In the monograph on his book, Good to Great, author Jim Collins pointed out that the “big thing” for a truly great company is neither a single innovation nor one grand plan. Instead, it’s the underlying flywheel architecture, properly conceived, built over time, slowly gaining momentum, and eventually breaking through.
At Alibaba’s Investor Day on September 28, Lazada Group’s chief executive officer Li Chun cited this flywheel concept as a way of reiterating the company’s long-term strategy of building a healthy sustainable business by investing in technology infrastructure and logistics capabilities.
As Alibaba’s flagship platform in Southeast Asia, Lazada wields the competitive advantage of tapping into two decades of experience and cutting-edge technology from the world’s most successful eCommerce player. What matters most, Li said, is creating real value for consumers, brands and sellers across the region as the company builds to last.
Some key highlights from Investor Day:
Strong sustainable growth momentum in the past year
With a culturally diverse population of more than 650 million and a rapidly digitalising economy, Southeast Asia is fertile ground for eCommerce. During the COVID-19 pandemic, digital adoption surged in the region; brands and sellers raced to onboard Lazada’s platform at an unprecedented pace. In the 12 months ended July, Lazada had more than 80 million annual active consumers, and active monthly users topped 100 million in July. Year on year, its quarterly order volume has doubled for the past three years.
Moreover, key performance metrics illustrate strong growth momentum. With the time that users spend on the Lazada app and purchase frequency increasing year-on-year by 20 per cent, the platform is demonstrating that it is enabling businesses to grow. The number of sellers generating more than USD 5,000 a month in sales has more than doubled. Gross merchandise value growth year-on-year per marketing dollar is 90 per cent, reflecting how smart algorithms are enabling an effective marketing model and achieving scalable efficiencies.
“As a result of our data-driven approach, only a small proportion of our overall gross merchandise volume (GMV) is driven by subsidies,” Li said. “Minimal marginal costs mean our business model is both scalable and sustainable. Strong fundamentals, dedication and a customer-first mindset, all contributed to Lazada being a quality platform, with both quality users and supply.”
The Tech Advantage
When Li joined Lazada in 2017, his first priority was to transform its product and technology architecture, cognizant that it would be the main engine of the company’s growth. Since then, Lazada has, among other things, revamped its core eCommerce platform, consumer app, seller centre, as well as its AI and recommendations engine. Lazada’s tech architecture is key to improving the experience of users, partners, sellers and brands.
Notable examples include how Lazada’s artificial intelligence technology effectively matches the right products to the right consumers at the right price point, while its proprietary operating data dashboard provides sellers and brands with real-time, actionable insights on buyers’ preferences and business performance, allowing them to react smart and pivot quickly. Lazada Sponsored Solutions, launched earlier this year, further equip merchants with a suite of marketing tools, from on-site ads to offsite affiliate marketing, to better reach potential customers.
The Logistics Differentiator
Logistics is critical to the eCommerce value chain, especially in Southeast Asia with its geographical vastness and diversity. Lazada has the region’s largest, most intelligent integrated logistics and supply chain network for eCommerce. Today, its network across these six countries includes fulfilment centres sited on more than 300,000 sqm of land, over 15 sortation centres, and close to 400 pick-up and delivery hubs. All these are powered by a data-driven, smart routing algorithm, enabling the company to meet the surging demand of Southeast Asia’s flourishing eCommerce industry. More than 85 per cent of total parcels delivered are now sorted by Lazada’s proprietary network.
With e-logistics still in its early days in Southeast Asia, Lazada is just only starting to see how smart logistics and network control can empower businesses and give customers a better shopping experience. Logistics is a game of scale – the wider the network, the more cost efficiencies can be achieved through network synergies, and the better the experience for customers.
The Commitment to Southeast Asia
Li concluded his presentation by declaring the commitment of Lazada’s financial, people and technology resources to the region. Execution and innovation are of the utmost importance.
Lazada is fully backed by Alibaba Group, whose vision is to be a company that lasts for 102 years, with Southeast Asia being a the key pillar of its globalisation strategy.
“We are playing the long game,” he said. “This is not a fight over the next four or eight quarters. It’s a battle spanning the next three, five and even eight years. We are here to stay.”
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