Lelong CEO sanguine on Rocket Internet entrance
By Karamjit Singh June 6, 2012
- Pricing not everything to buyers, contends Richard Tan
- Money not everything to Internet companies either
Tan is actually one of four shareholders of Lelong, and all are still with the company. Officially Tan is managing director of Interbase Resources Sdn Bhd which owns Lelong.my.
This is an important point to make because when I met Tan over breakfast recently to chat about how he was specifically facing up to the challenge from German Internet company, Rocket Internet, Tan, in typical fashion, shied away from sharing his strategy at first.
“I prefer to reserve my comments on how we have changed strategy to face this new challenge,” he said.
But he offered what I though was a telling statement. “Lelong has strong shareholders committed to the long term.” He then added what I thought was the kicker: “It’s not always about the money.”
This statement stands in stark contrast to the aggressive money-chasing machine Rocket Internet. Launched in Germany in 2007, it has made a name for being an aggressive copier of US-based Internet trends and selling its companies to American players.
Last year, it moved into Asia, and South-East Asia in particular, in a big way. In rapid expansion mode, it has been setting up e-commerce sites in the various countries around the region, hoping to dominate the market with the sheer amount of money and bodies it is throwing into each country.
The strategy looks sound on the surface as the incumbents are all entrepreneur-led start-ups that are scaling organically and with little external funding to help them ramp up fast.
Starting in Singapore and Vietnam, it has since gone live in Malaysia, the Philippines, Thailand and Indonesia.
All with the same name: Zalora for women’s fashion and Lazada for electronic items. Furniture is on the cards too for Singapore and Malaysia.
It typically comes into a country in an aggressive manner, ramping up hiring (it has been reported to have over 300 staff in Singapore and around 450 in Malaysia), paying aggressive salaries -- with some Malaysian hires getting double their last drawn salaries and prompting one Malaysian CEO to say in jest that he was available for hire too!
However they are a demanding lot too with the Malaysian operations said to be experiencing a high turnover rate. Even the CEO for Malaysia, Howard Soh, recently left a few weeks ago after just under a year in charge.
The end game for Rocket Internet is to outspend the competition in A&P, offer better prices with its bulk buying and unrivalled shopping terms in the South-East Asian region.
Until it came along, no e-commerce site offered free shipping irrespective of the value purchased and certainly none offered a no-questions asked return policy. Rocket Internet does, and more.
The idea is to gain a leading market share and exit the market in a few years via a trade sale.
Tan seems unperturbed though. When pressed on how they will compete, he suggested that while price is very important to buyers, it is not everything. Superior customer service is an important component of online shopping and he feels that Lelong, which has been in the market for a long time, knows how to give customers the best service possible.
He also hinted that Lelong can be competitive in pricing too, if it wants too.
But he questioned if offering low prices can be a viable approach and sustainable in the long term.
“Do you build and then [sell and ] disappear,” he asked.
Judging from its track record, that is a question Rocket Internet is happy to answer in the affirmative.
Next: Richard Tan on how the landscape has changed dramatically and why Rocket Internet is good for the ecosystem.