Lazada is the largest Southeast Asian e-commerce platform with a market share of 57% in Indonesia. It has employed over 10,000 people under its business.It has made its presence in the Southeast Asian countries with its successful business model.
Thus this makes us keen to know the business model of Lazada. In this blog, we have discussed in detail the business model of Lazade which includes its revenue model, product segment, customer analysis, etc.
Before we start with its business model let us know about Lazada as a company.
Lazada was founded in 2012, by Maxmilliam Bittner and owned by Alibaba group. The company was founded to imitate Amazon’s business model in Southeast Asia. The company was successful in doing so because of the weak presence of Amazon in these regions.
Lazada is a B2B and B2C platform where merchants can buy and sell products via mobile as well as website.
In 2012, it launched its first website selling goods directly to consumers in Malaysia, the Philippines, Thailand, and Vietnam and in 2013, it started allowing third parties to provide goods on this platform.
In 2016, the company was majorly owned by the Alibaba group. Lazada kept on growing as an e-commerce platform. Lazada’s mission is not only to become the biggest shopping platform but also to provide technology, payment solutions, and logistics to the local business owners.
Let us now see the business model of Lazada in detail.
Business Model of Lazada
A business model helps a business in providing insights into how the company is operating. It provides information about a companies cost structure, revenue model, product portfolio, etc.
The aim of Lazada is to get new customers while competing more effectively in some products.
Lazada embraced Google AdWords’ flexible bid strategies. These flexible bid strategies present options that allow businesses to automate their cost-per-click bids to achieve specific goals such as ROI maximization, conversion maximization, cost per acquisition, and visibility.
Lazada followed a process called target outranking share. In this target outranking share bid procedure, the companies can raise or lower their bids up to the predefined cost-per-click with the aim of outranking those of others. Because of this, the traffic increased by more than 30% and the share grew by 50%.
Let us now see step by step the business model of Lazada by starting with its revenue model.
Business Model of Lazada – Revenue model
Similar to Alibaba and Amazon, Lazada found multiple ways to earn money. Let’s dive into them:
In the Lazada Marketplace, the merchants sell their products and the company takes care of the payments and fulfillment process of these authorized sellers. For these services, it takes a commission fee of 1% to 4% depending on the product category.
LazMall is a better version of the marketplace that serves “selected brands from around the world and locally, top online brands and authorized brand distributors”. In this, commission for each transaction is capped at 5%.
Top Up and eStore
Lazada provides a wide range of services in Top Up and eStore including –
- Recharge for prepaid phones
- Downloading services such as Xbox or Spotify
- Buying gift cards, insurance, coupons for food and beverages
- Getting various travel deals
Lazada takes a commission for these services. The charges are not disclosed.
Lazada acquired delivery start-up RedMart in 2018. The business is now Singapore’s leading online grocery marketplace. Here, Lazada charges a fixed fee on each delivery and takes a commission based on the total order amount.
Lazada is providing various payment and funding solutions, especially in under-served Southeast Asian regions.
Business Model of Lazada – Product Segment
Lazada has a wide range of products: men’s clothing, women’s clothing, groceries, personal care items, electronic appliances, and more. It also provides its customer with a 15-days return policy from products of LazMall (except for non-returnable products). Shopee provides a 7-days return policy.
Lazada is a brand that provides quick delivery. It is not only focusing on selling products but also focuses on providing payment solutions and logistics to the local merchants.
Business Model of Lazada – Key Activities
The main key activities of Lazada’s are product delivery and e-wallet. This includes maintaining their e-commerce platform, logistical operations and secured servers to facilitate financial transactions – very similar to the Business Model of Amazon.
Business Model of Lazada – Competitor Analysis
Lazada has had a lot of competitors since the time it is growing. Some of Lazada’s competitors are –
Shopee is the market leader in the e-commerce business in Southeast Asia and Taiwan. It was established in 2015 which was made to provide an easy, secure, and fast online shopping experience. This makes Shopee a tough competitor for Lazada
Zalora is an e.commerce business founded by Kinnevik AB and Rocket Internet which operates in different parts of Southeast Asian countries. It was founded in 2012 and is headquartered in the central area, Singapore.
eBay is one of the oldest e-commerce websites in the market. It allows its users to sell their products and auction them on their website. It was founded in 1995 and has a market share of 3.46% in the world.
The main competitor of Lazada is Shopee.
Business Model of Lazada – Active users
In the first 4 months of 2021, Shopee had more than 54,600,000 monthly web visits which made it the most visited e-commerce website in the country. Lazada was the second with monthly web visits of 38,286,700
On the analysis of the business model of Lazada, we have seen that it has implemented its business model very well and has a good position in the market.
It has different revenue streams some of which are the Lazada market place where it charges commissions depending on the product, grocery delivery, fintech solutions, etc. It provides a wide variety of products in different categories giving the customers ease in shopping and providing them with 15 days return policy.
It has many competitors in the market such as Shopee, Zalora, and eBay.
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