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Executive column: Lazada to focus on overcoming logistics hurdles in Indonesia
Florian Holm (Courtesy of Lazada Indonesia)To expand its customer base, e-commerce platform Lazada Indonesia, part of the Southeast Asian online retailer Lazada Group, plans to set up new warehouses and accommodate more merchants nationwide next year
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Florian Holm (Courtesy of Lazada Indonesia)
To expand its customer base, e-commerce platform Lazada Indonesia, part of the Southeast Asian online retailer Lazada Group, plans to set up new warehouses and accommodate more merchants nationwide next year. The Jakarta Post’s Marchio Irfan Gorbiano recently spoke with Co-CEO Lazada Indonesia Florian Holm about the companies future business plans and other pertinent topics. Here are excerpts from the interview.
Question: What are your thoughts on the Indonesian market in particular and the Southeast Asian market in general? How do you assess Lazada’s growth potential in Indonesia?
Answer: I think what we need to realize is that it’s still very early days for e-commerce. E-commerce was only valued at US$1.7 billion, according to a Google-Temasek study in 2015. Obviously, it is bigger than that now. We expect it to grow to $46 billion by 2025.
I think my observation of the market is absolutely realistic, meaning that the size of e-commerce right now compared to the future potential is still very small. So there is still a lot of room to grow.
We especially see a lot of potential in tier two and tier three cities, such as Makassar, Balikpapan, Surabaya, Medan, Palembang, Denpasar and Padang, most of which are actually big cities. But, even in Jakarta, there is also plenty of growth potential.
E-commerce now represents only 2 percent of the total retail sector [in Indonesia]. As a comparison, in China it approaches 15 to 20 percent of total retail.
I think there are several trends happening in Indonesia right now. On the one hand, every day more and more people go online. When I came here two years ago, I think there were like 60 million people online and now I hear the latest number is maybe 130 million people.
Only a small percentage of the people going online, maybe around 20 to 30 percent, actually shop online. Eventually the ratio between people shopping online and the population will be around 60 to 70 percent.
In Jakarta there are already many people who shop online.
In general, there are three stages of growth: an increase of the internet population, an increase of the percentage of the internet population who shop online and then, an increase of the share of the wallet from people who already buy online.
Despite the enormous potential, there are still infrastructure and logistics challenges, so it can take significant time to ship products and it can be quite expensive. So, we are really focused on making sure we build our warehouses closer to customers to enable us to deliver goods to them faster.
What is your assessment of Lazada’s business in 2017? Have you seen significant growth?
We have been very happy with 2017. Our short term plans have run as expected. I think the most important part is that we are working continuously to get the right solutions in place for our long term plans. Logistics and customer experience are both important areas for us for the future. We have seen significant growth [in our business] in line with our expectations.
Are you pushing for better integration of offline and online businesses?
Yes. We’re also giving offline retailers a good channel to be successful in general. In my view, offline and online businesses are complementary. There are people who still appreciate the experience of going to malls, as it is like a social gathering. Behavior may shift a bit though, with people visiting malls to eat and less to do shopping. This may be happening.
For us, Lazada in the end is a platform, so we are open for everyone. We work with a lot of offline retailers. For example, Ramayana recently opened a store in Lazada. I think for us, it’s not about being online or offline. We try to make it work for everyone.
What is Lazada’s plan for Indonesian firms, particularly small and medium enterprises (SMEs)?
We allow SMEs to store their products in our warehouses so they can distribute them directly from there to their end customers. As a business entity expands, logistics and operations become more and more challenging. That’s why we provide logistics solutions, which really helps SMEs to grow into larger entities.
In the past two to three years, we have focused significant attention on the marketplace and helping SMEs, and you can find a lot of them offer products that you can’t find anywhere else because they are made by small businesses.
We plan to expand our platform beyond Indonesia, to the entire Southeast Asia and China, so Indonesian merchants can also sell their products in Malaysia, Thailand, the Philippines, Singapore and China.
