By Charles F. Moreira
The popularity of online shopping, especially in the developed countries, shouldn’t come as a surprise.
Since even before the mass public availability of the Internet, countries in Europe, North America, Australia and perhaps also New Zealand, already had a well established culture of remote shopping by post (“snail mail”) and later TV shopping; so it was a simple matter for shoppers in these countries to make the transition to online shopping when the Internet arrived.
For example, mail-order shopping was already well established in the U.K. in the 1970s, when this writer was a student there. I mostly bought vinyl albums (no CDs back then), had my film processed, bought books from a book club and occasionally exclusive items from a catalogue by post.
Most students didn’t have credit cards back then, but unlike in Malaysia, banks in the U.K. quite readily issued students with cheque books, so it was a simple matter to total up my purchases, add the p&p (postage and packaging) cost, drop the envelope with my order and cheque into the post box and the goods would arrive in the post about a week later.
Sure, it couldn’t beat the physical shopping experience, such as thumbing through the selections of vinyl albums on the shelves of Sir Richard Branson’s Virgin Records on Newton Street in the Manchester City centre, which was only a 20 minute bus ride away from my bed-sitter lodgings.
Unlike today’s slick layout and atmosphere, that Virgin Records store back then was rather rustic, with worn wooden floors and shelves, friendly, casually dressed staff and “hippie” atmosphere with psychedelic paintings and the sweet scent of burning incense cones in the air.
Also, whilst there was nothing special about the photography counter at Lewis’s departmental store nearby (now closed), I however could also browse through the shelves and buy my groceries there after dropping off my film or picking up my photos. Also, there were the sights and sounds of throngs of humanity going about its Saturday shopping in and around Piccadilly Square, Manchester.
However, a key incentive to shop or have my film processed by post was that exactly the same items and services cost about 30% to 40% less than in the physical stores, which wasn’t surprising, since they operated from a central warehouse in outer areas of large cities such as London, so they saved on rental and operational costs of having multiple stores in different city and town centres – savings which they passed on to their customers.
The other incentive was exclusivity – i.e. items not available in physical stores but only by post. These exclusive items weren’t necessarily expensive nor anything special, but rather ordinary items such as stainless steel kitchen knives from Japan, sling bags or battery operated alarm clocks which were generally not available in the local stores.
So no surprise that when easier access to credit cards and the Internet came along in the U.K. and other developed countries, it was almost a natural progression to make from postal to online shopping.
On the other hand, whilst there was hardly any postal shopping in Malaysia and the TV shopping culture is relatively weak, I strongly believe that it’s the novelty factor which drove the uptake of online book purchases from shopping portals such as Amazon.com, Barnes & Nobel, etc. Speaking for myself at least, I would rather buy a book from a physical MPH, Times, Borders, Kinokuniya, Minerva, University or other book store and would only buy online if it’s not available locally, which is what I have done on occasions.
How will it survive?
So shortly before Lazada Malaysia launched its online consumer electronics, home appliances and consumer goods shopping portal on 24 April, 2012 to sell goods online to customers within Malaysia, I wondered whether they would sell exactly the same items available in local stores or items which are not available, and if they are to sell items also available in local stores, then would Lazada Malaysia sell than at the same price or at an attractive enough discount?
.jpg "Lazada - Over One Year on and Counting 2") |
| The Lazada team in action |
After all, unlike Germany where Lazada Malaysia’s main shareholder Rocket Internet is based, computer, mobile phone, camera, etc stores in Malaysia open even till 10.00pm, seven days a week, labour is relatively cheap, competition stiff and profit margins wafer thin. So how would Lazada Malaysia compete with the likes of Low Yat Plaza, Digital Mall and others?
When Lazada Malaysia’s portal eventually went live, the answer was clear, it had taken the first course to sell the same items online as the physical stores, and at discounts.
Discounts on some items are as deep as 74% in some cases, such as for LED TVs and certain Android tablets, though the latest discounts on smart phones are around 30% and often under 10% for notebook and desktop PCs. The company which operates out of Southgate Commercial Centre off Jalan Sungai Besi in Kuala Lumpur, claims its prices are lower than in local retail stores, though we haven’t thoroughly verified that.
(resized).jpg "Lazada - Over One Year on and Counting 3") |
| Lazada Malaysia at age 1 |
It also provides free delivery by courier nationwide, 14-days free return if not satisfied, cash-on-delivery for people without credit cards, online banking facilities, no computer or Internet access, are not tech-savvy or who are uncomfortable with making online transactions. It’s customer service helpdesk takes orders by phone, so customers can look up the item they want on its portal and place the order by phone. Now that’s being smart. Lazada Malaysia celebrated its first anniversary in April, 2013.
One-on-One
Meanwhile, Enterprise IT News (EITN) caught up with Dr. Mahmoud Fouz, Lazada Malaysia Managing Director, Head of Onsite Marketing and Conversion Optimisation via e-mail to find out more on where the company is at right now.
