Alibaba’s Lazada braces for South-east Asian war with Amazon
SINGAPORE — Alibaba Group Holding and Amazon.com are about to clash in South-east Asia. And Singapore-headquartered Lazada Group, which Alibaba bought a controlling stake this year for US$1 billion (S$1.44 billion), will be right at the heart of that conflict.
SINGAPORE — Alibaba Group Holding and Amazon.com are about to clash in South-east Asia. And Singapore-headquartered Lazada Group, which Alibaba bought a controlling stake this year for US$1 billion (S$1.44 billion), will be right at the heart of that conflict.
South-east Asia’s largest e-commerce site is rolling out a series of initiatives in anticipation of the United States giant’s entry next year. It is expanding its delivery network within the region and beyond, via partners in China and Korea. It is on the prowl for investments and acquisitions to shore up its supply chain. And it intends to delve deeper into online groceries next year, a notoriously difficult market it got into by buying RedMart. That is because Lazada’s home turf is shaping up to be the next battleground for Alibaba co-founder Jack Ma and Amazon chief executive officer Jeff Bezos.
While still lacking the transport and payments infrastructure crucial to the widespread adoption of e-commerce, the region has become the world’s fastest-growing Internet arena, with a combined populace of 620 million people getting more comfortable with online shopping.
“It is a jungle out here,” Lazada CEO Maximilian Bittner said when asked about an incursion by the world’s largest online retailer. “We are looking forward to seeing how they will differentiate themselves.”
Now that Alibaba has established its dominance of China and Amazon has taken the lead in the US, both are looking to make their mark overseas. The American company in particular has made huge strides in India.
Alibaba took control of Lazada from Rocket Internet in what remains its largest overseas move to date.
The company Mr Bittner started in 2012 is now pivotal to quickening the Chinese e-commerce giant’s so-far tentative steps abroad, and fulfilling Mr Ma’s ambitions of becoming a truly global business.
Amazon meanwhile has not voiced its intentions for South-east Asia, but the industry expectation is that its constant quest for growth will lead it there by next year. Techcrunch reported in November the company is likely to bring its Prime delivery service and Amazon Fresh to Singapore in the first quarter, using the Republic as a springboard for the region.
“Both of them will want to dominate South-east Asia,” said Mr Thompson Teo, an associate professor at NUS Business School. “Alibaba has acquired companies to shorten the learning curve and grow faster. It is going to give Amazon a good fight.”
Alibaba’s experience quashing Amazon in China may yet prove indispensable. Central to Lazada’s effort is building a system that can deliver goods into South-east Asia from merchants in other countries, a cross-border model akin to Alibaba’s.
Lazada covers six countries — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — and runs 12 warehouses and 92 distribution centres from which it conveys goods directly to buyers. It counts Kerry Logistics Network and DHL in Thailand and JNE Express in Indonesia among its more than 100 logistics partners. In recent months, it has also teamed up with China’s state postal service and CJ Korea Express Corp.
Now that RedMart has given it a foothold in Singapore, Lazada also plans to begin selling groceries online in one of the capital cities of Malaysia, Indonesia or Thailand as early as the second half of next year, said Mr Bittner.
RedMart has more than 150 trucks ferrying an average of 22 food items per order. It plans to cut delivery times to four to six hours (from mostly next-day) by the end of the first half of next year, said the startup’s co-founder and CEO, Mr Roger Egan. By the second half, the company will offer an express service, shipping groceries within an hour or two of ordering online, he said.
“Grocery is seen as notoriously difficult one to do online, but it is the largest market representing 60 per cent of overall South-east Asian retail,” Mr Egan said. “Customers are much more engaged. They visit twice a week so the frequency allows you to develop a deep relationship with customers.” BLOOMBERG