Online shopping site Lazada celebrated its first anniversary on Monday and invited members of the press, partners, and suppliers to join the event at Decanter Wine House in Jakarta. CEO Max Bittner was on hand to oversee the festivities and announce the milestones the company has achieved over the year, its outlook, as well as future plans which include a marketplace, mobile apps, and more integrated logistics operations.
Lazada launched in Southeast Asia in April 2012 to bring the proven e-commerce model to the region as part of the Rocket Internet family of companies. Rocket Internet saw an opportunity in regions not yet explored by the major players and decided to go in and establish its own presence in the hopes to own and lead the market. The company operates in Malaysia, Indonesia, Thailand, Vietnam and The Philippines.
Asked why Lazada did not enter Singapore, Bittner said that they wanted to establish on the high growth markets with large populations. Singapore may have a higher propensity to purchase goods online but the five countries present a better launching pad. Eventually they will enter the remaining countries in the region, but for now the focus is on the five countries.
Bittner told DailySocial that entering Indonesia and Southeast Asia a year ago was “absolutely the right decision to make at absolutely the right time. We wanted to come in to the market and grow along with it. If we had entered the region when it’s more mature, that means someone else would have been there first and have the first mover advantage”. The McKinsey alumni has a bullish outlook, “Indonesia is our strongest performing market”, he adds. With a nominal GDP of 6-10% annually, “the middle class is expected to grow from 110 million to 150 million in 2015. That is a super trend”.
Bittner said that a lot of Indonesians are already using the Internet as part of their purchasing decision. With use of 3G expected to grow significantly over the next few years, mobile commerce will make up a large part of e-commerce which is why the company is preparing to launch mobile apps for Android and iOS shortly. According to Lazada Managing Director Martell Hardenberg, mobile customers make up about 10 percent of the company’s transactions and it’s expected to rise along with the adoption of smartphones and tablets in the next few years.
Managing Director Magnus Ekbom was asked why Lazada claims to be the largest online shopping site in the region. He said, “We look at Alexa rankings and we are present in five countries in Southeast Asia, no competitor has that market reach. Lazada has 3000 different subcategories, 20 tablet brands, and we have the largest home & living online shop in the country.” Ekbom added that Lazada Indonesia sees 250,000 visitors per day to its site. As for the overall growth in sales, Lazada claims it’s achieving 20% monthly growth and expects to make $6-7 billion in sales over the next few years. Currently Indonesian sales make up 30% of Lazada’s regional revenue.
This growth is what prompted investors such as Summit Partners, Kinnevik, JP Morgan, and Tengelmann to pump tens of millions of dollars each to spur further expansion and growth. Back in January, German retail group Tengelmann invested nearly $20 million even after Lazada received $26 million from Summit Partners in December of last year. Prior to that, Swedish retail group Kinnevik put in $40 million and JP Morgan reportedly gave Lazada up to $50 million.
Lazada is currently building its own logistical operations. The company already controls its supply chain and it wants to ensure it has an end to end shopping solution for consumers which means it has to rely on its own delivery channel. “You will see many Lazada motorbikes on city streets in the coming months. We will have our own delivery fleet made up of motorbikes to get our goods to customers”, Bittner said to DailySocial. He did not rule out big trucks and cargo planes but they’re not in the immediate plans.
Right now Lazada Indonesia’s warehouse is located in Jakarta as 60% of its transactions are done in Java. Eventually the company will explore decentralizing its supply chain and establish warehouses in other areas to maximize reach and reduce delivery times. “Our market right now is 60% in Java but other islands are catching up. We’re definitely looking to grow in Sumatra since Medan is a big market for us. We’re interested in Kalimantan and Sulawesi as our next major markets”, adds Bittner.
Lazada will also introduce a marketplace to allow customers and partners to set up their own shop. VP marketing Rizki Suluh Adi explained that the decision was made to accelerate the adoption and acceptance of e-commerce in Indonesia as well as in the region. The company is currently talking to dozens of small to medium businesses in building the Lazada marketplace. Details have yet to be announced but they are expected to surface shortly.