Unilever, Lazada team up to ride e-commerce boom in region

For Mr Bittner and Mr Sigismondi (far right), the alliance will allow Lazada and Unilever to exploit emerging trends more readily while seeking out ways to overcome key logistical issues and other e-commerce challenges.
For Mr Bittner and Mr Sigismondi (far right), the alliance will allow Lazada and Unilever to exploit emerging trends more readily while seeking out ways to overcome key logistical issues and other e-commerce challenges.PHOTO: DIOS VINCOY JR FOR THE STRAITS TIMES

A boom is afoot for e-commerce in South-east Asia, with major players reaping strong sales and seeing even brighter prospects ahead.

Consumer goods giant Unilever sold more products online last month than it did all of last year.

"In the past three years, our e-commerce sales in the region have grown nearly 50 per cent. We expect growth of three times in the next three years," Mr Pier Luigi Sigismondi, who is president of Unilever South-east Asia and Australasia, said.

Meanwhile, at Lazada, an e-commerce platform that focuses on South-east Asia, items shipped last year were up 150 per cent from 2015.

"Our biggest markets are Thailand and Indonesia. But all our markets are growing strongly, even a mature one like Singapore - our youngest, which we entered just five years ago, and also our fastest-growing," said chief executive Maximilian Bittner.

The two men spoke to The Straits Times last week as they unveiled their new e-commerce alliance.

The move will see Unilever expanding its online sales via Lazada, building on an existing partnership that includes an exclusive Unilever online store launched on Lazada Singapore earlier this year.

There will also be more social media content around Unilever products to engage consumers.

But more importantly, the team-up will be a process of collaborative learning, to discover new trends and solutions in the still evolving landscape of e-commerce.

A key priority will be learning how to overcome logistical inefficiencies holding back the use of e-commerce, especially in large and diverse markets such as Indonesia.

"One challenge is that the logistics infrastructure is still underdeveloped," said Mr Sigismondi. "Some congested areas in big cities don't allow direct and affordable deliveries. Consumers in rural areas are also hard to reach cost-effectively."

Mr Bittner noted the alliance will create one of the biggest warehousing networks in South-east Asia.

Lazada is also eager to learn more about regional consumer habits through Unilever's vast customer base.

"For example, we want to figure out the right packaging size so we can minimise shipping costs. It's about studying things like payment basket size, and we can't possibly do that by ourselves," said Mr Bittner.

The two companies have come together at a time when the fast-moving consumer goods (FMCG) segment is becoming a major part of e-commerce.

Mr Bittner said FMCG was Lazada's fastest-growing category last year, as more people went online to shop for food, healthcare and fashion products.

Lazada, which is majority-owned by China's Alibaba, with Temasek Holdings among its shareholders, acquired online grocer RedMart in November last year.

Unilever is transforming rapidly, but it is still mostly a physical retail business in South-east Asia, where e-commerce now accounts for less than 30 per cent of the total.

"I don't see e-commerce becoming the dominant retail channel," said Mr Sigismondi. "But there is enough space for the two to coexist and to complement each other. The future is about having a multi-channel presence - letting people buy where they want to buy, in a supermarket, on the street, on the phone."

The notion of online versus offline is "archaic", Mr Bittner noted.

"We're always online, even when you think we're offline. Go into a shop and I bet you'll find half the customers looking at their phones.

"So there is no separation, and people who shop offline will look online for information. An effective e-commerce platform is about more than just transactions. It's also about content, education and research for customers."

A version of this article appeared in the print edition of The Straits Times on April 03, 2017, with the headline 'Unilever, Lazada team up to ride e-commerce boom in region'. Print Edition | Subscribe