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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.

Newly appointed Lazada Indonesia co-CEO Florian Holm announced that Lazada will introduce Alipay to Indonesia in an interview with Tech in Asia.

How Lazada performs in Indonesia concerns the entire group. The archipelago is Lazada’s most important and most challenging market. Following Lazada’s launch in 2012, it faced strong local competitors such as Tokopedia.

Despite the general reputation and numbers suggesting that Lazada is bleeding money, curbing expenses to acquire more customers is not high up in the agenda this year.

Lazada will continue to invest in tech, and its alliance with Alibaba will benefit this goal greatly.

HelloPay is going to integrate with Alipay. It has massively better systems. It’s extremely important to have good fraud detection. – Florian Holm, Lazada Indonesia co-CEO.

Indonesians still prefer to pay cash when their products arrive, but perhaps Alipay will widen the scope of online payments amongst users.

There are no concrete launch dates as of now. Aside from the technical integration, there are also regulatory hurdles to sort out.

Lazada will also focus on operating on a leaner structure within a large ecosystem. This will be done through automation and outsourcing. Some services the company used to do themselves will by handed over to third party providers.

Currently, Indonesia has approximately 1,000 people employed under Lazada. With automation, Holm wants to achieve more transactions with the same amount of people.

China is the role model. It’s huge ecosystem of third party providers operating around a lean infrastructure there.

Currently, Tokopedia is Lazada’s biggest threat, but Amazon’s incoming shadow also looms over them.

Having Alibaba as a partner, combined with a roll-out of Alipay may be able to grant Lazada a secure spot in the cut throat landscape of Indonesia ecommerce, where startups pit against each other to claim the dominant platform. As Holm puts it, “Amazon doesn’t enter to come second.”

A version of this appeared in Tech In Asia on August 4. Read the full version here.