Lazada CEO: While online sales grows, most shopping is still done in stores

Lazada CEO, Hans-Peter Ressel speaks to Malay Mail Online during an interview at his office in Kuala Lumpur April 26, 2017. — Picture by Yusof Mat Isa
Lazada CEO, Hans-Peter Ressel speaks to Malay Mail Online during an interview at his office in Kuala Lumpur April 26, 2017. — Picture by Yusof Mat Isa

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KUALA LUMPUR, May 3 — In the last five years, the typical Malaysian online shopper has “transformed” from a young urban male to a family man. Or woman.

“When Lazada Malaysia was launched in March 2012, online shoppers consisted of mainly urban male youths aged between 18 to 23 who were constantly on the hunt for gadgets and cheap deals,” Hans-Peter Ressel, CEO of the popular online shopping platform, said.

“Our customer base was mainly young male college kids who were based in KL, Penang and Johor Bahru. They made up 90 per cent of our business.

“Today, we see a strong shift to families with kids. Fifty per cent of our customers are aged 30 and above. Also, it’s predominantly females now,” he told Malay Mail Online recently.

“We also see a strong shift from electronic items to lifestyle, health, beauty and fashion related items. The share of electronic products is much smaller today.”

According to Ressel, Lazada attracts about 30 million visits to their website every month.

Last year, statistics portal Statista estimated the total revenue for the Malaysian e-commerce market would hit US$894 million (RM3.75 billion) with the revenue expected to see an annual growth rate of 23.7 per cent in the next five years.

At present, electronics and media make up the bulk of the e-commerce market with a volume of US$380 million (RM1.64 billion).

Internet user penetration is at 61.7 per cent this year and is poised to hit 76.8 per cent in 2021.

Shifting away from urban centres

While online shoppers were mostly centralised in metropolitan areas in the past, they can now be found in rural areas, Ressel said.

“More than 80 per cent of our customers are outside of Kuala Lumpur,” he added.

He also said that Lazada has a huge customer base in East Malaysia due to the lack of shopping malls there.

“Some people in East Malaysia don’t have access to a wide range of products in shopping malls, that’s why they adopt e-commerce faster.

“If we can provide a delivery period within two to three days, that’s a great alternative for them. It’s very convenient.”

Earlier this month, online payment service provider iPay88 revealed a 161 per cent rise in its online transactions from 2015 to last year.

Its “Malaysians’ Online Buying Patterns” study showed that it processed 38.2 million transactions last year compared to 14.6 million transactions in 2015.

According to the 2016 Bain Brief and Google’s Consumer Barometer, 14 million people — almost half of Malaysia’s population — researched products and services online.

However, it pointed out that the main challenge faced by e-commerce is that only 29 per cent of consumers convert this research to an online purchase. A lack of trust is cited as a reason.

According to the research, Lazada and Zalora placed at number two of the e-commerce market share in Malaysia with a majority of 12 per cent. Mudah placed at number 1 with 19 per cent of the market share.

Demise of retail outlets?

While the growth of e-commerce is accelerating at an extraordinary rate in Malaysia, Ressel estimates that 80 per cent of transactions still takes place in retail outlets.

“E-commerce is just like two to three per cent of total retail in Malaysia and it will increase over time. We saw this in every market, the moment you hit two per cent, it only further accelerates to maybe more than 10 per cent.

“But, 80 per cent of retail business is happening offline. The truth is, how do you engage with customers in all channels?” said Ressel.

Lazada addresses this issue by collaborating with various established brands like Tesco, Senheng, Watsons, Guardian and many more. This is done by having joint marketing and advertising campaigns with brands, he said.

“Combining these two worlds is what we do with brands and retailers. They are interested in engaging with their customers online and we can help them with our platform.

“There will always be people who prefer to spend time at malls and experience service in a retail store.”

In December last year, the Retail Group Malaysia (RGM) predicted that 2017 will be  a challenging year for Malaysian retailers as consumers are likely to cut back on spending in the first half of the year.

However, RGM projected a 5 per cent growth in the nation’s retail sales as they are anticipating a “significant recovery” in the second half of the year.

RGM also pointed out in its statement that Malaysia’s 2016 retail sales growth contracted from 3.5 to 3 per cent.

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