Understanding Lazada Group’s Unique Business Model

A Comprehensive Guide on how the Lazada Group is revolutionizing and dominating the e-commerce realm

    1. Introduction
    2. The Birth of Lazada Group and Its Gradual Development
    3. The Business Model of Lazada Group
    4. Over to you

Born from the digital revolution, E-commerce has emerged as a powerful force, fundamentally altering how businesses operate, and consumers engage with products and services. At the forefront of this sweeping change stands Lazada, a trailblazing e-commerce solutions company that has harnessed the potential of the digital age to revolutionize the Asian e-commerce landscape.

Lazada Group has taken the lead, pioneering an innovative approach that caters to diverse consumer preferences and cultivates an entirely new way of engaging with commerce.

By seamlessly blending cutting-edge technology, an adaptable business model, and a deep understanding of local markets, Lazada has capitalized on the e-commerce wave and molded it to its advantage.

In this blog post, we delve into the intricacies of Lazada Group‘s success story and business model, along with the key factors that have propelled its rise to dominance in the Asian e-commerce scene.

The Birth of Lazada Group and Its Gradual Development

Lazada Group‘s journey began in 2012 when it was founded by Rocket Internet. From the outset, the company focused on penetrating underserved or largely untapped Southeast Asian (SEA) markets. 

By entering countries with developing online shopping cultures, Lazada was able to position itself as a pioneer and gain a first-mover advantage. This strategy allowed it to shape consumer behavior, build brand loyalty, and create B2B and B2C platforms for buying and selling via mobile and website.

Through these platforms, it could sell goods directly to consumers in Malaysia, the Philippines, Thailand, and Vietnam in 2012, 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 to become the biggest shopping platform and provide technology, including e-commerce order management and logistics management software, payment solutions, and logistics to local business owners.

The Business Model of Lazada Group

Lazada’s success hinges on its adaptability to local preferences in the Asian market. Rather than imposing a one-size-fits-all approach, Lazada Group customizes its platform to accommodate unique shopping habits and cultural nuances in each country. This involves offering localized languages, payment methods, and a product range tailored to local tastes. Their adaptive strategy has fostered familiarity and trust, differentiating Lazada from global competitors. Lazada’s strategic approach encompasses partnership, business-to-consumer, and marketplace strategies, each contributing to its success.

Now, let’s delve into these strategies:

1. Leveraging Cross-Border Trade

Lazada has strategically tapped into the trend of cross-border e-commerce, allowing sellers from one country to access customers in another. This has greatly diversified Lazada’s product offerings and fostered a thriving ecosystem for global sellers and buyers, strengthening its status as a unique one-stop shopping destination.

2. Logistics and Fulfillment Excellence

Lazada addressed the complex Asian e-commerce logistics by investing in robust fulfillment networks and advanced logistics management software. They strategically placed fulfillment centers across countries for efficient order processing and on-time deliveries. This dedication to smooth logistics enhanced customer satisfaction and loyalty, giving Lazada a competitive advantage.

3. Innovative Payment Solutions

Lazada Group addressed diverse payment preferences in Asia by offering innovative solutions, including digital wallets, buy-now-pay-later, and installment plans. This inclusivity expanded their audience and streamlined payments, boosting conversion rates and customer loyalty.

4. Seamless Mobile Experience

With Asia’s remarkably high mobile penetration rate, Lazada seized the opportunity to develop a seamless mobile app. With personalized recommendations and smooth navigation, this app caters to on-the-go shoppers, keeping Lazada ahead in the industry and appealing to tech-savvy consumers.

5. Strategic Partnerships

Lazada’s success story isn’t limited to its efforts — it results from strategic collaborations with diverse stakeholders. The company has forged strategic partnerships with established brands and emerging startups, creating a diverse and comprehensive product catalog. Beyond retail partnerships, Lazada Group collaborates with local governments and industry players to address regulatory challenges, contributing to the overall growth of the e-commerce ecosystem.

6. Continuous Innovation

To remain at the forefront of the industry, Lazada consistently embraces innovation. This e-commerce solutions company invests in technologies such as artificial intelligence, machine learning, and data analytics to enhance its user experience, optimize supply chain management, and refine marketing strategies. This culture of innovation positions Lazada as a true industry leader, equipped to adapt to evolving market dynamics and ensure sustainable growth.

7. Marketplace Strategy

As an e-commerce solutions company, Lazada needs to gather as many brands and products as possible to attract an even wider scope of consumers. Their adoption of a multiplatform and omni-channel marketplace strategy in 2013 has yielded significant benefits. This approach expands product variety, reduces inventory risks, and enhances the economy through effective e-commerce order management solutions.

The success of Lazada is not given naturally; it is majorly driven by the fact that it has yet to embrace a one-size-fits-all approach and has evolved its business strategy and marketing model through these strategies to better align with the digital revolution the world is currently experiencing.

8. The revenue strategy

Lazada Group strives to attract new customers and gain valuable data-driven insights into its operations through a robust business model. Similar to industry giants like Alibaba and Amazon, Lazada has devised multiple revenue generation strategies.

The group has embraced Google AdWords’ flexible bid strategies to automate their cost-per-click bids to achieve ROI maximization, conversion maximization, cost per acquisition, and visibility. Additionally, Lazada employs a technique known as “target outranking share,” allowing them to adjust their bids upwards or downwards to reach a predefined cost-per-click threshold to surpass competitors. This strategic approach has resulted in a remarkable 30% increase in their website traffic and a 50% growth in their market share.

  • Lazada Marketplace – In the Lazada Marketplace, the merchants sell their products, and the company takes care of these authorized sellers’ payments and fulfillment process. Depending on the product category, these services take a commission fee of 1% to 4%.
  • LazMall – LazMall serves “selected brands from around the world and locally, top online brands and authorized brand distributors.” In this, the 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, and getting various travel deals. Lazada takes a commission of the revenue collected through these services.
  • Grocery Delivery – Following acquiring the RedMart delivery startup in 2018, Lazada has become Singapore’s leading online grocery marketplace. Lazada charges a fixed fee for each delivery in this segment and takes a commission based on the total order amount.
  • Fintech Solutions – Lazada extends its services to include a range of payment and funding solutions, particularly focusing on underserved regions in Southeast Asia.

This diversified revenue model ensures the Lazada Group has both stable income and broad customer appeal, strengthening its position in e-commerce and fintech.

To Sum Up

Lazada Group‘s success in Asian e-commerce is built on its ability to blend localized strategies with a global vision. This approach will be crucial for maintaining its leadership position as it evolves and expands. Its ascent to e-commerce dominance in Asia is a tale of strategic brilliance, cultural adaptability, logistics excellence, and unwavering innovation

Lazada’s platform is a launch pad for business owners looking forward to starting their entrepreneurial journey in the international market by creating their online store. Another emerging e-commerce solutions company is Ordazzle, empowering businesses to navigate the evolving e-commerce landscape.

Contact our experts now and better understand these trends and models to emerge as a top-rated seller in a limited time.