Singaporeans are no strangers to e-commerce and online shopping, especially over the past year.
Due to the Covid-19 pandemic, Singapore witnessed an e-commerce boom, with consumers buying everything from groceries to home appliances online.
When it comes to e-commerce marketplaces, two platforms, Lazada and Shopee, reign supreme.
Singaporeans would also be familiar with the two e-commerce platforms vying for customer attention, each of which offers more luxurious deals or games to keep customers coming back.
Lazada shopping festivals like the 11.11 and 12.12 campaigns regularly manage to generate a considerable amount of interest from customers. Many would also remember Lazada’s iconic 11/11 ad. led by Korean idol Lee Min Ho.
However, not many know that when Shopee first entered the market in 2015, Lazada was already the leading e-commerce platform in the region.
In the first quarter of 2021, Lazada was classified as second ecommerce site by iPrice after Shopee, and averaged 7,296,700 monthly web visits.
|Businessman||Monthly web visits|
Singapore’s Top Ecommerce Players and Their Monthly Web Visits (Q1 2021) / Statistics from iPrice
According to Crunchbase data, Lazada has raised a total of $ 4.2 billion in nine funding rounds.
We take a look at Lazada’s milestones and how it evolved from a fledgling e-commerce platform to a major player in Southeast Asia (SEA).
Achieve 1 billion dollars in sales in 4 years
Lazada was founded by Maximilian Bittner with the backing of Rocket Internet in 2012. Rocket Internet is a German incubator that creates companies that copy the business models of successful US tech companies in emerging markets.
Maximilian Bittner, Former CEO of Lazada Group / Image Credit: Financial Times
Maximiliano intended to establish Lazada as the “Amazon of Southeast Asia,” while taking advantage of Amazon’s then weak presence in the region.
In 2012, the site first launched in Malaysia, Thailand, Indonesia, the Philippines, and Vietnam, with a business model of selling inventory to customers from its own warehouses.
Later, it added its marketplace model in 2013, where multiple vendors can come together to sell their products or services to a customer base.
By 2014, the market accounted for 65 percent of Lazada’s sales. That same year, it expanded to Singapore.
According to Technology in Asia, Lazada recorded more than US $ 350 million in consumer purchases in 2014. This was higher than the US $ 89 million in 2013.
The growth was primarily driven by the Lazada market launch, and Maximilian told Tech in Asia in 2015 that market vendors are a “central driver of growth” at Lazada.
In 2015, Lazada said he recorded a total of US $ 1.3 billion Annualized Gross Merchandise Value (GMV) in its six markets in SEA, making it the largest e-commerce player in the region.
How Lazada grew up so fast
Image Credit: Lazada
Lazada’s rapid growth can be attributed to several factors.
For one thing, Lazada had the first-mover advantage when it first launched in 2012, as large, Amazon-style e-commerce sites were rare in SEA.
After gathering its critical mass of users, it was also able to innovate and improve the services it provided.
The world of e-commerce never slows down, and if products are not delivered to customers in a timely manner and on such a large scale, an e-commerce business is bound to lose customers.
Lazada works with third party contractors to develop its own logistics service Lazada eLogistics (LEL). The team behind LEL connects the region with Lazada’s logistics partners.
Image Credit: FOCUS Magazine
Using leading technologies and Lazada’s robust modular infrastructure means fulfilling orders on time and being able to provide services such as guaranteed next-day delivery, real-time tracking, and end-to-end cross-border logistics.
Growing a customer base is one of the main goals of any e-commerce business. This has led Lazada to create affiliate programs. Under this program, users who promote specific products assigned by Lazada will earn a commission if the transaction for that product is successful.
Image Credit: Lazada
This provides incentives for customers to promote products, while helping Lazada drive sales.
In addition, in its early days, Lazada has always been ahead of its competitors in creating sales events. In 2017, Grupo Lazada generated a GMV of US $ 250 million from its 12/12 sale only.
During the 11/11 sales last year, he saw more than 40 million users and 400,000 brands and sellers participating in the one-day sales event throughout the region.
“Shortly after we started the campaign at midnight, we were already exceeding $ 100 million in sales, in less than half the time we took last year,” said Chun Li, CEO of Lazada Group.
Be acquired by Alibaba Group
Image Credit: CNBC
In April 2016, Alibaba made a total investment of about Billion dollars in Lazada, in an agreement that made him the majority shareholder of the e-commerce platform.
