Lazada has no pressure from parent Alibaba to become profitable, focusing instead on winning market share, chief executive Max Bittner said.
“Southeast Asia, for them, is hugely exciting. They see it as big an opportunity as China and my mandate is to win the market,” he added.
Bittner made the remarks during the recent Tech in Asia Jakarta 2017 conference.
Chinese e-commerce giant Alibaba spent more than US$2 billion to take control of Lazada, a five-year-old online shopping company based in Singapore and doing business in six countries.
With players deploying massive ammunition in the e-commerce war to lure customers and gain market share in the region, Bittner said: “We’ve got the firepower we need and we have the backing of one of the most profitable companies ever. We’ll do whatever it takes and really win as much as we can.”
Talking about Shopee, Lazada’s closest rival and part of publicly listed Sea, Bittner said it will have a “harder time continuously raising money”, adding that “at some point, investors expect improvements in profitability. The luxury of being us is we’re not exposed to that scrutiny.”
Dubbed as the “Amazon of Southeast Asia”, Lazada started out doing direct sales to consumers from its own warehouses. In 2013, it added a marketplace for merchants, using its assets to offer merchants fulfilment, including warehousing, packaging and shipping.
According to Bittner, Lazada has 15 warehouses across Southeast Asia. Three are located in Indonesia, and two more will be launched in the 250 million-strong market by the end of the year.
Bittner is angling for what he calls the three Cs. “Capacity – how much volume you push through the system at any given time. Cost – we want to make it cheaper. And capability – which is really the distinguishing factor.”
More than the spending power, Bittner wants to differentiate Lazada from its competitors by building out its infrastructure.
As Tech in Asia reports, Bittner thinks the industry’s biggest challenge lies in the region’s logistics issues. “We see logistics as a massive bottleneck… it’s important that as the market matures, you have a dependable system,” he said.
In Indonesia, Lazada’s former country boss, Magnus Ekbom, previously lamented that third-party logistics providers couldn’t keep up with Lazada’s growth. “Indonesia is pretty much running out of logistics capacity,” he said.
Lazada has relied on logistics companies for its deliveries to customers – from Ninjavan in Singapore to Go-Jek in Indonesia. But it began investing heavily in its own delivery network. In Indonesia, Lazada now handles the bulk of those deliveries itself.
This investment in infrastructure is something that Alibaba has fully embraced. It has been spending huge sums on its logistics unit Cainiao.
Lazada is taking stock of many lessons from Alibaba’s playbook, such as making use of big data analytics to match consumers with the right products, as well as to prevent fraudulent sales on their sites.
“We’re the only platform in the region which actually limits the amount of orders you can do per item. So on Lazada, you can’t just order one item 20 times in one order, you have to come back and order again. That’s how our systems keep track if this is fraudulent behavior,” Bittner said. “Alibaba has a huge amount of experience in avoiding this kind of behavior.”
The Lazada CEO is also weighing up the possibility of opening a mall in Indonesia, taking a cue from Alibaba’s move into supermarkets.
In the burgeoning Southeast Asia e-commerce market, Lazada is competing with Bukalapak, Tokopedia, JD, Qoo10, along with its closest rival Shopee and the new entrant Amazon.
Asked how he thinks the competition will evolve, Bittner said “to be honest, I don’t know”, but added that “Alibaba [is] here to stay. We’re here to stay. [We’ll focus] on what distinguishes us and we’ll match whatever we can match.”
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