Lazada, or Lazada Group, is an e-commerce company based in Singapore. The company works under the Alibaba Group of companies. There, it operates its sites in various countries. The company has made rounds for its marketing and business model. Lazada sells inventory to customers through its own warehouses. In 2013, it added a marketplace model, where it allowed third parties to sell their products through its site.
What is Lazada?
Lazada isn’t a single company or product. It is a brand that the Lazada Group uses for several business ventures. Like other companies in the e-commerce world, Lazada does not have a humble beginning. Instead, it comes from a German investment and venture building company, Rocket Internet. This company is well-known for replicating other companies and starting a similar business in other areas.
Rocket Internet specialized in identifying high-performing companies from different investors. Once it did so, it armed them with capital and expertise. In the past, Rocket Internet had gained popularity for supporting Zalando. The company was also an imitator of the Zappos business model, a well-known brand in the US. This move was in tangent with Rocket Internet’s business model.
Rocket Internet launched the Lazada website in 2012. At that time, it sold consumer goods directly to potential customers. These products included clothing and electronics. Initially, the company started operations in Indonesia, Malaysia, the Philippines, Thailand and Vietnam. At the time, it was operating under a B2C business model. In 2013, Lazada added a current marketplace business model to its platform, effectively becoming B2B2C.
Through the above change, Lazada allowed third-party sellers to use its platform to sell their goods. This decision became a significant success for the company. Within a year, Lazada made 70% income through other sellers. In the same year, the company launched its services in Singapore. The company continued its growth in several markets. However, it also made significant losses in those areas.
The losses started becoming more problematic for the company. Rocket Internet also saw those issues and wanted to get out of the losses. Consequently, they sold a controlling stake in the company to Alibaba for $1 billion. This investment gave them hold of 51% of Lazada’s shares. This transaction occurred in 2016, and Alibaba took over Lazada’s management. In 2018, they introduced Lucy Peng as the new CEO. However, she didn’t last long.
In December 2018, Lucy stepped down as Lazada’s CEO while Pierre Poignant took over. In a few years, the company started acquiring various companies. However, these transactions were a part of Lazada’s strategy to integrate the new business into its platform. This strategy was also a part of the Lazada business model during the Rocket Internet era.
How does Lazada work?
Lazada is one of the leading e-commerce platforms in South East Asia. The company operates in Singapore, Indonesia, Thailand, the Philippines, Vietnam and Malaysia. However, sellers can join its platform from other areas as well. The company is open to sellers worldwide, including Hong Kong, Mainland China, Europe and the US. Before selling items on the platform, users must understand how to register.
Sellers on the Lazada platform must have a seller account. This account comes after registering with the platform. Primarily, users must visit the official Lazada website in their country. Once they do so, they can click on the Sell on Lazada icon at the top. This button will require them to choose between three options. These include Lazmall seller, local seller or Lazmall global seller. Each of these accounts comes with specific benefits.
For local sellers, the local account provides the best option. However, brand owners can get the Lazmall seller account for better results. The global account is suitable for international sellers. Once users select their account type, they can click on the Signup option below the screen. Users must provide basic information during this process. On top of that, the platform also requires them to scan and upload some documents.
Usually, Lazada requires bank account statements, logos and trademark documentation. For most sellers, these documents are crucial in helping them to operate on the platform. The process is smooth and straightforward. Once users upload their documents, they can submit their forms. Lazada will take some time to verify the application for registration. Usually, users get a reply within three working days.
Once Lazada approves a user profile, they can start selling on the platform. Before doing so, they will receive an email from Lazada. This email includes a link that users must follow to access their platform. From there, they can start setting up their items for further sale. However, the process may be different based on the type of account users have chosen.
What is the Lazada business model?
Lazada originated from trying to imitate companies with a marketplace business model. Under this model, the company uses its platform to offer users various products. In the past, Lazada offered these products from its side. This business model was successful at first. However, it did not earn the returns its founders had wished.
At that time, Lazada used a B2C business model. In this model, the company offered its products directly to its customers. Third parties were not a part of this business model. However, Lazada soon changed its core strategy. As mentioned above, the company later adopted a B2B2C business model. Consequently, it allowed third parties to offer their products on the platform directly to its consumers.
Over the years, Lazada has also grown its business into other ventures. The company also adopted a fintech business model to invest its payments in other companies. Usually, all the transaction on the platform gets handled by Lazada. This process gives Lazada access to significant funds. The company adopted a fintech business model to use these funds for its gains.
Lazada also acquired RedMart as a part of its investments. Through this company, Lazada offers grocery delivery services. Essentially, it replicates the Instacart business model with some modifications. On top of that, Lazada’s offers top-up services, which are a part of its business model. Overall, the company uses its business model to deliver a broad range of services.
How does Lazada make money?
Lazada makes money from various sources. An explanation of each of these is available below.
Lazada Marketplace
While Lazada has expanded its operations into other ventures, the source of its primary revenue is its marketplace. The company uses this feature to allow merchants to sell various consumer goods through its platform. In exchange, the company helps them with payment and shipment solutions. Lazada makes money from each transaction, about 1%-4%, based on conditions.
LazMalls
LazMalls work similarly to Lazada Marketplace. However, it offers more premium features based on the same model. These features apply to customers and merchants offering their products through Lazada. This income source works similar to the Lazada Marketplace. However, the commissions are higher, capping off at 5%. These commissions are also for every transaction.
Grocery delivery (RedMart)
As mentioned above, Lazada acquired RedMart, which gave the company access to a new market. Lazada makes money on the grocery deliveries process through its subsidiary. However, the profits margins are lower, as is prominent for the industry. Nonetheless, Lazada makes money by charging fixed delivery fees for every transaction.
LiveUp
Lazada LiveUp is a membership program where customers can save money on various services. For example, it can provide them discounts on the above revenue sources. On top of that, it offers users other services, for example, free Netflix subscriptions. The company partners with various companies to provide these services. In exchange, Lazada makes money monthly or annually.
Fintech solutions
Lazada processes payments from its various income sources. These payments provide Lazada access to a substantial amount of capital, which it uses in Fintech solutions. Essentially, the company partners with several local companies to offer these services. Lazada provides merchants access to credit options to fund their businesses. In exchange, it makes money through interest payments.
Conclusion
Lazada is a prominent name in the South Asian e-commerce industry. The company offers a marketplace where it allows merchants to sell goods. In exchange, it processes its transactions and logistics. Lazada uses a similar business model as Amazon and eBay. The company makes money from various sources, including the ones listed above.
