
business, Peng Lei will participate in discussions on Lazada’s investment strategy and talent introduction. More importantly, she knows how to lead Lazada and Alibaba Group to cooperate seamlessly.
Lazada’s Southeast Asia headquarters is now located in the AXA Tower in downtown Singapore, an oval skyscraper. Standing on the 47th floor and looking down, you can clearly see the famous Strait of Malacca.
According to Zhang Ji, an Alibaba expat employee who works locally, there are about 200-300 Lazada employees in the entire building, and only a dozen of them were sent by Alibaba. There are also employees from Ant Financial on the 43rd floor providing technical support for Lazada Pay (a new payment business). Even so, the proportion of employees sent from outside Alibaba is not very large.
As an expatriate employee, Zhang Ji deeply felt the huge gap between the Southeast Asian market and the domestic market. In the online review of LazMall (similar to and Tmall ) investment products that she is responsible for, Tmall in China generally requires merchants to provide business licenses, brand qualifications, etc. The requirements are detailed and strict. Not only that, Tmall's back-end system will be directly connected with the Consumers Association, Industry and Commerce and other departments, so that merchant qualifications can be checked clearly and quickly. But in the Southeast Asian market, such an audit mechanism will no longer work. All rules and audit standards must be overturned and re-established.
logistics is also a big problem. Due to the immature logistics system, it is difficult for Southeast Asian consumers to sit at home and collect and unpack express delivery like Chinese buyers do. In Vietnam, the post office is responsible for collecting customer goods, returning goods, and handling cash refunds; in Malaysia, consumers can receive goods in 7-11 lockers; and in the Philippines, Lazada will let sellers put goods in gas station, and then the delivery staff will pick up the goods.
After Alibaba took over Lazada, everything became different.
Alibaba has brought talents, technology and food. Not only do more than 300 technicians in Hangzhou provide technical support to Lazada, Lazada also quickly connects with Chinese brands - Huawei mobile phones, Semir clothing, Camel clothing, QCY Bluetooth headsets, small Brands such as Dog Electrical Appliances and Bluedio Blue String have entered Lazada. Among them, Camel Clothing has 2,000-3,000 SKUs on Lazada, with monthly sales reaching US$100,000 in less than half a year.
Under the influence of Alibaba culture, Lazada has become more and more Alibaba-specific. The Southeast Asian market has also fully learned from the rich experience of the Chinese e-commerce market and is on the road of rapid development.
Lazada's expansion path
With the support of Alibaba, Lazada is also constantly expanding its business territory. Acquisition is undoubtedly the most effective and direct way.
In 2017, Lazada acquired rival Redmart for nearly $50 million, which was close to Redmart’s previous total financing.
Redmart focuses on daily groceries, fruits, vegetables, meat and other commodities. Due to its high quality and low price, Redmart has become one of the most popular online supermarkets in Singapore. Among Singaporean consumers who currently buy groceries online, 70% of them do so at Redmart. During the visit,
interface news reporters found that in addition to certain advantages in product variety and user volume, Redmart also has 6 distribution warehouses in Singapore. Its central warehouse is located next to a remote road in the southwest of Singapore. These warehouses can basically cover the entire distribution business in Singapore, and the fresh food logistics capabilities demonstrated behind them are exactly what Alibaba is interested in.
Singapore is not very big, only twice the size of Chaoyang District in Beijing. It takes no more than 2 hours to drive from one end of the city to the other. However, due to its geographical location close to the equator, the climate here is hot all year round, which brings huge challenges to fresh food distribution.
Generally, the basic storage temperature required for fresh food is 2 degrees Celsius - 5 degrees Celsius. During the transportation process, there is a specially set up fresh food refrigeration area in the truck, and each package sent out is packed in an insulated box. Products delivered by Redmart even include ice cream and chocolate, which requires users to refrigerate the products as soon as possible within 15 hours of delivery. The on-site staff of
told Jiemian News that such a core warehouse covers an area of about 120,000 square feet (picture below) and has a total of 165,000 products. A pick-up person has to handle 1,500 items a day. On average, the entire warehouse's daily shipment amount is about 5 million yuan.
On March 15, 2019, the Redmart service was launched on Lazada and was officially integrated into Lazada’s Singapore business territory. Brian, a warehouse manager at Redmart, told Jiemian News that after being acquired by Lazada, his title was promoted from Ship Manager to General Manager, and he needs to be responsible for recruiting and training local employees. There are no other essential changes.
Redmart fills in some gaps in Lazada’s product categories. Fresh daily necessities are high-frequency consumer goods, which help boost Lazada's overall activity. More importantly, Redmart's cold chain logistics system will be copied to other countries through Cainiao Logistics and Distribution Services together with Lazada Logistics. According to
data, the market value of fresh food and daily necessities in Southeast Asia will reach US$309 billion by 2021, with shoppers purchasing daily necessities online at least twice a month.
users can also feel the changes in Lazada’s shopping experience. Jian Yang, a consumer in Singapore, said that he started buying goods on Lazada two years ago. Because he was worried about the low quality of the products, he only bought small items under $10 at first. Now he mostly buys household items.
is similar to Taobao. It usually takes about 3-4 days for Lazada to deliver goods. Cross-border returns and exchanges are more troublesome and take about 5-6 days. But overall, it's much better than before.
