Dialogues, Strategy

Over 20 million shopped Lazada’s Singles Day sales – here’s how the company managed the surge in orders

The Lazada 11.11 shopping festival has seen a slew of new records that have been broken so far (from 00:00 hrs to 16:00 hrs), including:

  • The fastest time taken to pack a parcel was 25 seconds after the order was placed;
  • On average, each shopper in Southeast Asia collected more than nine vouchers;
  • Malaysia set a new industry record when all 11 units of Volkswagen Polo B&W cars were snapped up under one minute;

Overall, technology and lifestyle brands dominated sales in the region. Some of the most popular items snapped up include mobile phones, vacuum cleaners, diapers, milk formula, nutrition drinks, and game consoles.

As shopping festivals such as Singles Day takes a global turn, logistics becomes a big element for ecommerce retailers to gain customers’ trust. To meet the expected surge in orders, online retailers rely on partners such as Lazada to make sure that its delivery fleet and logistics partners are able to deliver parcels to customers quickly and reliably – even in cities with poor infrastructures.

Supply Chain Asia recently concluded an interview with Felix Hochgesand, Lazada ELogistics (LEL) SEA CEO, on why logistics plays a huge role in customers’ trust in eCommerce and sustaining ecommerce growth in Southeast Asia.

Q1: What are some of the latest or upcoming trends that will impact the region’s logistics industry?

At a recent Lazada-hosted panel discussion on the state of eCommerce in Southeast Asia, The Economist Intelligence Unit (EIU) Asia shared the following trends:

  • Growing middle class: ASEAN-6 (i.e. Indonesia, Malaysia, Singapore, Thailand, Vietnam and Philippines) will have 138 million middle-class households by 2030
  • Rising private consumption: Total private consumption in ASEAN-6 are forecasted to rise by 2.6 trillion by 2030
  • The contribution to the increased wealth will increasingly come from tier 2 and 3 cities, in addition to metro areas

In parallel with these trends, consumers in Southeast Asia are generally shopping online, but there is significant room for consumers to transition to online shopping as an everyday thing. In addition, Lazada has also observed that the concerns of our online shoppers have evolved from “when will I receive my order” from its early days in 2012, to “can I get it faster” to “I want it now”.

Thus, eCommerce logistics (eLogistics) in Southeast Asia is poised to grow exponentially as the demand of fast delivery of large volumes of small parcels to individual customers across each country in the region, will shape the logistics industry.

Q2: How is Lazada responding to these trends?

Through our unique model of strong in-house operations paired with a network of third-party logistics (3PLs), we are able to provide new logistics solutions to the increasing and changing customer needs, and the growing eCommerce ecosystem.

 Through our innovative eLogistics solutions, we are able to provide better service, better cost and ensure capacity in a severely constrained yet high-growth environment.

  • Our sellers have access to the cheapest rates in the market at the best service level, enabling them to create a better shopping experience for their customers. 
  • Our customers in more locations are now able to enjoy same or next day delivery, for example shoppers on LazMall, which we launched in September, enjoy guaranteed next-day delivery to all capital cities.   

Q3: What is Lazada’s logistics strategy?

The logistics environment in a diverse, highly-fragmented and fast-growing Southeast Asia is riddled with challenges. To illustrate, the distance from North West (Aceh) to the South East (Papua) of Indonesia is greater than the distance from Seattle to Miami; and the Philippines has one of the highest number of typhoons in the world.

We have set up Lazada eLogistics to address these challenges, delight both our sellers and shoppers, and win them over to eCommerce.

Lazada’s eLogistics ability to deliver to customers anywhere in Southeast Asia is our unique value proposition. We believe that the best approach to tackle the supply chain and fulfilment challenges in Southeast Asia is to build our own logistics capabilities while deepening partnerships with third-party vendors and the ecosystem. Our capabilities span from last-mile delivery to warehouse management to cross-border solutions.

We are championing an approach based on trust, collaboration and shared technology, as no single entity will be able to keep pace with the rapid growth of eLogistics in this region.

By doing this, we can provide better service, better cost and ensure capacity in an infrastructure-constrained yet high-growth environment.

Q4: The Lazada 11.11 shopping festival will put the company’s ability to ensure timely and reliable deliveries. How Lazada preparing its logistics to meet the large influx of local and cross-border orders for this major shopping festival?

Lazada’s logistics capabilities give us a unique advantage as we invest in our own infrastructure and fleet complemented by a network of local 3PLs to reach a very high geographical coverage.

Ahead of Lazada 11.11 Shopping Festival, we have further expanded our fulfilment operations and last-mile delivery capabilities to support the eCommerce growth in the region.

Examples in fulfilment:

  • We recently opened a fulfilment centre in Davao, the Philippines, and expanded the centres in Manila and Cebu.
  • In Vietnam, we also opened a fulfilment centre in Danang.
  • In Surabaya and Medan, Indonesia, we built a sizable and specialised supply chain operations for bulky items like baby diapers to fulfil customer demands.

