E-commerce and online shopping are no stranger to Singaporeans, especially in the past year.
Due to the Covid-19 pandemic, Singapore experienced an e-commerce boom with consumers buying everything from groceries to home appliances online.
When it comes to e-commerce marketplaces, two platforms dominate – Lazada and Shopee.
The Singaporeans are also familiar with both of the ecommerce platforms that vie for customer attention, each offering more generous deals or games to get customers to come back.
Lazada's shopping festivals such as the 11/11 and 12/12 campaigns regularly manage to arouse considerable customer interest. Many would also remember Lazada's iconic 11/11 advertisement hosted by Korean idol Lee Min Ho.
However, not many know that when Shopee first launched in 2015, Lazada was already the leading e-commerce platform in the region.
In the first quarter of 2021, Lazada was ranked Singapore's second e-commerce site after Shopee by iPrice, with an average of 7,296,700 monthly web visits.
|Dealers||Monthly web visits|
Singapore's Leading Ecommerce Players and Their Monthly Web Visits (Q1 2021) / Statistics from iPrice
According to Crunchbase data, Lazada raised a total of $ 4.2 billion in nine funding rounds.
We take a look at Lazada's milestones and how it has grown from a fledgling e-commerce platform to one of the leading players in Southeast Asia (SEA).
Achieve $ 1 billion in sales in 4 years
Lazada was founded in 2012 by Maximilian Bittner with the support of Rocket Internet. Rocket Internet is a German incubator building companies that copy the business models of successful US technology companies in emerging markets.
Maximilian Bittner, ex-CEO of the Lazada Group / Image source: Financial Times
Maximilian intended to establish Lazada as the “Amazon of Southeast Asia” and at the same time to use Amazon's weak presence in the region at the time.
In 2012, the website was first launched in Malaysia, Thailand, Indonesia, the Philippines and Vietnam with a business model of selling inventory to customers from its own warehouses.
In 2013, it added its marketplace model, where multiple vendors can come together to sell their products or services to a customer base.
By 2014, the marketplace made up 65 percent of Lazada's sales. In the same year it expanded to Singapore.
According to Tech in Asia, Lazada recorded more than $ 350 million in consumer sales in 2014. That was an increase of $ 89 million in 2013.
Growth was mainly driven by the launch of Lazada's marketplace, and Maximilian told Tech in Asia in 2015 that marketplace vendors are a "core growth driver" on Lazada.
In 2015, Lazada announced that it had a total of $ 1.3 billion in annualized gross product value (GMV) across its six markets in SEA, making it the largest e-commerce player in the region.
How Lazada grew so fast
Image source: Lazada
Lazada's rapid growth can be attributed to several factors.
For one, Lazada had the first mover advantage when it was launched in 2012 as large, Amazon-like ecommerce sites were uncommon in SEA.
After gathering her critical mass of users, she was also able to innovate and improve the services she provided.
The e-commerce world is a world that never slows down, and if goods are not delivered to customers on time and on such a large scale, an e-commerce company inevitably loses customers.
Lazada is working with outside contractors to develop its own logistics service, Lazada eLogistics (LEL). The team behind LEL connects the region with Lazada's logistics partners.
Image source: FOCUS Magazine
Using leading technology and Lazada's robust modular infrastructure means fulfilling orders on time and providing 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 primary goals of any ecommerce business. This has prompted Lazada to create an affiliate program. As part of this program, users who promote certain products that Lazada assigns to them will receive a commission if the transaction of that product is successful.
Image source: Lazada
This gives customers incentives to promote products while also helping Lazada increase sales.
In addition, in its early days, Lazada was always ahead of its competitors in creating sales events. In 2017, the Lazada Group earned from the sale on December 12th alone. a GMV of $ 250 million.
During last year's 11/11 sales, more than 40 million users and 400,000 brands and sellers attended the one-day sales event across the region.
"Shortly after we started the campaign at midnight, we have had sales of over $ 100 million in less than half the time it took last year," said Chun Li, Lazada's chief executive officer Group.
Acquisition by Alibaba Group
Image source: CNBC
In April 2016, Alibaba invested a total of around $ 1 billion in Lazada, making it the majority shareholder in the e-commerce platform.