But so far, Redmart has only provided services in Singapore, which is also one of the areas where Alibaba and Amazon compete most fiercely in the Southeast Asian market. Not only because Singapore is a developed country and its per capita GPD ranks first among the six Southeast Asian countries, but also because Singapore is smaller and can provide better operational services more easily.
It is foreseeable that in the Southeast Asian market, Lazada will invest more and more in Redmart, and Lazada has no intention of stopping its expansion.When talking about the investment philosophy, Pierre Poignant emphasized that logistics, payment, and supply chain are the main factors Lazada considers when looking for investment targets. In addition, the market where the investment target is located also needs to have good infrastructure as business support. However, the future does not necessarily rely entirely on investment and mergers and acquisitions, and any other form of cooperation is possible.
It will take some time to become the top one in Southeast Asia
At the end of 2018, iprice, a Southeast Asian e-commerce aggregation platform, counted the annual visits of 60 e-commerce companies in Southeast Asia last year. Among them, Lazada ranked first with 27% of the visits, followed by Tokopedia accounts for 17% of visits, Shopee accounts for 15% of visits, and Bukalapak accounts for 12% of visits.
Lazada has obviously received more attention in this market than other competitors. But even with Alibaba's blessing, there are still many variables for Lazada to secure its top spot.
Tencent is the first to bear the brunt. Shopee, which is backed by Tencent, achieved GMV of US$1.8 billion in the first year of its establishment. In the second year, GMV reached US$2.5 billion, with more than 30 million download users, making it the C2C e-commerce platform with the strongest growth momentum in Southeast Asia.
Benefiting from the rise of e-commerce in Southeast Asia and the market education dividend that Lazada has completed, Shopee, although it started late (it was only officially established in 2015), has achieved rapid success. Shopee adopts a mobile + social + P2P model to solve the pain points of local e-commerce platforms such as Carousell and Gumtree being unable to pay and not responsible for logistics. Soon its business scope covered six Southeast Asian countries.
On the other hand, Lazada also faces fierce competition from local e-commerce brands in various countries.
Tokopedia, Indonesia’s local e-commerce platform, is very popular among users and performed well in the Ramadan promotions in May and June 2018. Throughout May, Tokopedia's overall visits were close to 150 million times. In December 2018, Tokopedia raised US$1.1 billion with a valuation of over US$7 billion, led by Softbank and Alibaba.
Vietnamese e-commerce platforms Thegioididong and Tiki also performed well in 2018. These two e-commerce companies selling in the Vietnamese market received 29 million and 26 million total visits respectively.
Global e-commerce giant Amazon is also pressing ahead. In 2017, Amazon announced its entry into the Southeast Asian market, launching the Prime Now service (which can be delivered within one hour if you pay an additional fee), and launching products such as fresh food and home appliances. Although its main service area is limited to the Singapore market, this is the first time that Amazon has provided retail product services in a country where it does not have its own sales network. For Amazon, Singapore's consumption habits and the cultural quality of its citizens are closely related to the Western markets that Amazon is familiar with. They want to radiate the entire Southeast Asia region through the Singapore market, which has relatively complete infrastructure.
Lazada also achieved some visible results last year: In mid-August 2018, Lazada announced that it would unite more than 200 Chinese merchants to launch Global Collection, a selected product library that matches people and goods stores, enabling 72-hour direct cross-border logistics services; in September , Lazada also launched the crazy bargaining function "Slash It". But Lazada’s overall performance cannot be described as “amazing”.
In the past year, Lazada also experienced a coaching change internally. Pierre Poignant succeeded Peng Lei as Lazada CEO and reported to Peng Lei.
As for the reason why Peng Lei resigned, according to Techcruch speculation, it is likely to be directly related to Lazada’s insufficient performance during Double 11 and Double 12 last year.
During Double 11 in 2018, Alibaba did not disclose the specific GMV data of Lazada. It only mentioned that a total of 400,000 merchants participated in the Lazada platform, and 20 million consumers participated in the rush purchase in a single day. In the second quarter of fiscal 2019, Lazada's total revenue was 4.5 billion yuan ($650 million), a 55% increase year-on-year, but only accounted for 85.15 billion yuan ($12.4 billion) of Alibaba Group ) a very small portion of total revenue.
Lazada's own business model is also changing. It currently has multiple models such as Marketplace platform model, Lazmall B2C model and LazGlobal cross-border model. Lazada President Yin Jing said in an interview that the platform model and Lazmall cannot simply be directly mapped to domestic Taobao and Tmall.
“This is a completely new business format, not from C2C to B2C at the beginning.Nowadays, the Southeast Asian market is so vast that it is far too big to distinguish between C2C and B2C, because prematurely defining B2C will cause limitations and even shackles for young local users. Lazmall is actually part of the entire Lazada system. "Yin Jing emphasized.
As one of China's largest export markets, Southeast Asia has unique location advantages and development characteristics, accounting for 41.2% of China's total exports to "Belt and Road" countries. This is exactly what Lazada has done to encourage Chinese merchants through various measures The opportunity to enter the Southeast Asian market faster through the cross-border model.
Currently, Lazada has more than 400,000 sellers, thousands of brand partners and more than 100 logistics partners. At the previous merchant conference, Lazada announced its 2030 vision. The goal is to serve hundreds of millions of consumers, create 20 million jobs, and incubate 8 million small and medium-sized enterprises. For Lazada, there are still many tough battles to fight in the Southeast Asian e-commerce market.
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