Examples in last-mile delivery:

  • Lazada Singapore has recently partnered 7-Eleven and Ninja Van to launch the largest network of eCommerce parcel collection points – close to 350 7-Eleven stores island-wide.
  • In Vietnam, we have partnered with VNPost, the national courier company with the most pervasive country-wide reach.

Q5: What are Lazada’s warehouse operations and strategy? How many facilities do you own and where are they located?  

Our warehouse operations strategy is three-pronged:

  • Building new generation fulfilment centres, including mega hubs and integrating more automation
  • Expanding the network into places outside of metro and capital cities with short-tail warehouses that serve sellers and customers within the specific locale, and handle a selection of fast-moving SKUs
  • Operating specialised fulfilment centres for certain categories such as bulky or Returns

Today, we operate 20 fulfilment centres – one in every major urban area in Southeast Asia, as well as selected fulfilment centers in cities that are experiencing fast growth and high demand such as Medan and Surabaya.

The fulfilment centres span more than 270,000 square metres with 16+ million storage capacity and counting. We have high geographical reach in Southeast Asia and are able to deliver even to remote islands in Indonesia and the Philippines.

Q6: Do you work with local logistics partners, and how?

Our partners include regional third-party logistics firms, international express companies, local and regional delivery companies, point-to-point and on-demand transport providers, airlines, freight forwarders, postal organisations and specialty companies that handle certain kinds of freight.  

At our sortation centres, we receive freight shipments from various channels, sort it, and distribute it to Lazada sellers and others in our ecosystem. This enables transport companies to gain economies of scale in their own operations and migrate into the world of B2C.  

Depending on what our customers need, we have access to transport companies that can handle different freight profiles, geography, classes of service, etc. Lazada can help feed volumes to suit their networks. For example, we are able to provide cash-on-delivery (COD), limited geography and only line-haul services.  

Our open network approach enables us to give volumes tailored to each domestic provider. This approach is based on the understanding that no one entity will be able to keep pace with the needed growth of logistics.

Trust-based collaboration and shared technology approaches are the only path for the region. As a result, Lazada is bringing together a whole ecosystem of sellers, sorting centres and delivery partners for a top-notch customer experience.

Being a large player with sizeable footprint and reach to the region makes it easier to achieve this.

Q7: Apart from warehouses, what other areas is Lazada investing in?

Besides warehouses, Lazada also invests in last-mile delivery hubs, sorting centres and vehicle fleets including bicycles, e-bikes and e-trikes.

We also invest in innovation which include:

  • The region’s first picking robots in Malaysia
  • Green electric delivery fleet across the region
  • 72-hour cross-border delivery solution for main metros in Southeast Asia
  • The first fully automated sortation centre network in five markets

Q8: Any logistics infrastructure plans or focus areas that Lazada is looking to make in the next few years?

We are constantly growing our network in terms of space by adding new locations and increasing existing facilities. We now have a large build-to-suit eLogistics warehouse in Indonesia and the Philippines and are working on the second phase of the project. In Thailand and Malaysia, we are kicking off mega fulfilment hub projects.

We are also expanding our last-mile facilities. Today we have 210 last-mile delivery hubs across the region that connect us closer to our sellers and customers for faster delivery, and we continue to plan for further expansion to keep up with demand.

Q9: What are your views on competitors offering services such as Amazon Prime?

While Southeast Asia is promising, it is also a diverse, highly fragmented region and any player wanting to enter the region must have local knowledge and on-the-ground presence to be able to serve the needs of growing middle-class consumers in each different market. Lazada is rooted in Southeast Asia, having built strong local teams and partnerships over more than six years in each of the country that we are in.

Q10: Any comments on last-mile challenges and opportunities? Any comments on services such as IMDA’s federated locker system in SG?

eCommerce and cross-border trade have opened doors to a global product catalogue, giving customers greater product variety and choice. Nonetheless, the fragmented nature of Southeast Asia’s infrastructure development means that common products may not even reach everyone in the region.

The IMDA federated locker system in Singapore is an initiative that demonstrates the industry’s commitment to last-mile fulfilment.

The deployment and operation of parcel locker networks across Singapore is a key milestone to accelerate transformation in the logistics industry that brings convenience for consumers and productivity for retail companies.

At Lazada, we are similarly committed to creating an ecosystem that brings maximum customer convenience and ease for sellers with the help of our network of 3PLs. For example, our partnership with 7-Eleven and Ninja Van to offer the largest network of about 350 7-Eleven outlets as collection points give customers another convenient option to receive their parcels.

Q11: What are your thoughts on last-mile developments by competitors such as drone usage or JD.com’s plans for an underground urban fulfilment network?

We are focused on our strategy of building our own logistics infrastructure and fleet while deepening our relationships with the local ecosystem of partners. In last mile, Lazada invests in innovations such as fully-automated sortation centres, and alternative vehicles like bicycles, e-bikes and e-trikes.

Southeast Asia is a very dynamic market.  There are always new players, partners or capabilities becoming available, and regulations are constantly changing. Thus, innovation needs to be an ongoing process. We will continue to innovate guided by our winning strategy.

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