This article first appeared in The Edge Malaysia Weekly on November 13, 2017 - November 19, 2017
THE biggest sale season of the year has already kicked off with the West ramping up preparations for Black Friday in two weeks and Christmas next month. In the East, while there is Christmas and other festive occasions, there is, more importantly,
Alibaba Group’s Singles Day on Nov 11 and even Double Twelve on Dec 12, whose catchy marketing and strong sales success have become the envy of other e-commerce platforms.
What was believed to have been created as an anti-Valentine’s Day by college students in the 1990s, the significance of Singles Day on Nov 11 has become synonymous with Alibaba’s major 24-hour 11.11 Global Shopping Festival, dubbed the greatest online shopping day of the year in China.
Today, it may well be the largest single-day online sale event in the world.
Started in 2009, the 11.11 Global Shopping Festival began with just 27 merchants on its Taobao Mall (Tmall) website as an event for local merchants and consumers to raise awareness of the value in online shopping. Fast-forward to 2016, and the shopping festival had nearly 100,000 merchants participating in it with consumers spending RMB120.7 billion (US$17.79 billion) during the 24 hours.
Some say this is perhaps what Amazon’s Prime Day aspires to be. While Amazon’s annual sale event in July has been regarded a success after debuting two years ago — the second edition last year was declared the “the biggest day ever for Amazon” — the scalability of the two events is differentiated by its target group.
Amazon Prime Day is open only to Amazon Prime subscribers whereas Alibaba’s shopping festival is open to all shoppers. Exact sales figures were not released by Amazon but it did reveal that its 2016 event recorded more than a 50% year-on-year increase in orders from the US while more than one million customers were recorded to have used the Amazon application tool for the first time on last year’s Prime Day.
Amazon extended its Prime Now delivery service to Singapore in July, giving Singaporeans the added option of having their items delivered within two hours. While this is a significant move for Amazon as it tries to increase its presence in the emerging markets, it does not pose a threat to existing regional e-commerce platforms that have grown exponentially, such as Shopee and Lazada.
Some would say the Alibaba effect is being felt in Southeast Asia as the success of its 11.11 shopping event has evidently begun to influence the annual online sale of Shopee and Lazada, which have now adopted the same date and marketing scheme. Shopee users, however, enjoy a longer sale period of between Nov 1 and 11 while for Lazada users, it is a month-long affair.
In fact, Lazada’s annual Online Revolution sale has been taking place on Nov 11 since 2013. It was initially held on Dec 12 when it debuted in 2012. Given that Alibaba boosted its controlling stake in the group to 83% last year, it makes sense for Lazada to share the same sale date, reflecting a natural alignment of the two.
The group expects this year’s event to generate higher sales with a “potential uplift of 12 times in orders for Online Revolution Malaysia”, says Lazada Malaysia chief operating officer Kevin Lee during a Lazada warehouse tour.
While he cannot disclose the percentage of Online Revolution sales to overall revenue, he does say that Lazada Malaysia’s current online marketplace contributes more than 80% to overall sales.
As for the group’s earnings, a check with the Companies Commission of Malaysia shows that Lazada Malaysia’s registered company, Ecart Services Malaysia Sdn Bhd, registered revenue of RM173.45 million in its financial year ended Dec 31, 2015 — up considerably from RM6.87 million in FY2012. Its loss after tax has been widening, however, from RM25.54 million in FY2012 to RM193.05 million in FY2015.
Lee says on the first day of Online Revolution 2016, half a million items were ordered in Malaysia. In the other five Asean states where Lazada is present — Indonesia, Singapore, Vietnam, Thailand and the Philippines — about two million items were ordered on the first day. Lazada Malaysia’s website and mobile application collectively captured more than three million visits on a single day last year during the sale.
In anticipation of a larger number of orders in this year’s sale, Lee says the group has been busy over the past few weeks to build more inventory storage space.
In Malaysia, Lazada set up seven fulfilment centres across the country to help process orders faster as only 20% of the orders are based in Kuala Lumpur; the rest are from across the country.
A new 240,000 sq ft warehouse with a capacity to hold one million items was also built in Subang Jaya, Petaling Jaya, where around 700,000 items have been stored so far for Online Revolution. In total, Lazada Malaysia has over 80 million items in inventory.
Lee explains that e-commerce is not limited to the city folk and a good example to illustrate this is the location of its first order for last year’s Online Revolution.
“At the stroke of midnight for last year’s Online Revolution, the first order was for a handbag and it came from Kota Baru, Kelantan. Who knows where the first order for this year’s event will come from,” Lee smiles. He, however, declines to disclose how much was spent on the warehouse expansion.
Speaking to The Edge after the warehouse tour, Lee downplays the severity of logistical and back-end troubles that have resulted in more customer orders not being fulfilled or going missing.
On the surge in customer complaints, he says, “Being on the scale that we’re at, one small error may seem bigger than it is. We are open to feedback and comments. What we were doing [at the time it happened] was improving our systems in preparation for Online Revolution. In the future, we will be more prepared for these things.”
Moving forward, Lee says he is excited to have Lazada benefit from the trade opportunities presented by the Digital Free Trade Zone (DFTZ), which was officially launched on Nov 3. The government had announced that it would provide RM83.5 million for the construction of infrastructure for the first phase of the DFTZ Aeropolis, KLIA — a joint initiative between the government and Alibaba.
The Aeropolis also marks Alibaba’s first regional e-fulfillment hub outside China.
“The DFTZ coming in has been a sort of blessing because it will enable us to do Southeast Asian cross-border trade. We have taken our processes and systems and put them into [our warehouse at] DFTZ. What happens now is DFTZ becomes one of the points in our Southeast Asia network, which has always been our vision,” says Lee.
“Imagine opening up a customer base, from a population of 30 million in Malaysia to 600 million in Southeast Asia. I think this is the opportunity that Malaysia needs. Small and medium businesses too should work hard to put the right products there.”
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