- Speculation about Amazon's entry into Southeast Asia highlights the region's potential for e-commerce, says a Lazada co-founder
- The company is backed by Alibaba, which has invested over $2 billion and owns a controlling stake
E-commerce player Lazada, which is now majority-owned by Alibaba, is confident that its expertise in Southeast Asian markets can counter the looming threat from Amazon's much-anticipated entry into the region, a top executive told CNBC.
Last year, TechCrunch reported that Amazon had planned to launch local e-commerce services in Singapore in the first quarter of 2017. But earlier this year, the news site cited sources and said Amazon's much-anticipated entry was postponed.
Aimone Ripa di Meana, co-founder and chief marketplace officer at Lazada, said the company's on-the-ground knowledge about each of the six regional markets in which it operates, its logistics network and the backing from Jack Ma's Alibaba Group will be advantageous in the face of competition.
"We feel very confident about what we've built so far — we have a very unique approach to business," Meana said. "Having built teams that have been with us for a long time that function in a very organic way that know the markets, know the complexities that are in each market, which can't easily be replicated. I don't think knowing how to do (business in) Singapore is in any way relevant to how you build your business in the Philippines or Indonesia."
He explained that the differences in each Southeast Asian market went beyond people and languages spoken. It involved things including the infrastructure set-up in each country to facilitate logistics and delivery, how the syntax of each local language affected the way search worked and also the behaviors of small and medium enterprises in listing their products and structuring their catalogs.
But the region is still lucrative for e-commerce as millions of first-generation internet users embrace online shopping. A frequently cited study from Google and Singapore investment firm Temasek Holdings predicted the region's internet economy to grow to $200 billion by 2025, driven mostly from growth in e-commerce. Meana said Alibaba's investments into Lazada, and the speculation surrounding Amazon's eventual push into the market, underscored the potential of the region.
"We are in a market that is at the beginning of its curve," said Meana. "While obviously the numbers are vast and exciting, I think the opportunities that lie ahead are much larger than anything that's been built behind us."
To be sure, Amazon has aggressively invested in markets outside the U.S. to grow its stake. For example, reports in India said Amazon has invested more than $2 billion to-date to compete with local e-commerce players Flipkart and Snapdeal.
Earlier this year Alibaba upped its stake in Lazada from 51 percent to about 83 percent, with over $2 billion invested into the company. Its affiliate Ant Financial, earlier this year, merged with Lazada's helloPay platform to bolster payments processing capabilities.
The backing allowed Lazada to move into Alibaba's ecosystem and make use of all of the innovation and features for sellers on their platform, said Meana. Those include offerings like a business intelligence portal and new promotional features that allow sellers to create shop decorations in the same way they would've done for an offline business.
To offer consumers more variety, Lazada launched its Taobao Collection store that curates and sells about 4 million products in English from Alibaba's Taobao marketplace — which is inaccessible to many non-Chinese speaking consumers in Southeast Asia.
Logistics operations, which Meana said is a key differentiator for Lazada, also benefit by tapping into Alibaba's technology, processes and approaches to delivery. Currently, Lazada has about 100 logistics partners in the region and its operations are split into two areas of business: last-mile delivery and a control tower that coordinates the most effective means of delivering parcels from merchants to customers.
"For a consumer or merchant, this is completely seamless. They don't need to make decisions or choices — all that is done by us, and in turn what that means is, a number of players that were maybe too small to catch the trend, that weren't able to enter e-commerce, are now being able to leverage our infrastructure and be part of this phenomenal growth that we're seeing in e-commerce," he said.
Delivery speed is another way that many online retailers attempt to differentiate themselves. For a region like Southeast Asia, Meana explained that fast delivery was not always feasible. That is, cross-border e-commerce, a growing part of Lazada's business, means consumers are more willing to wait for their parcels, he said.
Ultimately, Meana said, it's about maintaining a balance between being local and nimble — required for most online marketplaces — in multiple countries and having a regional structure to grow the business.
"That's clearly one of the great learnings of having built Lazada over the past five years — the interplay between having this regional structure and the economies of scale and scope to get there and then maintaining the nimbleness of the market," he said.
"It's not an easy balance, but it's something that we've invested a lot of time to get to and I don't think it's acquired or built in a day."