Lazada Malaysia wants to help its merchants expand to China

Southeast Asian e-commerce platform Lazada is looking into helping its merchants in Malaysia do business in China and overseas, as Malaysia becomes the fastest-growing e-commerce market for the company.

Lazada, together with Alibaba’s logistics arm Cainiao, will lead the establishment of Alibaba’s e-fulfilment hub in Malaysia’s Digital Free Trade Zone (DFTZ) announced last week. The DFTZ allows companies in Malaysia to conduct free digital trade with China, where a similar zone has already been established.

“Lazada is a part of the [DFTZ] initiative, we have a lot of local fulfilment capabilities and work with a lot of merchants. We want to help bring small and medium enterprises (SMEs) online and help them to succeed at doing cross-border business,” said Hans-Peter Ressel, chief executive of Lazada Malaysia in an interview with the Post.

Lazada started out as an e-commerce retail site selling items directly to customers, but later turned itself into a marketplace allowing brands and merchants to sell products on the platform as well. Today, about 15,000 merchants do business on Lazada’s platform in Malaysia.

“It is easier to scale up business online, enabling the merchants to expand to a regional or global audience. With the [DFTZ] here in Malaysia, and the hub in China – local businesses can sell to an additional 1.3 billion people,” Ressel said, adding that Lazada’s knowledge in e-fulfilment allows the company to help partner up with Cainiao and other companies to help operate Alibaba’s e-fulfilment hub that is expected to fully launch in 2019. Alibaba owns the South China Morning Post.

Lazada Malaysia, which recently celebrated its fifth anniversary in the country, is currently Lazada Group’s fastest-growing e-commerce platform, overtaking the Singapore market. Lazada also has operations in Indonesia, Thailand, Vietnam and the Philippines.

Last year, Lazada Malaysia recorded more than 100 per cent growth in sales, and Ressel expects the momentum to keep up in 2017.

Much of the company’s growth has been driven by merchants on its marketplace, which have helped Lazada increase from about 10,000 items when they first started in 2012 to the 12 million product offerings across 15 categories the platform has today, Ressel said.

“Lazada has really become the platform for brands to have their official [online] flagship stores selling products through Lazada to their customers. They’ve made us a branded platform, and when consumers trust the brands they are buying from, they start trusting us as well,” Ressel said. Brands with flagship stores on the Lazada Malaysia platform include Samsung, Microsoft and Acer.

Revenue in the e-commerce market in Malaysia is expected to reach US$1.12 billion in 2017, a 25 per cent increase from the previous year, according to statistics portal Statista. User penetration rates in the e-commerce market are also expected to reach about 66 per cent this year, which means that almost two-thirds of Malaysians will have shopped online by this year.

Lazada, which first saw most of its customers come from affluent, metropolitan cities such as Kuala Lumpur and the surrounding Klang Valley area, has also seen a shift where a majority of its customers now come from more rural areas in the country.

Over 80 per cent of its business comes from outside Kuala Lumpur, Ressel said.

“The strongest growth we’ve seen comes from east Malaysia,” he said. “Some retailers and brands don’t have as much physical presence there, but the internet and smartphone penetration rate has been really driving e-commerce.”

“With smartphones, suddenly people in [more rural areas] like Terengganu, Kuching, or Kota Kinabalu have access to the same products and the same prices,” Ressel said, indicating that having items shipped to customers in one or two days is much more convenient for customers in the eastern part of Malaysia who sometimes may have to drive 45 minutes to reach the nearest shopping mall.