Lazada to build more hubs, logistics infrastructure nationwide

LAZADA, the largest online store in Southeast Asia, is looking into building more hubs and logistics infrastructure nationwide to deliver growing orders for groceries, pet supplies and telco loads. The company is exploring the Philippine market further to set gauges that target profitable areas for hub expansion. Lazada Philippines aims to complete the construction of additional hubs this year.

“For now, it’s mainly based on drop density. For example, there should be a specific minimum number of deliveries for a particular area before we put motorcycle drivers or warehouses there,” Lazada cofounder and CEO for the Philippines Inanc Balci said in an interview with the BusinessMirror.

At present, Lazada has 30 hubs nationwide, including those in the cities of Taguig, Cebu and Davao. As part of the expansion, Lazada is also moving into a nearby 30,000-square-meter warehouse in Santa Rosa, Laguna, in a few months.

“Lazada will continue investing in logistics infrastructure, both for in-house and third-party logistics services. Currently Lazada mainly uses in-house logistics service called Lazada Express for the majority of our deliveries,” Balci said.

Balci said the complex geography of the Philippines, which consists of over 7,000 islands, is only one of the bigger problems that make online shopping less accessible in the country compared to other Southeast Asian countries.

The Philippines’s limited Internet connection, digital-payment methods and knowledge of e-commerce among small and medium enterprises slow the growth of domestic online businesses. Balci said these lessen Lazada’s product suppliers and increase its costs of selling. “Our market is relatively nascent compared to other Southeast Asian countries, like Indonesia, mainly because of logistics, payment solutions and lack of competition. But we are looking forward to more competition because e-commerce will penetrate the market and help us grow the market further,” Balci said.

Although Lazada, dubbed The Amazon of Southeast Asia, has gained a 91-percent market share in Philippine e-commerce as of March, Balci said Indonesia remains the dominant market in the region, which comprises 20 percent of total consumers.

Thus, Lazada continues to work with the Department of Trade and Industry to build more communication infrastructure under the E-commerce Road Map of 2016-2020.

“We are optimistic more Filipinos will do more shopping online because infrastructure are now being put into place by the government and the private sector,” Balci said.

In 2015 the interest in e-commerce in the Philippines has grown closer to Indonesia’s.

A survey in 2015 by VISA International said 72 percent of Filipinos bought online. Among the respondents, 65 percent preferred card payment, while 34 percent chose bank transfer. In 2016 in Indonesia, 77 percent shopped online and 73 percent paid online, according to the Japanese firm Di Marketing Online Research in Asia.

The partnerships with new and various telecommunications companies for faster and broader Internet connection will not only ease payments through digital channel, but also increase advertisements on social media and spur innovative products online, Balci said.

Among the features of online shopping, 58 percent of Filipino respondents valued convenience and 62 percent wanted faster deliveries. Eighty percent of them also sought more local retailers. Balci said the additional hubs will store fewer supplies and categories of gadgets and other electronics, but more groceries, pet supplies and telco loads.  As of March, Lazada Philippines has offered 6.3 million items online.

“Our strategy will remain—that is to increase our brands, assortments and logistics infrastructures—so customers can reach more of our products at Lazada and at the same time, keep prices very affordable,” Balci said.