It included US $ 500 million in newly issued capital stock, as well as the purchase of existing shares from Lazada shareholders, valuing the company at US $ 1.5 billion.
Rocket Internet, Tesco and Kinnevik said they had sold some of their Lazada shares to Alibaba as part of the transaction.
According to Technological crunch, Rocket Internet sold a 9.1 percent stake for $ 137 million. Meanwhile, Tesco sold an 8.6 percent stake for $ 129 million and Kinnevik parted ways with a 3.8 percent stake for $ 57 million.
By investing in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside of China, a proven management team, and a solid foundation for future growth in one of the most promising regions for e-commerce at the global level. world.
Michael Evans, President of Alibaba
The following year, he announced a deal to pay close to a billion dollars increase your stake in Lazada from 51% to 83%, raise the company’s valuation to US $ 3.15 billion.
The deal saw Alibaba buy shares of existing backers. Singapore sovereign wealth fund Temasek and Lazada’s management team are the only investors who held their shares.
For 2018, Alibaba announced still another investment of US $ 2 billion in Lazada, which meant that it invested a total of US $ 4 billion in the e-commerce site.
Along with the new funding, Alibaba also said that it appointed a new CEO for the company. Maximilian Bittner, who had been Lazada’s CEO since 2012, was succeeded by Lucy Peng, Alibaba’s co-founder and then Lazada’s president.
After the acquisition, conflicts and disagreements quickly erupted. According to KrAsia, after its funding in 2018, Lazada had to clean up your internal organization first, before countering competitors like Shopee.
Sellers in Southeast Asia also found that the backend of Lazada’s interface had become almost a replica of Taobao’s overnight, causing a lot of confusion.
The acquisition by Alibaba had also led to many members of Lazada’s initial European team, including Lazada co-founder Charles Debonneuil and chief marketing officer Tristan de Belloy, leaving the company.
How he was overtaken by Shopee
Image Credit: Inside Retail Asia
Lazada was already a leading e-commerce platform in the region when Shopee first entered the market in 2015.
However, Shopee quickly went from being a new entrant to taking the crown as the most visited e-commerce platform in Singapore for the second quarter of 2020. How did this happen?
For starters, Shopee took a different strategy early on by launching as an app in the first place to take advantage of SEA’s high mobile penetration rate. He noted that mobile devices, not desktop computers, are the main battlefield for e-commerce going forward.
He also took the tactics Lazada took and improved upon them.
Lazada saw the success of entertainment features on Alibaba’s app and launched ‘Laz Live’ in June 2019, allowing sellers and guest hosts to run live streaming shows to interact with their users.
Called “Shoppertainment” by Lazada, this feature was launched in Thailand, the Philippines, and Malaysia.
In the same month, Shopee released the same feature – Shopee Live – which covered the same markets as Lazada and more.
Additionally, while Shopee took into consideration the trends and cultures of each market it entered, Lazada tried to bring to Singapore what worked in China for Alibaba.
The China Playbook in Lazada remains untested in SEA. Some strategies include temporary stops of free shipping in some markets that led merchants to other sites and attempts to promote bulk purchases, sources saying.
There is still growth potential
A joint study between Google and Temasek Holdings in 2019 found that despite e-commerce growth in the region, online retail makes up less than 2.5 percent of SEA’s total retail and accounts for only one percent of total retail sales.
Considering the size of the SEA market, this is quite low compared to Europe and North America, where online retail accounts for six to eight percent of the total revenue generated by retail.
However, e-commerce platforms in Singapore recorded a 23% double-digit growth in total web visits during the first six months of 2020, according to iPrice. Singaporeans spent an average of S $ 113 on a single online transaction from January to June 2020.
Now that Singaporeans are used to the convenience and efficiency that e-commerce brings, it is highly unlikely that they will go back to a purely retail model.
Instead, we will continue to see new uses for e-commerce, and the demand for e-commerce and its subsidiary services will continue to increase.
This, when combined with Alibaba’s endorsement of Lazada, gives you the potential to continue developing new features and functions that are tailored to the needs of your SEA users.
In addition, Lazada currently has a large amount of user data that he can capitalize on to make better decisions regarding the development and marketing of the platform.
All of these factors allow Lazada to be well prepared to continue an upward growth trajectory in Singapore and the region.
Featured Image Credit: Easy 2 Digital