Lazada, Southeast Asia’s largest e-commerce / online shopping platform, and a unit of China’s Alibaba has announced a new partnership with Unilever to provide Unilever’s Fast Moving Consumer Good (FMCG) products to consumers across the region.
The Lazada platform provides almost 40 million products across a variety of verticals including electronics, fashion, home, sports and personal care. The company is active in Southeast Asia in six markets including – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Lazada reported that growth in the FMCG category in 2016 was 180% above 2015’s sales making it the platforms strongest growth category. Both Lazada and Unilever expect that the FMCG category will continue to rapidly expand as more consumers shop online and they project FMCG sales of $20 billion USD by 2020.
Pier-Luigi Sigismondi, President of Unilever Southeast Asia, said in an interview on CNBC television that the partnership between Unilever and Lazada "will allow us to grow our online sales by three times compared to what we saw in 2015 and 2016” and that "consumer trends are all going online, so the opportunity is exciting." He also said that Unilever's online sales in Southeast Asia have been higher this March than in the entirety of 2016 and that tailored online marketing is the primary reason.
One of the advantages of the partnership is that consumer demographic and sales trend data that is collected by Lazada will allow Unilever to better understand consumer behavior patterns and then target them individually online and this data will also help the company’s brick-and-mortar sales.
Another benefit of the partnership for Unilever will be the ability to test new products in any of Lazada’s markets. The company can then formulate regional product positioning, pricing and distribution strategies for each product. Product tests will allow the company to offer “exclusive” products that are available only through Lazada or and give it the flexibility to expand distribution of these products to offline retail.
Online / retail sales in Southeast Asia have plenty of room for future growth, with market research firm Frost & Sullivan noting that e-commerce / online sales account for just 2.5% of total retail sales in Southeast Asia, compared to online sales more than 12% in China.
While both companies are optimistic about the future, they are also realistic about the multiple challenges that they face. The first challenge is the differences in infrastructure and logistics in each of the markets that they’re active in. Clearly, delivery in a market like Singapore is much easier than in Indonesia or the Philippines.
The second major challenge is regional credit card usage remains quite low. Credit card ownership and usage is high in Malaysia and Singapore, but in Indonesia, the Philippines, Thailand and Vietnam the average is less than 6%.
To overcome these and other challenges, the companies have announced that they plan to work closely together on data, fulfillment, marketing, social commerce, supply chains and talent development to grow their business in the region.
Alibaba’s $1 billion USD investment in Lazada was one of Asia’s top investment deals in 2016 and Unilever's deal with Lazada is similar to a partnership it made in 2015 with Alibaba in China which has allowed both companies to reach more Chinese shoppers.