Lazada is the leading shopping and selling destination to target South East Asia.
Retail in Asia has met Duri Granziol, Director of Lazada Indonesia, to understand the challenges, which brands face in the emerging markets in South East Asia, and in particular in Indonesia and the Phillippines.
RiA : What are the challenges that brands face in those markets, which bring them to choose Lazada?
Duri : Brands interested in targeting South East Asia first launch online. Typically, brands explore three options: going with a wholesale player, going with a market place such as Lazada or Alibaba, or creating their own .com.
Creating your own .com is more ambitious and it requires huge investments, which go beyond building the website. Brands can easily build an e-commerce website, but how to bring people to the website, this is the challenge.
Unless, you are selling something specific, which customers cannot find elsewhere, you are a small shop next to a shopping mall. Either people know your shop, or you will be basically just one in the thousands shops in the city, so on the internet.
When people look for products without having any preference or idea, they go to a mall, and if you are not in there, you will miss your chance. In an online environment, those people go to market places and search per category.
Customers who go to Lazada for instance, do not search per brand, they search for category, and if you are not there, it is very hard to target those customers.
Additionally, a brand, which decides to open its own website will have to deal with high marketing costs to bring traffic to the website, with Lazada, those marketing costs are reduced as we work as a group. This is a massive advantage.
In the countries we serve, Infrastructures are a huge obstacle. Indonesia, for instance, has thousands of islands, as well as Philippines, and you need to deal with that, 50% of our orders are done ourselves.
Another advantage of going with Lazada is the customer service management, which is internal for us makes it easier to reply to all questions regarding products, delivery, and logistics issues.
Furthermore, payment, in countries like Indonesia, present some difficulties. Credit card and online banking penetration are still low or COD remains the lion’s share of payment methods and this it’s pushed us to develop a business model for it.
Cash on delivery is the solution for markets, in which trust is hard to build, and other payment services are not very well established.
Concisely, Lazada is not only a market place, Lazada means experience in managing the customer journey and the different stakeholders involved in it.
Ria : In your experience brands approaching you, they want to simply test the market to later go offline, or are they willing to stay with Lazada?
Duri : Clearly, brands that approach us are interested in the markets themselves. Markets like Indonesia and Philippines, for instance, are the future with over 500 millions of people. Huge countries with growing middle class, and a GDP growth of 6% per year, in Indonesia.
Of course, those countries present obstacles, but they also offer incredible opportunities, which brands do not have in countries like Europe for instance.
Going online is definitely a way of testing, but even if brands are launch offline afterwards, why would not they do online anymore?
In these markets customers are all tech savvy. In Indonesia a smartphone is below 100 US dollars, and today we have already a population of 100 millions connected consumers, therefore, and if you sell online, why would you go offline?
Moreover, retail infrastructure are only available in the main cities and 50 millions still live in rural areas, where shopping malls are inexistent and it will take years to build one.
Even in China, cities tier 2-3 live on online retail as the development of the retail infrastructure has been quite slow. Actually, its lack has boosted the proliferation of such a sophisticated online retail landscape.
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Ria : How about the more reluctant premium brands, do they approach you?
Duri : I would say, they were reluctant. Now they have realized we are an opportunity more than a threat. Next year you will see very well established brands joining Lazada to target markets like Indonesia and the Philippines, where they recognize the difficulties and the need for a local partner.
Ria : I always ask this question to offline retailers, and they still see the physical store in their future plans. How about the future of the physical store through an online retailers’ perspective?
Duri : Physical store will still be there, sharing the scene with online retailers. Nobody knows the share, 60-40% probably. But physical store will preserve their role, under which form and accomplishing which new function I do not know, but omnichannel will dominate retail in a format with more blurred boundaries between online and offline.
Ria : Alibaba and Amazon have announced their plan for a physical mall. Do you envision it in Lazada’s future?
Duri : Currently, I would say there is no reason for Lazada to go offline. We work with retailers, we have built strong partnerships, which allow us to focus on our core activity, which is on the internet.