Disrupt on e-commerce: Big opportunity, intense competition

  • E-commerce has 99% of retail market yet to be conquered
  • Lazada to launch B2B2C model to go nose-to-nose with Rakuten

Disrupt on e-commerce: Big opportunity, intense competitionWELL, we got the answer to our question posed at the panel discussion during the July 24 DNA-TeAM Disrupt session: E-commerce – is it game over?
Disrupt is a monthly networking and gathering session organised by Digital News Asia (DNA) and the Technopreneurs Association of Malaysia (TeAM), wrapped around a panel discussion on major issues affecting the ICT (information and communications technology) ecosystem.
The question revolved around whether the strong push into Malaysia, and other South-East Asian nations, by deep-pocketed players such as Rocket Internet’s Lazada and Zalora, would sweep away small e-commerce players enjoying a relatively good income from their niche offerings and the established home country players.
The latter would include the likes of superbuy.my (electronics items), lelong.my (mix of auctions, second-hand and new items) and easy.my (online mall) in Malaysia’s case.
If you believe what Rakuten Malaysia chief executive officer Masaya Ueno and Lazada South-East Asia chief executive officer Maximilian Bittner had to say, then the future of these local players is by no means bleak and doomed.
With 99% of the retail market in Malaysia still very much in the brick-and-mortar world, the size of the market opportunity yet to be conquered by Lazada and all the other e-commerce players – plus the e-commerce enablers like Rakuten – is too big for them to be worried about each other, they claimed.
Now, they may not be worried about each other, but I bet they monitor each other’s prices every day.
As a consumer looking to buy something online, say a smartphone, I am definitely going to compare the prices on some local sites, simply because it is so easy to do so. And it surely is not a coincidence that there often is not much of a difference between their prices too, at least when it comes to electronic items.
The only exception is when they strike a deal with a product owner or main distributor for a limited number of units. One such example I was aware of was when Superbuy.my was recently selling Nokia’s Pureview 808 smartphone at around RM1,000 (US$311) per unit. That was much lower than anyone else.
What was the surprise to me from the Disrupt discussion was the low volume of mobile commerce transactions at the moment, even though the panellists were unanimous in their belief that this niche in online shopping will surely take off. I am talking about specifically smartphone transactions.
The other surprise to me what that Lazada is now in direct competition with Rakuten, having expanded its model to now imitate Rakuten’s B2B2C (business-to-business-to-consumer) model. This is where Rakuten helps traditional merchants build online storefronts to sell to consumers.
Bittner called this a natural expansion of Lazada’s B2C model. He tells me that already 12% of Lazada’s revenue in the region comes from this model. He estimates it to be between 10% and 15% in Malaysia.
I wonder if Lazada was inspired by the early success Rakuten claims it is having in Malaysia. As Ueno noted, while Rakuten launched in Thailand and Indonesia before Malaysia (though indirectly), it is in Malaysia that it has seen the stronger growth in e-commerce.
Ueno said this was “because the payment gateways and infrastructure are just so much better here.”
Disrupt on e-commerce: Big opportunity, intense competitionI, for one, will be very keen to observe this space as they both race to sign up merchants and retail chains to get a cut from their online sales. Lazada did not mind being second to market as Bittner pointed out that Rakuten has done a great job in educating merchants.
I think the battle between them both is going to be all about execution on behalf of their brick-and-mortar merchants and not so much about who is spending the smartest marketing dollar or who offers the best customer service. Both of these are a subset of executing well.
As Bittner said at one point of the discussion when touching on delivery, “We need to be perfect, every time.” That’s the yardstick the ex-McKinsey consultant has set for Lazada.
I also think they are dismissing the threat of Amazon to their peril. Amazon recently started offering free shipping to Singapore for a minimum of US$125 worth of goods.
With 500,000 Malaysians working and living in Singapore, there must be at least two million Malaysians who have family or friends living on the island republic. That means they have a storage space and address in Singapore for their Amazon-bought goods to be delivered to.
Beyond Amazon, I wrote last year about how Sear’s department store has also started shipping goods to customers in Singapore. And when it starts doing the same for Malaysia, then watch how the competitive pressure gets to Rakuten and Lazada.
On that note, I thought Bittner brought up an interesting point. He says that most of their traffic and revenue comes from outside the Klang Valley where consumers have a lower number of options and not as competitive pricing for goods bought. “We are filling that need for them and they are responding.”
Will they still respond when they can also shop at Amazon, Sears and whoever else is attracted to the same growth prospects of South-East Asia as the likes of Rocket Internet and Rakuten?
Related Stories:
Disrupt on e-commerce: ‘AirAsia broke down barriers’
Foreign e-commerce threat for retailers in Malaysia?
E-commerce merchants getting ‘bashed’ in Malaysia
TeAM and DNA out to ‘Disrupt’ the ecosystem
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