It included $ 500 million in newly issued equity as well as the purchase of existing shares from Lazada shareholders, which valued the company at $ 1.5 billion.
Rocket Internet, Tesco and Kinnevik each said they sold a portion of their Lazada shares to Alibaba as part of the deal.
According to Tech Crunch, Rocket Internet sold 9.1 percent of the shares for $ 137 million. Tesco meanwhile sold 8.6 percent of the shares for $ 129 million, and Kinnevik sold 3.8 percent of the shares for $ 57 million.
With the investment 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 worldwide.
Michael Evans, President of Alibaba
The following year, the company announced an agreement to pay nearly $ 1 billion to increase its stake in Lazada from 51 percent to 83 percent, raising the company's valuation to $ 3.15 billion.
In the deal, Alibaba bought shares from existing donors. The Singapore sovereign wealth fund Temasek and Lazada's management team are the only investors who have kept their shares.
By 2018, Alibaba announced another $ 2 billion investment in Lazada, which meant it had invested a total of $ 4 billion in the e-commerce site.
In addition to the fresh funding, Alibaba has also appointed a new CEO for the company. Maximilian Bittner, who had been CEO of Lazada since 2012, was followed by Lucy Peng, co-founder of Alibaba and then chairwoman of Lazada.
After the takeover, conflicts and disagreements quickly broke out. According to KrAsia, after his funding in 2018, Lazada first had to clean up his internal organization before he could face competitors like Shopee.
Sellers in Southeast Asia also found that the backend of the Lazada interface had become almost a replica of Taobao overnight, causing a lot of confusion.
Alibaba's acquisition had also resulted in the departure of many members of Lazada's original European team, including Lazada co-founder Charles Debonneuil and chief marketing officer Tristan de Belloy.
How it was overtaken by Shopee
Photo credit: Inside Retail Asia
Lazada was already a leading e-commerce platform in the region when Shopee first launched in 2015.
However, Shopee quickly went from being a new addition to the crown of the most-visited e-commerce platform in Singapore by Q2 2020. How did that come about?
To start with, Shopee pursued a different strategy early on, first introducing it as an app to take advantage of SEA's high mobile penetration rate. It found that mobile – not desktop – is the main battleground for e-commerce in the future.
It also took over and improved Lazada's tactics.
Seeing the success of Alibaba's in-app entertainment features, Lazada launched "Laz Live" in June 2019, which allows sellers and invited hosts to conduct live streaming shows to connect with their users.
Called “Shoppertainment” by Lazada, this function was introduced in Thailand, the Philippines and Malaysia.
That same month, Shopee also rolled out the same feature – Shopee Live – covering the same markets as Lazada and more.
Additionally, while Shopee kept in mind the trends and cultures of each market, Lazada tried to bring to Singapore what worked in China for Alibaba.
The China playbook in Lazada remains unproven in the SEA. Some strategies include temporarily suspending free shipping in some markets that drove traders to other sites, and attempts to encourage bulk purchases, the sources said.
There is still potential for growth
A 2019 joint study by Google and Temasek Holdings found that despite the growth of e-commerce in the region, online retail accounts for less than 2.5 percent of total SEA retail and only accounts for 1 percent of total retail sales.
Given the size of the SEA market, this is quite small when compared to Europe and North America, where online retail accounts for around six to eight percent of total retail sales.
However, according to iPrice, Singapore ecommerce platforms saw double-digit growth in total web visits of 23% in the first six months of 2020. Singaporeans spent an average of S $ 113 on a single transaction online from January to June 2020.
With Singaporeans already used to the convenience and efficiency of e-commerce, a return to a pure retail model is highly unlikely.
Instead, we will continue to see new uses for e-commerce and the demand for e-commerce and its ancillary services will continue to grow.
Coupled with Alibaba's support for Lazada, this has the potential to continue to develop new features and functionality that suit the needs of its SEA users.
Additionally, Lazada currently has a wealth of user data that it can leverage to make better platform development and marketing decisions.
All of these factors make it possible for Lazada to be well positioned to continue its growth path in Singapore and the region.
Image source featured: Easy 2 Digital