How Lazada conquered the Southeast Asian Market?

01/07/2019

While online shopping in Southeast Asia is gaining traction, Lazada has beaten the competition and has now become the number one e-commerce in the region, leading the largest market share in six SEA countries

 

With a population of 650 million people increasingly buying online, Southeast Asia’s (SEA) e-commerce potential is growing year after year and China obviously did not miss the chance to try its hands at the market.

Here, Alibaba has marked the territory with the Lazada Group and the results have been impressive. According to the calculations made by App Analytics and App Annie, in fact, the Singapore e-commerce company controlled by the Chinese group turned out to be the “Top Publisher” in Southeast Asia in 2018, with the highest number of monthly active users (MAU) among the region’s e-commerce platforms.

 

Founded by the German Rocket Internet, Lazada was launched in Singapore in 2011. The intent was to build an Amazon-like business model in Southeast Asia, leveraging both the emerging online consumer market and the lack of strong competition.

 

In 2012, Lazada was launched in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, collecting various investments including those from Alibaba, which increased its stake in the company from 51% to 83% and thus cementing a foothold for China in the region’s e-commerce market.

From a starting investment of $1 billion, Jack Ma’s total investment reached $4 billion in 2018 when the Chinese company also placed at Lazada’s top Lucy Peng, chairwoman of Ant Financial and one of Alibaba’s 18 co-founders. “The investment underscores Alibaba’s confidence in the future success of Lazada’s business and the growth prospect of the Southeast Asian market, a region that is a key part of Alibaba’s global growth strategy,” said the e-commerce giant.

 

How lazada conquered southeast asia - e-commerce - cifnews

© Lazada. Launched in 2012, Lazada is the number one online shopping and selling destination in Southeast Asia.

 

Today, Lazada operates in six different markets of the Southeast Asian region. During the first quarter of 2019, its MAU base still continues to outperform competitors such as Shopee and Amazon with more than 31 million visits every month.

The company’s 300 million stock units, ranging from toys and beauty products to shopping and consumer electronics, include the widest selection of products available online in SEA, including those of major global brands. To ensure fast delivery, Lazada thus works with over 100 logistics companies in the region.

Last April, for example, the Singapore company signed a joint business plan with cosmetics giant L’Oreal to consolidate their long-term partnership. According to the new agreement, L’Oreal will work with Lazada’s warehouses and logistics network to deliver the next day in some cities in Southeast Asia by June, the company said in a statement.

Last year, it also hosted its own Singles Day and when the event kicked off at midnight, the platform saw three times more shopper traffic compared to the previous year, bringing the festival to consumers in Southeast Asia.

 

“This victory as the number one shopping app in Southeast Asia testifies our commitment to redefining the online shopping experience,” said Mary Zhou, head of marketing for Lazada. “We will continue to create more value for our buyers and sellers in the region with investments in e-commerce infrastructure and the innovative engagement capabilities of our app,” she added.

 

In June, Lazada also brought the “live shoppingtrend to Thailand. Lazada repeated Alibaba’s successful “See Now, Buy Now” fashion show, the purchasing formula that allows customers to buy what they see on the screen on the spot.

Taking advantage of this technology, over 120,000 spectators in Thailand were able to follow a fashion show in real time on their mobile phones in towns and villages across the country. The “See Now, Buy Now” function has therefore allowed them to purchase the items through the Lazada app.

Lazada held the same fashion shows in the Philippines and Malaysia at the beginning of May. The total number of spectators for all the three live events exceeded 300,000, as claimed by the company. “At Lazada, we authorize sellers and support them with revolutionary marketing and ‘shoppertainment’ initiatives to better engage their customers and also become leaders in their sectors,” said Mary Zhou, Chief Marketing Officer of Lazada Group. “This is how they can finally excite customers, who will drive the growth of their e-business and online shopping,” she added.

Lazada has already hosted 270 live-streaming sessions on its platform in Thailand from May 21st to May 26th. Over 80 local Thai brands and 20 global brands participated in the sessions and, although new to the platform, this formula already reached over 400,000 spectators.

 

How lazada conquered southeast asia - single day - cifnews

© Alizila.com. Lazada, the Southeast Asian e-commerce platform in which Alibaba holds an 83% stake, saw record-breaking numbers for its last Single Day sales.

 

As the Southeast Asia market is growing both in terms of purchasing power and in terms of economic development, the region has turned to be the next e-commerce opportunity.

The 10 members of the Association of Southeast Asian Nations (ASEAN) form an economic power whose combined GDP reached nearly $2.8 billion in 2017, exceeding that of the United Kingdom, France or India. Therefore, if ASEAN were a single economy it would rank sixth worldwide. Moreover, in terms of population, the 650 million people living in ASEAN doubles the population of the United States and it is estimated that this figure will increase by another 80 million by 2030.

As it has already happened for China, the South East Asian region has significant potential for e-commerce. According to a joint 2018 report by Google and the Singapore sovereign fund Temasek, the region’s internet economy will reach $240 billion by 2025, compared to $72 billion expected last year. The report also estimates that there were around 350 million Internet users in the region in 2018.

 

In a 2016 study by Google, it was estimated that as much as 3.8 million new users will come online each month in Southeast Asia, making it the fastest-growing internet region in the world between 2015 and 2020.

 

Online shopping currently accounts for just 4% of retail purchases in SEA leaving plenty of room for e-commerce giants to grow in the region. Consultancy Frost & Sullivan forecasts the total gross merchandise value of e-commerce here to rise to $65.5 billion in 2021, from $20.5 billion in 2017.

Southeast Asia is, therefore, one of the most sought-after markets for online shopping platforms. It is no coincidence that Vietnam is among the countries with the highest growth worldwide in terms of e-commerce and, together with Singapore, Indonesia, Malaysia, Thailand, and the Philippines, it turned to be a golden goose, which can count on 145,000 local and international sellers and 3,000 brands with a catchment area of about 560 million consumers.

 

How lazada conquered southeast asia - live shopping - cifnews

© Alizila. Lazada recently introduced Alibaba’s “See Now, Buy Now” feature, letting viewers make real-time purchases of any items on the runway from their mobile phones.

 

Therefore, thanks to Lazada, Alibaba has gained an important advantage in the area. Rather than to open an Alibaba branch abroad, the company opted to purchase the Singapore platform and to move its own management into the existing corporate structure. Moreover, the increasing investments suggest that the Chinese company perceives a threat from the growing presence of other e-commerce platforms in the region.

Indeed, currently, one of Lazada’s biggest competitors is Chinese e-commerce platform JD.com, which has a standalone operation in Indonesia and a joint e-commerce fintech investment JV in Thailand. Even Amazon recently launched Amazon Prime in Singapore, although its efforts to expand in the region have been more conservative than its rivals.

Even Shopee fought tough. Between the first and the fourth quarter of 2018, the Alibaba backed e-commerce received a strong challenge from Shopee who grew its total visits on desktop and mobile web by 98%. Towards the end of the year, Shopee reduced Lazada’s lead by 62% to become its closest competitor.

However, Lazada was the first to be able to take advantage of the growing smartphone and internet penetration rate in SEA, which has driven the rise of digital shoppers, who prefer to shop online due to its affordability, variety, and convenience. On top of that, the region has one of the fastest growing middle-class population who are tech-savvy millennials, an audience that Chinese e-commerce companies know well and that Lazada could easily reach thanks to Alibaba’s experience.

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