EITN: How far has Lazada Malaysia come today, since April 2012 in terms of sales volume/revenue, product portfolio and public acceptance?
Dr. Mahmoud: In one year, we have experienced an incredible growth with monthly growth rates, ranging between 20-30%. At the beginning, the company’s growth was driven by strong marketing spent, continuously optimizing our marketing and approaching a positive return on investment.
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| Dr. Mahmoud Fouz |
Furthermore, we have seen that there is a strong correlation between the quality and size of our product assortment and the sales, which is why we are focussing on expanding our assortment continuously. At the moment, we have about 40k products online which are increasing on a daily basis. In addition, we have recently launched our marketplace feature for selected suppliers which will further expand our portfolio significantly.
We strongly believe that we can only be successful by being customer-centric. We take any feedback seriously from our customers and are optimizing our processes accordingly. As a result, we are seeing an ongoing upward trend in our NPS score. Compared to other countries in SEA, we do see that customers in Malaysia are more critical, but we take this as a challenge to improve ourselves.
EITN: What is your staff strength today compared to April 2012?
Dr. Mahmoud: Although one year might not sound like a long time, we have gone through an incredible learning experience, both as a start up company in Malaysia as well as part of the Rocket Internet group which expanded massively in the last year, starting with a few founders. Now, we have a great team of 1, 000 employees in Lazada Southeast Asia. Compared to April 2012, we have a better understanding on e-commerce in emerging markets which is reflected in much more refined processes.
EITN: What is your most popular product category?
Dr. Mahmoud: Mobiles, Tablets and Cameras are still our main revenue driver. However, we have slowly shifted into non-electronics categories where we can exploit the strength of e-commerce by offering a huge assortment.
EITN: Where do your customers mostly situated – i.e. Klang Valley, big cities, small towns, rural areas, Peninsular Malaysia, East Malaysia, etc?
Dr. Mahmoud: About 75% of our customers are from the large cities. The rest is distributed among a long list of small cities and villages. Meanwhile, customers from East Malaysia contribute about 10% to the revenue.
EITN: What types of information technology (IT) -based facilities and systems such as customer contact centres, customer database, order processing, big data, analytics, data centres, online security, order processing, shipping & logistics, supply chain management, and customer relationship management do you use? Do you use any local data centres?
Dr. Mahmoud: We are using a number of tools to keep track our numbers. This includes tools that were developed in-house or by Rocket Internet as well as third party solutions like Business Objects, SQL Server Analysis Services, and Unica. Sensitive data is stored in local databases.
EITN: Inevitably, such an operation like yours has its problems, mistakes and deficiencies, which with today’s social media are highlighted by some of your customers who are disgruntled. For example at www.pissedconsumer.com and www.complaintsboard.com.
Most of the complaints towards Lazada Malaysia are dated from July to October 2012. What were the problems and what have you done to rectify them?
Dr. Mahmoud: At that period, we actually experienced a very strong growth and demands from the customers, which led to slight challenge to our processes and logistics management. Also, most of our suppliers were not accustomed to handling large amount of request in speedily manner. As a result, a significant delay occurred.
From this learning experience, we have redefined our processes and extended our stock significantly to make sure that we can deliver our promise. Today, more than 90% of the orders are shipped on the same working day. Aside from that, we have also launched a very successful promise campaign on a large number of products for which we guarantee a delivery within two working days.
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| Lazada gang |
EITN: How do you find competing with retailers in a market where margins are very thin, retail shops open nearly every day, where wages are still relatively low? What are the opportunities and challenges?
Dr. Mahmoud: E-commerce is a global trend that keeps rising in Malaysia. According to a recent study by A.T. Kearney, Malaysia has the highest e-commerce potential in Asia, after China. E-commerce simply creates price and product transparency to customers which is not possible in offline retail.
A big challenge for us is to find the best way on how to expand our operations in East Malaysia. At this moment, we do not have a warehouse there which is crucial for us to guarantee the same quality of service to our customers like in West Malaysia.
EITN: Instead of competing with local retailers, have you considered differentiating your product portfolio with products that are not sold by domestic retailers?
Dr. Mahmoud: This is an interesting point! We are leveraging on our regional presence in five countries to share products that are selling well across countries. If these products are not available locally, we will then import them.
EITN: Does Lazada Malaysia sell products to customers outside Malaysia and do you sell products sourced from outside to Malaysian customers?
Dr. Mahmoud: We don’t sell products to customers outside Malaysia at this moment but we might do so perhaps in the future. We don’t sell any “grey” imported products but work closely with the official distributors.
EITN: What are Lazada Malaysia’s plans moving forward, including plans for mobile shopping on handheld devices such as smartphones and tablets?
Dr: Mahmoud: We are going to launch our mobile app for Android and iPhone users soon. Adding to that, we have also heavily investing on expanding our portfolio through a marketplace model where selected suppliers can offer the full range of their assortment to our customers.
EITN: Thank you sir. We wish you all the very best in your endeavours.
