Singaporeans are no strangers to e-commerce and online shopping, especially over the past year.
Due to the Covid-19 pandemic, Singapore witnessed a boom in e-commerce, with consumers shopping from groceries to appliances online.
As for e-commerce markets, they dominate two platforms: Lazada and Shopee.
Singaporeans would also be familiar with the two e-commerce platforms that would compete for customer service, each offering more luxurious offers or games for customers to return to.
Lazada’s commercial festivals, such as the 11.11 and 12.12 campaigns, regularly manage to generate great customer interest. 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 Singapore second place in e-commerce by iPrice after Shopee, and recorded an average of 7,296,700 monthly web visits.
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In accordance with Crunchbase data, Lazada has raised a total of US $ 4.2 billion in nine rounds of funding.
Let’s take a look at Lazada’s milestones and how it evolved from being a fledgling e-commerce platform to being one of the leading players in Southeast Asia (SEA).
Achieve sales of 1 billion US dollars in 4 years
Lazada was founded by Maximilian Bittner with the support of Rocket Internet in 2012. Rocket Internet is a German incubator that builds companies that copy the successful business models of American technology companies to emerging markets.
Maximilian intended to establish Lazada as “Amazons of Southeast Asia“, Taking advantage of the weak presence of Amazon in the region.
In 2012, the site was first launched in Malaysia, Thailand, Indonesia, the Philippines and Vietnam, with a business model of selling inventory to customers from its own warehouses.
He later added his market model in 2013, where several vendors can come together to sell their products or services to a customer base.
In 2014, the the market accounted for 65% of Lazada sales. That same year, it expanded to Singapore.
In accordance with Technology in Asia, Lazada recorded more than US $ 350 million in consumer purchases in 2014. It increased from US $ 89 million in 2013.
Growth was driven primarily by the launch of the Lazada market and Maximilian told Tech in Asia in 2015 that market vendors are a “main engine of growth” in Lazada.
In 2015, Lazada said he recorded a total 1.3 billion US dollars of annualized gross commodity value (GMV) in its six SEA markets, making it the largest e-commerce player in the region.
How Lazada grew so fast
Lazada’s rapid growth can be attributed to several factors.
On the one hand, Lazada had the advantage of being the first engine when it launched in 2012, as Amazon’s large e-commerce sites were uncommon in SEA.
After classifying 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 goods are not delivered to customers on time and on such a large scale, an e-commerce business will 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.
The use of state-of-the-art technologies and Lazada’s solid 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 led Lazada to create a file affiliate program. Under this program, users who promote specific products that Lazada assigns to them will get a commission if the transaction for that product is successful.
This provides incentives for customers to promote products, while helping Lazada drive sales.
In addition, in its early days, Lazada has been consistently ahead of its competitors in creating sales events. In 2017, the Lazada Group generated one GMV of $ 250 million since its sale on 12.12 ground.
During last year’s 11.11 sales, it was seen more than 40 million users and 400,000 brands and vendors participating in the one-day sales event across the region.
“Shortly after starting the campaign at midnight, we were already surpassing US $ 100 million in sales, in less than half the time it took us last year,” said Chun Li, CEO of the Lazada Group.
Achieved by the Alibaba Group
In April 2016, Alibaba made a total investment of approximately 1 billion US dollars in Lazada, in an agreement that made him the controlling shareholder of the e-commerce platform.
It included US $ 500 million in newly issued share capital, 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.
In accordance with Technical crunch, Rocket Internet sold a 9.1% stake for 137 million US dollars. Meanwhile, Tesco sold an 8.6% stake for $ 129 million, and Kinnevik parted ways with a 3.8% stake for $ 57 million.
With the investment in Lazada, Alibaba accesses a platform with a large and growing consumer base outside China, a proven management team and a solid foundation for future growth in one of the most promising regions for global e-commerce. .
Michael Evans, President of Alibaba
The following year, he announced a deal with pay about 1 billion US dollars increase its stake in Lazada from 51% to 83%, increasing the company’s valuation to US $ 3.155 billion.
The deal allowed Alibaba to buy shares from existing sponsors. Singapore’s sovereign wealth fund Temasek and Lazada’s management team are the only investors holding its shares.
In 2018, Alibaba still announced it another US $ 2 billion investment in Lazada, which meant he invested a total of US $ 4 billion in the e-commerce site.
Along with the new funds, Alibaba also said it has appointed a new CEO of the company. Maximilian Bittner, who was CEO of Lazada since 2012, was succeeded by Lucy Peng, co-founder of Alibaba and then president of Lazada.
After the acquisition, conflicts and disagreements quickly erupted. According to KrAsia, after its funding in 2018, Lazada had to do it clean up your internal organization first, before counteracting competitors like Shopee.
Vendors in Southeast Asia also found that overnight, the background of the Lazada interface had become almost a replica of Taobao’s, which caused a lot of confusion.
The acquisition of Alibaba also caused many of Lazada’s first European teams, including Lazada’s co-founder Charles Debonneuil and Belloy’s director of marketing Tristan, to leave the company.
How he was overtaken by Shopee
Lazada was already a leading e-commerce platform in the region when Shopee first entered the market in 2015.
Still, Shopee quickly went from being a new entrant to taking the crown as the most visited e-commerce platform in Singapore in the second quarter of 2020. How did that happen?
For starters, Shopee adopted a different strategy at first, as it launched as an app to tap into SEA’s high mobile penetration rate. It was pointed out that the mobile (not the desktop) is the main battleground of e-commerce in the future.
He also adopted the tactics adopted by Lazada and improved them.
Lazada saw the success of the entertainment features built into the Alibaba app and launched “Laz Live” in June 2019, which allowed vendors and guest hosts to perform live streaming programs to interact. with its users.
Lazada, called “Shoppertainment”, was launched in Thailand, the Philippines and Malaysia.
The same month, Shopee too has released the same feature – Shopee Live: covered the same markets as Lazada and more.
Also, while Shopee took into account the trends and cultures of each market she entered, Lazada tried to bring to Singapore what worked in China for Alibaba.
He Game book from China to Lazada remains unproven in SEA. Some strategies include temporary stops for free shipping in some markets that led merchants to other sites and attempts to promote mass buying, sources said. dit.
There is still growth potential
A joint study between Google and Temasek Holdings in 2019 it was found that despite the growth of e-commerce in the region, online retail represents less than 2.5% of all SEA retail and only accounts for 1% of total retail sales. detail.
Given the size of the SEA market, this is quite low compared to Europe and North America, where online retail accounts for about six to eight percent of total retail revenue.
However, e-commerce platforms in Singapore experienced double-digit growth (23%) in total web visits during the first six months of 2020 according to iPrice. Singaporeans spent an average of US $ 113 on a single online transaction from January to June 2020.
Now that Singaporeans are already accustomed to the convenience and efficiency that e-commerce brings, it is highly unlikely to return 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, combined with Lazada’s support for Alibaba, gives it the potential to continue to develop new features and functions that will be tailored to the needs of its SEA users.
In addition, Lazada currently has a wealth of user data that can be leveraged to make better decisions about platform development and marketing.
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