Business News

Alibaba-backed Lazada partners with Unilever to capture Southeast Asia's online retail growth

Lazada and Unilever tag team it in Asia
Lazada and Unilever tag team it in Asia

Southeast Asia's dominant e-commerce player, Lazada, has joined hands with Unilever in hopes of grabbing a bigger slice of the region's online retail market in fast-moving consumer goods that is projected to reach $25 billion by 2020.

As part of the deal, the two companies will work closely together on supply chain, fulfillment, data, marketing, social commerce and talent development to grow their business' reach in the region.

"The goal is to find better ways to address the exploding middle class across Southeast Asia and communicate directly with them," Maximilian Bittner, Lazada Group's CEO told CNBC about the partnership.

Lazada's fast-moving consumer goods (FMCG) product category grew by 181-percent in 2016 over 2015, making it the platform's strongest growth category. The Alibaba-backed company sells 39 million products across Southeast Asia, including electronics, home products and fashion.

Lazada wants to be a household name
Lazada wants to be a household name

"This will allow us to grow our online sales by three times compared to what we saw in 2015 and 2016," Pier-Luigi Sigismondi told CNBC, adding that Unilever's online sales in Southeast Asia have been higher this month than in the entirety of 2016. Sigismondi cited online tailored marketing as the primary reason.

"Consumer trends are all going online, so the opportunity is exciting."

The data collected by Lazada will allow Unilever to better understand consumer behavior patterns of its consumers and target them individually online.

But, while global consumer products giant Unilever sees e-commerce as the next wave for significant growth in the region, Sigismondi said the deal will also help inform future brick-and-mortar offerings.

The partnership will allow Unilever to test new products before deciding whether to send them offline, while also allowing the company to offer exclusive products to Lazada shoppers.

According to market research by Frost & Sullivan, online sales account for just 2.5-percent of total retail sales in Southeast Asia, compared to more than 12-percent in China.

Alibaba invests in Southeast Asian retailer Lazada
Alibaba invests in Southeast Asian retailer Lazada

This creates both a challenge and opportunity among the countries which include Singapore, Malaysia, Indonesia, Philippines, Thailand, and Vietnam.

For one, logistics and infrastructure are still challenged in the region. Meanwhile less than 7-percent of consumers have credit cards in the region, excluding Singapore and Malaysia.

Unilever's deal with Lazada is similar to a partnership it made in 2015 with Alibaba in China in which it aimed to reach more Chinese shoppers.