“Earlier rather than later”: Lazada’s strategy to lead SEA’s e-commerce space

Thanks to rapid urbanisation and a digitally-savvy young population, SEA’s online retail growth is amongst the fastest in the world, outpacing even that of India and China. In this booming space, early entrant Lazada is one of the regional leaders.

Founded in 2012, Lazada served over 80 million annual active buyers on its platform between August 2019 and July 2020, and is one of the region’s 10 unicorn startups valued over US$1 billion (S$1.37 billion). It has adapted quickly to COVID-19, showcasing the agility that helped it become an e-commerce juggernaut in just eight years.

Mr James Chang, Chief Executive Officer of Lazada Singapore, shares how the company unlocks opportunities in the digital future.

With challenges come opportunities 

During COVID-19, panic buying led to unprecedented shifts in consumer behaviour. Multiple orders were made by single buyers, and order sizes racked up, with the largest single order weighing over 800kg. Traffic on Lazada’s grocery arm, RedMart, increased 11 times over Singapore’s Circuit Breaker period.

“When consumers turn online, the last thing we want is to deliver poor service or to not meet their expectations,” shares Mr Chang.

At the same time, Lazada found new opportunities. With offline shopping experiences disrupted, LazMall, Lazada’s virtual shopping mall, brought curated selections from departmental stores to its online shopping experience, helping retailers maximise reach while expanding product assortment for its platform.

“Shopping malls and Lazada have similar goals – to help brands drive sales by creating a comfortable space for consumers,” remarks Mr Chang. “The only difference is that shopping malls do it physically and Lazada does it online.”

Striking even before it’s hot

In 2012, when investors were focused on developing markets in Brazil, Russia, India, and China, Lazada set eyes on the SEA market.

Mr Chang shares how e-commerce in the region was almost non-existent then. For instance, he remembers how Sulit, the biggest e-commerce player in the Philippines in 2012, relied heavily on physical meet-ups for exchange of goods and payment.

“Nowadays, that’s hardly counted as e-commerce. That’s how early it was,” recalls Mr Chang with a chuckle.

He encourages businesses that are looking to adopt e-commerce to start earlier rather than later to tap on promising returns in SEA’s e-commerce growth: “There is no right time to start e-commerce, but the earlier you start, the more proficient your team will be, and the greater the loyalty of consumers you will generate.”

With the backing of incubator Rocket Internet and successful rounds of fundraising under its belt, Lazada launched its headquarters in Singapore in 2014. From its base here, Lazada coordinated its regional growth strategy, capturing SEA’s nascent e-commerce growth and becoming one of the market leaders.

Singapore offers just the right mix of developed payment and logistics systems coupled with tech-savvy consumers, allowing Lazada to effectively pilot new initiatives, adds Mr Chang.

Lazada’s foresight has paid off. SEA’s digital consumers are on track to increase 1.4 times between 2018 and 2025 from 250 million to 340 million. The company now operates in six countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam – and has fulfilment centres across 17 SEA cities.

Lazada’s four-step growth strategy for SEA

Mr Chang shares the four keys of Lazada’s SEA expansion strategy — trust building, assortment expansion, cross-border retail network development, and logistics investment.

In 2012, customers had many doubts as e-commerce was a fairly new concept in SEA. “Our challenge was getting the trust of the consumers. Is Lazada a scam? Will the payments be secure? Will delivery work? It was a big challenge to win the trust of consumers,” remarks Mr Chang.

Lazada’s first strategy was to ease consumers’ worries about buying online. To do this, the company sourced products from partners and performed strict quality control checks before delivery, ensuring positive buyer experiences for early adopters.

Lazada’s focus next moved to product assortment, tapping on cross-border retail networks to offer products from Alibaba’s extensive Tmall and Taobao merchant network in China, Japan, and Hong Kong to its SEA consumer base, bringing East Asia’s booming e-commerce supply chains closer to the region. Between 2017 and 2019, Lazada’s cross-border sales quadrupled as it helped SEA’s consumers discover and access these bargains online.

Today, Lazada carries over 18,000 brands and drives assortment quality by working with its network of global brands and businesses in Singapore. Just this year, the number of brands on LazMall Singapore has doubled, with global brands such as Toyota, Mothercare and Porsche Design coming on board.

This wide range of product offerings is carried by Lazada’s logistical infrastructure investments, the final piece in the company’s growth strategy. The platform is constantly innovating to shave time off. For instance, Lazada e-Logistics boasts 72-hour cross-border delivery for metropolitan cities once parcels have cleared local customs, as well as a green-energy delivery fleet. In 2018, Lazada’s last-mile fleet set a record of over one million parcels delivered in a day across SEA.

What’s next

Amidst the regional boom in online retail and digitalisation, Lazada’s competitors today include Amazon, eBay-backed Qoo10, and Tencent-backed Shopee. What does the future of e-commerce look like for Lazada?

Mr Chang sketches out two areas of growth – first, providing even more seamless omni-channel experiences, and second, delivering customer-first service solutions.

For example, Lazada partners with physical stores in Singapore to create online-to-offline experiences by encouraging customers to test products in person, but make purchases in-app by scanning product QR codes.

Lazada is also test-bedding service solutions that meet the specific needs of consumer groups. For instance, RedMart now offers a new Sunrise Delivery slot in Singapore, an overnight grocery delivery service catering to busy working adults.

Cybersecurity will remain a key business priority for the company. Last October, RedMart suffered a data breach where the personal information of 1.1 million user accounts was stolen from a legacy system the company no longer uses.

"The data incident highlights that people want to target our customers for nefarious purposes and protecting our customers' data and privacy remains a top priority. We have a team of professionals, comprising seasoned law enforcement professionals, lawyers and technology specialists, dedicated to pre-empting and preventing future incidents as much as possible," shares Mr Chang.