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Lazada generated $250 million in GMV for its annual 12.12 Online Revolution campaign, effectively doubling the results of 11.11 Single’s Day a month earlier ($123 million GMV). The company’s latest success is seen as affirmation for the ecommerce potential in the region or “a major highlight of consumption growth”, especially for the 3,000 brands selling on the platform.

End year sales mean greater discounts and a common route taken by most brands to increase sales and conversions. However, data analytics platform BrandIQ found some brands from the ‘Baby & Kid’ category on Lazada Indonesia actually took a different approach for the region’s biggest online shopping event.

Six popular baby food brands in this category actually lowered their discounts on the site five days before 12.12, meaning the product was actually more expensive during 12.12 than previous periods.

Some lowered theirs as close as a day before the sales event such as Dancow, a milk brand for children from Nestle, that decreased the discount percentage percent discount on its products by almost 14%.

And they weren’t the only brand that adopted this pricing strategy, the brand Cerelac also decreased discounts even more from 8.52% off to only 5.2% off on average.

Other brands such as Nutren and Nutrilon maintained a relatively stable discount strategy during the sales period.

Only two out of six baby food brands actually increased their discount during the 12.12 campaign

This behavior begs the question, why are certain brands countering the entire concept of a sales campaign by offering more expensive products?

The most likely reason is that these brands see the event as an opportunity to increase margins by leveraging the high traffic flowing into the marketplace with the hype and marketing efforts surrounding the shopping event.

Given that baby food is a relatively price inelastic product, meaning that demand is unaffected by price as babies need to eat, these brands have more leeway with not participating much in the discounts party but still reap the benefit from the online sales.

What does this mean for brands?

Brands entering the online space are often plagued by the pressure to enter price wars to win market share. This means lowering prices is almost a must for brands, especially during the sales period.

It was reported a few years ago that merchants on Tmall in China said that if they don’t price products lower than in stores on rival sites, Alibaba pushes them down their ranks, effectively limiting their access to hundreds of millions of potential customers. Alibaba didn’t comment.

However, as shown by the data above,

Brands can actually avoid price wars and hits to margins by understanding the nature of their product.

These two different strategies highlight an important lesson for companies during promotional periods, while most ecommerce players utilize heavy discounts to maximize sales, revenue can also be made by doing the opposite and lowering discounts.


HOW IS YOUR BRAND PERFORMING ON SOUTHEAST ASIA’S TOP MARKETPLACES?

Here’s what you need to know today.

1. Lazada Indonesia to on board SMEs

The Indonesian unit of Lazada said it plans to focus on adding small merchants to its online marketplace, emulating the strategy of Alibaba Group Holding. According to Florian Holm, co-CEO at Lazada Indonesia, Lazada also plans to enable some merchants to sell products to shoppers in China through Alibaba’s Taobao ecommerce platform.

Read the rest of the story here.

 

2. Alibaba’s robot maker raises funding

Geek+’s automated pods look like those from Kiva, the American startup snapped up by Amazon for US$775 million in 2012. The larger Geek+ bot can transport 1,000kg, while the smaller one scoots up to 100kg. They’re designed for any warehouse or factory where bits and pieces need to be moved to be accessed by human workers.

The startup says it has over 300 robots already in commercial use across China.

Its $14 million round was led by Vertex Ventures, a spin-off from Singapore’s state-owned sovereign wealth fund, Temasek.

Read the rest of the story here.

 

3. Amazon will now tell Prime members what to wear via “Outfit Compare” 

In the latest version of the Amazon shopping app, Prime members will find “Outfit Compare” in the sidebar navigation under the “Programs and Features” section.

 Outfit Compare prompts shoppers to share two photos of themselves wearing two different outfits they’re deciding between. A minute later, the user will get a response from an Amazon stylist who will tell them which outfit looks better. This determination will be made based on a number of factors, including how the clothes fit, what colors look best, how they’re styled, and what’s on trend.
Read the rest of the story here.

 

4.  Community Chatter: Adidas focuses on online operations

Source: aCommerce Group CEO, Paul Srivorakul’s Linkedin account

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.

Check out these ecommerce headlines before you start the work day.

1. Kaymu, Rocket Internet’s online marketplace, is shutting down in the Philippines, Myanmar, and Cambodia. 

Daraz operates as a “managed marketplace” similar to Lazada where sellers are curated and authentic products guaranteed. Read the rest of the story here.

 

2. Thailand’s Washbox 24 will attempt to fill the void left by recently ceased startup My Laundry

WashBox24 tackles the logistical pain point by implementing a hybrid locker and delivery system. Read the rest of the story here.

 

3. FMCG, fashion spur Lazada Indonesia growth

eCommerce group Lazada Indonesia says its current volume growth has accelerated to more than 150 per cent than at the same time last year. Key contributing categories are FMCG and fashion, which are both growing more than three times as much as last year. Also, about 80 per cent of the orders are via mobile devices. Read the rest of the story here