Inanc Balci, the 30-year-old investment banker from Turkey who helped establish Lazada in 2012, is starting an online revolution in the Philippines.
Balci, who has a double degree in Industrial Engineering and Economics from Purdue University in the United States, overseas a team of 1,800 young Filipinos, nearly half of them handling calls at the Lazada Philippines’ headquarters in Makati City to talk to customers and merchants about more than a million products.
Over the past two months, his company has been recruiting more people in preparation for Nov. 11, which he expects to be the biggest one-day e-commerce phenomenon in the country, with the offering of 200,000 special deals.
500 orders a minute
Lazada Philippines expects 500 orders worth P3 million per minute at peak on Nov. 11. More than 5,000 people, including Lazada employees and third-party logistics personnel, are expected to pack, ship and deliver packages. Delivery is expected to take only 1.7 days starting from the time of online transaction, according to the company.
“This is the biggest event of the year. We have a one-day event on Nov. 11, starting at midnight. Then, we have a month long activities. On Nov. 11, we have for customers up to 95-percent discount versus the market price. We talk to our merchants and suppliers and we make sure that they give the best price possible in the market,” Balci, the chief executive of Lazada Philippines, says in an interview in his office at Salustiana Dy Tower along Paseo de Roxas.
Lazada Philippines occupies three floors of Salustiana Dy Tower, where around 700 employees handle calls from customers and merchants. The company has become so big, it now has to find additional office space, he says. Lazada Philippines has more than 4,000 merchants selling over 1,000 local and international brands.
“We are finally moving to the Fort. We have been here in this building [Salustiana Tower] for three years. The company is getting bigger, so we will be moving some of the people to the Fort. We will still keep this building, so some of them will still stay here,” he says.
Lazada Philippines also employs more than 1,000 in its two giant warehouses in Muntinlupa City and Cebu City and 12 logistic hubs. The company will add another warehouse to serve Mindanao customers, he says.
Balci says profit is not the motivation for holding the big event. “The reason why we do this event is not to make revenues, but to make e-commerce penetration in the Philippines bigger. It is like a step-up for the whole market, because it gives an excuse for first-time customers. There are millions of customers who never shop online. With this event, the price is so low, it is a no-brainer for them. If they say they will try and choose something, then they become life-long e-commerce customers,” he says.
Low e-commerce penetration
E-commerce penetration rate, excluding food and travel, in the Philippines is around 1.5 percent, a figure that Balci hopes will double to around 3 percent, with Lazada’s online revolution. The company is teaming up with merchants, telcos, banks and logistic companies to provide the best online deals to customers, he says.
Aside from the 11/11 flash sales, Lazada will continue the promotion until Dec. 12, when customers can expect 200,000 marked-down deals across 13 product categories including electronics, fashion, toys and home items. Lazada Philippines expects to set a new record with over 2 million visits to its website and mobile app. Among the brands that have confirmed participation in the sale are Asus, Lenovo, Alcatel, Cherry Mobile, Starmobile, Bosch, HP, Philips, Canon, Epson, Acer, Intel, P&G, Nescafe, Milo, Nido, Unilever, Belo, Huggies, Mamy Poko, Timex and Giordano watches.
Lazada Philippines, where Germany’s Rocket Internet holds a 25-percent share, now accounts for 80 percent of the e-commerce market in the Philippines and also has leading positions in other Southeast Asian countries, says Balci.
Presence in six countries
“We started the company in 2012 in six countries. We have market leadership positions in five original markets. In the Philippines, we have around 80-percent market share, in retail commerce, excluding travel and food,” he says.
Balci denies that Lazada Philippines has a monopoly of the online market, saying he prefers the term market leadership. “Monopoly is usually in established markets. It is not a monopoly, but market leadership. We foresee that other companies will enter the market as well. At the same time, the market size will grow exponentially, which has been happening over the last three years,” he says.
Other major market players in Philippine online commerce are Zalora, where Rocket Internet also has an investment, and Metro Deal.
Balci says Lazada has 6.8 million customers across six Southeast Asian countries, including the Philippines, Thailand, Indonesia, Vietnam, Malaysia and Singapore. In the first half of 2015, the company handled 7.8 million transactions in the region.
“In six countries, the Philippines is one of the largest, between number 2 and number 3. Indonesia is the largest,” he says. “Lazada is No. 6 website in the Philippines. We have more visitors than Wikipedia and Twitter. It is the sixth most visited website, according to SimilarWeb,” he says.
Balci says while Lazada remains a startup, “we came to a size that also requires professional corporate governance. So, it is a mixed balance between the two for us.”
He says Lazada continues to invest in the Philippines, with a goal of growing in size, instead of making a profit. “Profitability is not something that is extremely important for us at the beginning. We are actually investing in the market, especially in the Philippines, which is still in early days of the market. If we try to make profit, then the market will not grow as much as you want. That loss is like an investment into the market,” he says.
He says the e-commerce market in the Philippines enjoys an explosive growth. “We foresee that growth will continue in the market. It is very hard for us to predict growth, but I can tell you that the explosive growth is going to continue,” he says.
The company formed its own logistics company called Lazada Express, which now delivers half of the Lazada shipments. “At the same time, we use a pool of third-party logistic companies. We have been talking to them for more than two months, getting them ready for the surge of orders. The team is ready to deliver for all our customers. We have been working for this for so long,” says Balci, referring to the Nov. 11 event.
Lazada is also the first and only online company with a cash on delivery network. “We are still the only company that can offer cash on delivery anywhere in the Philippines. We do it for free, for orders of at least P1,000. This was one of the biggest driving forces behind Lazada,” he says.
“With this sale, we are getting extra employees. I think we are getting about 2,000 people, including the agency temporary workers. Let us see how it goes after the sale,” he says.
Balci claims that Lazada is not trying to compete with shopping malls and stores. “Most of our merchants are already in shopping malls. So with these channels, we don’t compete with shopping malls. This is like additional channels to retailers to reach out to customers who don’t have access to shopping malls. Around 98.5 percent still buy at shopping malls,” he says.
Lazada’s customers in the Philippines are Internet users. “We have slightly more male customers, at 51 percent versus 49 percent female. With age distribution, the biggest bucket is between 25 and 35 years. There are a lot of millennials as well,” he says.
What is driving the growth of e-commerce, he says, is the mobile ecosystem. “Not everyone can afford a laptop. What we see happening is that they get smartphones. There is Android phone available at less than P1,000, which is very affordable. We see people use their smartphones. This year alone, there are additional 10 million people in the Philippines who are becoming smartphone users. The penetration is increasing from 30 percent to 40 percent,” he says.
“Right now, more than half of our volume is coming from mobile ecosystem, which is great for the Philippines. And we expect it to continue growing,” says Balci.
Balci says Lazada will expand to deliver “many more million products.” “At the same time, we will continue to offer lower prices and provide the best available e-commerce service in the Philippines,” he says.
“Our mission is to be the online destination, selling and shopping company in Southeast Asia. Our mission is for both our merchants and customers. We want to be the destination website, so that people will come to Lazada if they want to buy something and at the same time have leading position in all of our markets,” says Balci.
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