Lazada Indonesia co-CEO Florian Holm shares what the marketplace has learned since launching in Southeast Asia’s largest market four years ago. These are the most important highlights:

1. Growth lies outside Greater Jakarta

Florian: Growth was seen when we began to extend our free shipping outside of Greater Jakarta. 

Good to know:

  • LEX (Lazada Express) – the company’s 2 – 3 year old logistics arm – subsidizes costs for lower shipping costs and allows them to offer free shipping to approximately 30 cities outside Greater Jakarta.
  • The company has also extended cash on delivery payment option and created initiatives to aid social commerce.
  • Logistics companies and ecommerce solutions providers, like aCommerce, have launched over 10 hubs in cities such as Medan and Jayapura to shorten the last mile process and cut down cash-on-delivery reconciliation. [source]

 

2. Logistics is still the bottleneck

Florian: I think logistics is the biggest challenge; everything else comes afterward. Logistics is not discussed much because it’s a long-term game. You need to be cheap, reliable and fast. If you take 10 days to ship, customers might go to other platforms even though shipping costs more.

Good to know:

  • President Joko “Jokowi” Widodo has a goal of turning Indonesia into the biggest digital economy of the region by 2020 with a targeted value of $130 billion. The government plans to improve eight sectors in the country, including logistics. [source]
  • “In terms of logistics, this is interesting, because we have already decided to reposition [state-owned postal company] Pos Indonesia as a logistical platform for Indonesian ecommerce,” said Indonesia Communications and Information Minister Rudiantara. [source]

 

3. Ecommerce will grow, but there will be fewer players

Florian: I also think that like in every other market, there will be consolidation. There will be fewer players as time goes by.

Good to know:

  • Lazada acquired Singaporean e-groceries startup RedMart to prepare for Amazon’s arrival in Southeast Asia, namely to compete with Amazon Fresh.
  • While Indonesia has Southeast Asia’s highest number of startups, it also faces a big gap in funding. [source]
Indonesia Ecommerce Landscape

ECOMScape: Indonesia gives a snapshot of the country’s ecommerce ecosystem.

4. Lazada is neck to neck for market share

Florian: We have run the first 700 meters, I don’t care for now if I’m only ahead by a little.

Honestly, it’s not bad to be neck and neck with your competition. That inspires you.

Good to know:

  • MatahariMall.com, Blibli.com and Lazada Indonesia have similar traffic numbers per month – deep pockets mean more marketing spend to acquire customers.

ecommerceiq-indonesia-b2c-traffic

  • MatahariMall.com received $100 million in funding in October.

5. It’s too early for brick and mortar retail disruption 

Florian: We are too small right now to make the big retail chains feel it. But maybe the effects will be felt in two or three years?

Good to know:

  • Ecommerce penetration is now around 1 percent in Indonesia, as reported in that Google-Temasek report but expected to grow. Its value tripled 3X since 2013.
  • It’s like Amazon [in the USA]. In the first two, three years they were okay, but in five years, bookstores actually started closing. It took Amazon 15 years to do that.

 

What do you think?

The original interview can be found on Jakarta Globe and published November 29.

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