Pierre Poignant is an original “Lazadian” and one of the founding members of the company when it was set up by German group Rocket Internet in 2012.
Lazada is one of Southeast Asia’s biggest e-commerce platforms, yet when the company was founded, e-commerce was in its infancy, especially in the developing region of Southeast Asia. The company now covers six countries in the region, serving a diverse range of customers across different cultures, ethnicities and religions. In 2016, Chinese e-commerce giant Alibaba acquired a controlling stake in the Southeast Asian e-commerce platform, and has invested $4 billion in its southern subsidiary. As the company restructured after the Alibaba buyout, Poignant’s star rose. First joining as the chief operations officer and cofounder, he initially cut his teeth in the logistics side of the business, but, by the end of 2018, he was installed as chief executive officer.
Southeast Asia is now one of the fastest-growing regions in the world. Its digital economy is a hotly contested market, with both international e-commerce giants and nimble homegrown players battling it out for market share. Last year the region’s Internet economy crossed the $100 billion mark, and it is expected to triple to $300 billion by 2025, according to a report by Google, Temasek, and Bain & Company. The study showed that Southeast Asia is home to the world’s most engaged Internet users and is shaping technology trends. Of course, this research was conducted pre-COVID-19 and the new reality that retailers and consumers now face.
Across Southeast Asia, countries and regions have faced extended lockdowns in the battle to stop the spread of COVID-19. Lazada’s headquarters, and Poignant himself, are based in Singapore, which is currently in a “circuit breaker” period, essentially a partial lockdown with workplaces and schools closed until the beginning of June, for now. Ahead of the interview with WWD, Lazada had said that its Singapore-based online grocer Redmart, which the company acquired in 2016, was tweaking its product offering and updating its systems in response to a surge in orders due to COVID-19 concerns. The company has made changes to the range of products available during these uncertain times in order for customers to “receive their essentials in a timely manner.” As Lazada works across multiple countries, the rules and requirements of local governments vary, and business operations have been following suit.
Worldwide, the fashion industry has been, possibly forever, changed due to the effects of COVID-19. However, online retailers such as Lazada now find themselves in a unique position, with a captive audience of locked-down consumers. Poignant noted that Lazada is in conversation with many brands looking to join the platform, as they try to garner consumer engagement during the pandemic.
Here, Poignant discusses the e-commerce model during these troubled times.
WWD: Pre COVID-19, what were your main initiatives at Lazada for the year?
Pierre Poignant: If you ask the question in the context of COVID-19, actually in many ways our priorities do not change. I think we look at our business, we look at the environment around us and we have quite a long-term view. We want to build a digital economy. We are here to serve 300 million consumers in Southeast Asia. We are here to give opportunities to SMEs and businesses across the region to go online, to create their business online. We want to create millions of opportunities for them. And that doesn’t change. I think what we see is the nature of our business changing a little bit. The kind of business mix. What we see is an acceleration, actually, of consumers or sellers going online. And so, therefore, now we are very busy working on making this happen faster for the economy around us.
WWD: What about the types of products you’re selling? Redmart, for instance, has rejigged what it is making available, and these essential goods, or FMCG, might not have as big a profit margin as some of your other items.
P.P.: I think, across the region, what we see typically is essential products are in higher demand. Of course, products directly related to health and safety in this context are in very high demand. Then essential products, groceries, home products are in high demand, whereas products, like fashion products, are in softer demand. So, that’s what we see as a mix. Now, in Redmart per se, what we’re doing is reducing our range so that we are able to actually serve more customers. So our prime purpose is to serve more customers and increase capacity for the consumers in Singapore. That’s why we’re doing that. Actually, to be honest, I have not even looked at the impact on profit. It’s not really a consideration.
WWD: When we last met, you said that you thought that Southeast Asia is at the beginning of a “very, very strong e-commerce digital economy.” Does COVID-19 change this prediction?
P.P.: I think it will accelerate. What we see is that the businesses today that have an omnichannel strategy, a digital footprint, are doing much better than the businesses that are purely on one channel, offline. And what we see is that we have more than double the number of sellers we on-board every day on the platform since the beginning of the crisis. So we see an immediate direct acceleration of businesses that want to digitalize. I think, on the consumer side, we see a very strong engagement of consumers on our platform. So the demand changes, of course, but you can see the engagement is stronger to spend more time on the platform, they buy different things. That is here to stay. So we believe that we are going to see new ways of consumers engaging. We have, in Singapore, people that do livestreaming on our platform explaining, you know, how you cook at home, how you exercise at home. We have the example of sellers doing this kind of content and they engage with the consumer like this. They find new ways to engage with the consumers and I think this is here to stay. We work with brands and we have a lot of KOLs. The brands, a lot of their retail footprint is closed, so they work with us to still continue to engage with the consumer, while one of their main engagement channels, which is the retail footprint, is closed or doesn’t have any footfall. So we see all of that. And I think, when the crisis is over, and we all hope very soon, these habits are here to stay.
