Business Success Story of
LAZADA.COM.PH
Lazada’s Foundation
Turkish businessman Inanc Balci, co-founder and CEO of Lazada Philippines, is
of mixed race but was born and raised in Istanbul.
When the opportunity came to establish an e-commerce platform, the US-
educated Balci never hesitated to choose the Philippines as the launchpad in 2012. Balci
saw the opportunities for the social media savvy Filipinos. Those opportunities have
turned into realities and opening doors to more entrepreneurs.
Balci has steered Lazada, and the whole Philippine e-commerce industry to new
heights, where now over 10,000 sellers cater to over a million monthly transactions.
Lazada
Originally, they were focused on one of the niches that have historically worked
best in Asia: consumer electronics and devices. Lazada has expanded into the largest
online assortment of products ranging from mobile and laptops to consumer electronics
to books and media, health and beauty, home appliances, fashion and accessories.
Lazada is the Philippines’ online shopping mall that is rapidly changing the retail
scene across the archipelago. It has quickly revolutionized the meaning of online
shopping in a country. Lazada Philippines offers its wide customer base everything they
need in one place.
Since its establishment in the Philippines, Lazada continues to strive to live up to
its objective of improving people’s lives through effortless and risk-free shopping. It
continues to offer products and retail solutions that combine sense and simplicity, with
the end goal of providing superior value to its customers.
Retailing made easy
Lazada seeks to simplify shopping, make it more convenient. The brick and
mortar retailing can be a very difficult business because a retailer has to address the
demand and supply side. But with e-commerce, retailing can be made easy.
“We started very quickly and after two years we came up with an online shopping
mall. So rather than one store, we have lots of stores so we’ve unlocked money and not
limited on small items but 40 million items in the Philippines,” says the 31-year-old
Balci.
They also put up warehouses in strategic areas. It has over 40 distribution centers
in the country so they can deliver orders to customers faster. They also offer
warehousing services to Lazada merchandizers. As much as 10 percent of merchants are
using their facilities.
Lazada has now evolved not just as an e-commerce platform but for other
business models as a marketplace and as a venue for cross border retailing.
The marketplace now allows merchants to sell their products online. The cross
border business model enables merchants located abroad with operations, especially
China and Korea, to also sell their merchandize online. This is a combination of retail e-
commerce and cross border.
Challenges
When Balci decided to establish Lazada in the Philippines, all he knew then was
the potential of the market. What he did not know was how difficult it was to operate
here. He realized sooner the challenges in the Philippine market.
First, the Philippines is an archipelago with over 7,100 islands, making logistics a
nightmare. In addition, the mode of payment and connectivity are limited and pose as
hindrances to any businessman who strives to provide a nationwide service.
To address logistics concerns, the company launched the Lazada Express to
ensure products are delivered as fast possible. Traditional logistics has been operational
in the country, but e-commerce logistics is still very new.
So far, Lazada Express delivers 80 percent of Lazada packages and the rest are
being outsourced to third party service providers for remote areas like Mindanao.
Delivery is the same day for orders for Metro Manila coming in before 12 noon and for
items coming out of their own warehouse.
On the payment issue, Balci noted that majority of Filipinos do not use credit
cards and there is a high percentage of unbanked population. This has forced them to
accept cash on delivery. Now, majority or 75 percent of sales are paid via COD.
Connectivity in emerging economies remained a challenge, but Internet speeds
are improving. Customers are now able to use their mobile phones to connect to the
Internet. What Lazada did was to focus on the mobile ecosystem so people with mobile
phones can have access to its products. This is a significant measure as it makes Lazada
a mobile-commerce company.
Balci admitted they cannot control 100 percent of the products being sold on its
platform, products that do not fit into the standards are sent back to them and the money
paid is refunded 100 percent. Sellers are also rated to help advise buyers of their
performance.
“We have millions of products that even if you have 99.9 percent satisfaction
rating you still get 10,000 unsatisfied customers and no company can produce that
because of the way our business is designed,” he adds. He, however, said that as time
goes by they intend to have AI chatbots and “SWAT” teams to service customers and
ensure problems are resolved faster.
Leader
“We are the undisputed leader because of our infrastructure. No other company
can come close, we are the only e-commerce company with sizable logistics and supply
chain platform. We are the number one choice of brands whether small or big,” he adds.
This happened because Lazada was able to overcome market challenges inherent to an
emerging economy.
Balci explained the unique requirements of emerging markets in southeast Asia
that other e-commerce platforms may have a hard time adjusting. These challenges are
sure to discourage other e-commerce platforms that are built more for the developed
countries.
For an island nation like the Philippines and other southeast Asian countries, it
would be a different game and that would require much for a player to address.
“Lazada is 100 percent built for southeast Asia’s developing markets,” he adds
recalling that when he first started the company, Philippine companies did not want to
sell in Lazada. But two years after when they already understood that Lazada is not
competing against their traditional retail business, they finally joined the bandwagon.
“It took us sometime to reach them out, but today even the smallest MSMEs are
in Lazada,” recalls Balci noting these companies are now earning for their families by
using their infrastructure.