WWD: It’s interesting you mentioned KOLs because that is a Chinese buzzword and, of course, Alibaba is your parent company. Has Alibaba helped you move forward on this path to drive more digital engagement? Have you integrated some of its practices into Lazada?
P.P.: This is something that happens a lot in China, where you see a lot of customers or brands that go online and present their products through online streaming. I think this is something that we’ve done in Southeast Asia. The technology is very straightforward. We have taken it up from Alibaba, and that is something very easy to do because we share the same backbone. Now, how this gets translated into Southeast Asia, or how we do it, is actually quite different, given the social fabric of Southeast Asia, given the type of products, how the people engage with their consumers. I think we see things that are quite different here.
WWD: It is very different. Your market is so diverse, with different cultures, religions and preferences, whereas China is more of a monolith. How are you able to do this?
P.P.: Ninety percent of our staff are in the local countries. The vast majority of our staff are locals or live and breathe [locally] and all of our sellers are locals. So our ecosystem, our practices, are completely anchored in each of the countries. The way we do marketing for the types of products, if you go on the platform in Indonesia or you go in Thailand, you’re going to see a very different platform and a very different way the sellers do livestreaming. The kind of product they sell, how they do the content, how they write about the description, all of this is very different market for market.
WWD: Let’s talk about growth. How do you measure profitability and is profitability going to be an unattainable goal in this economic climate?
P.P.: The way we look at our business is we focus on two core metrics, two core objectives. The first one is our customer base — so our long-term target is 300 million consumers in Southeast Asia by 2030. Today we have more than 60 million consumers that we have as annual buyers. So people that bought on Lazada in the past 12 months. And we focus on our sellers. We have hundreds of thousands of SMEs and brands. We want to make sure that we have engaged customers and engaged sellers and the rest will follow. Today we are in a phase, obviously, where we invest for growth. That’s very clear. But if the engagement of the consumers is here, if sellers can make a business and create value on the platform, I think the rest will follow. E-commerce is a proven model in the world, we have the know-how, we have the technology to make it happen.
WWD: In terms of categories, what are you seeing growing overall, but especially during the virus? How is fashion faring?
P.P.: I think fashion has been our most successful and fastest-growing category. In the past year, we have more than half of our consumers buy fashion products. Last month, orders for our fashion and beauty categories made up about 40 percent of our business in Southeast Asia. And so it’s our largest and fastest-growing category. I think, with COVID-19, what we’ve seen is a slowdown in the growth of fashion, but it’s still growing. Basically, consumers, when they don’t go out, they buy less clothing. It’s as simple as that.
WWD: Aside from COVID-19, what are your main challenges to the business?
P.P.: I think the main challenges to the business are linked to our ecosystem or the infrastructure around us. So payment, logistics or, for example, digitization of the sellers. These are typically challenges because they introduce friction across the business. So that, we need to address. To give you an example, in terms of payment, we have not a lot of consumers in Southeast Asia with easy access to digital payments. So what we’ve done, and we’ve done for a long time, is we have used cash on delivery as a way to bring consumers online. Then, a year-plus ago, we launched a [digital] wallet in every market to make sure we transfer the consumer to an online payment method.
WWD: Around the world, delivery drivers are being hailed as the superheroes helping to keep countries running. How does it make you feel knowing that you’re helming one of these international operations working on the frontline of COVID-19?
P.P.: I’m very proud of the colleagues. It makes me feel proud and happy to see how the people are stepping up on this. And they have. If you see around the world, around the region, around our colleagues, there is a very strong sense of stepping up to help the community. I announced that we work for home, but our logistics colleagues, they cannot work from home. So we talk about it. And then, after that, the hub manager of Medan, he dings me and he says, “Pierre, I’ve just joined the company.” He says, “I’m so happy to join in. Don’t worry. We are here to serve the community and we’ll stand there and do our job in the hubs and make sure we can deliver to the people around us.” I was very happy to hear that. A lot of people are stepping up and that makes me very proud and happy.