This only showed that Lazada has successfully built its 3 business models from a
pure e-retail, which is now a billion-dollar industry to a significantly growing
marketplace, its booming logistics business, and the exciting cross border selling.
Lazada Philippines is not yet the leader among the group in southeast Asia,
according to Balci. Thailand is leading because it has been ahead in the e-commerce
space in terms of logistics and payments, but Balci said that the Philippines is doing very
well. It may not be as big as Indonesia, but it is a significant player.
“Philippines has significantly higher potential in e-commerce than any other
country in the world,” cites Balci.
This is because the Philippines is the SMS capital of the world. It is also the
social media capital of the world. This means Filipinos are very good at using
technology and communicating, making it easier for them to embrace online shopping.
“Once the Internet connectivity improves, once the rates become cheaper,
hopefully very soon, then we will start going to that significant tipping point,” he adds,
amazed at the growth potential ahead.
Home
As a manager, Balci has been very dynamic, collaborative and very hands-on.
Most of his days are spent meeting with third parties and internal teams to go through the
KPIs and how business is evolving. He is focused in getting concrete results being part
of a company that is number-driven.
“We measure every peso and every minute spent. If we cannot measure
something, we cannot become the market leader,” says Balci, who was an investment
banker in London engaged with investors in the e-commerce space, although at that time
it was still at their very conceptual stage. Thus, doing the actual thing for the first time
was so different.
For the past years of living in the Philippines, Balci has found his second home.
Balci never loses his faith in the Philippines; he has long been convinced the local
economy will continue its high growth trajectory.
“At the moment, anywhere you go in southeast Asia there is growth. At one point,
it was India, Brazil, and China, but now it is southeast Asia and in this region it is the
Philippines which has the highest per capita growth, even if it is just baking bread,” says
Balci.
Relatively young as they are, but Balci said they have started giving back to
society. It has undertaken some CSR efforts, investing some of their time engaging and
understanding the country more by spending time with lots of people through non-
governmental organizations such as “Bantay Bata” and Habitat for Community.
As a service provider, he belief the Lazada platform is helping others achieve
their goals. Despite its accomplishments here, Balci said Lazada is still barely scratching
the surface.
“We are still taking baby steps,” he adds.
Helping SMEs during Pandemic
As the pandemic hit, it was clear that SMEs has a great challenge ahead of them.
The precipitation of a recession coupled with accelerating changes in consumer
behaviors forced many SMEs to rethink existing business models and lean on the
government and eCommerce players for support. In a new norm fraught with changing
consumer behaviors, Lazada wanted to look for new opportunities to engage with
shoppers and excite them with new experiences.
Given the pandemic caused unprecedented structural shifts in the retail landscape
which left Southeast Asia’s SMEs in local economies at risk of survival, Lazada decided
that it would provide stimulus by way of subsidies and resources to encourage sellers to
diversify their operations online, in the areas of logistics, e-payments and customer
service. Lazada’s region-wide initiative took place in three key areas:
1) Provision of SME stimulus packages to support over 150,000 SMEs across
Southeast Asia, with subsidies and resources to enable these businesses to start
an online store with Lazada;
2) Support SMEs to optimise cash flow; and
3) Deliver initiatives in collaboration with local governments to support sellers.
Lazada's keys to success
Focusing on the shopping experience. It has been shown that satisfied
customers are more recurrent and their average tickets are higher. This has allowed them
to rapidly increase their turnover by diversifying their catalog without significantly
increasing their customer acquisition by focusing on selling mainly to already loyal
customers.
Taking a local/national approach. This is critical to explain their success, because
they have been able to approach the market in a more “Filipino” way.
Having AliBaba's support. Having one of the largest in the market behind them
always helps a lot, but they have been smart about not losing their idiosyncrasy and
brand.
Having omnichannel and service. Lazada is not closed to a single channel. They
have web platforms, mobile app and even physical stores. Their marketing mix does not
forget the price variable; the shopping experience is fabulous, reliable and secure;
their control of logistics guarantees an efficient service; and, most importantly: their real
customers, the marketplace sellers, they are in very good care and very happy selling on
Lazada.
References:
Cahiles-Magkilat, Bernie (2018). “Lazada unleashes PH’s e-commerce potential” Manila
Bulletin. https://mb.com.ph/2018/04/17/lazada-unleashes-phs-e-commerce-potential/
Ordoñez, Laia (2021). “eCommerce success: the story of Lazada (1)”
https://www.oleoshop.com/en/blog/ecommerce-success-the-story-of-lazada-1
Ordoñez, Laia (2021). “eCommerce success: the story of Lazada (2)”
https://www.oleoshop.com/en/blog/ecommerce-success-the-story-of-lazada-2
Tan, Janice (2021). “#PRAwards 2021 highlight: How Lazada helped SMEs weather
pandemic headwinds.” https://www.marketing-interactive.com/prawards-highlight-
how-lazada-helped-smes-weather-pandemic-headwinds
