Tech companies need to learn to get back on a slow but healthy growth trajectory.
Text丨Chen Jing
Editor丨Guan Yiwen
On the first weekday evening of 2024, some Lazada Shenzhen employees found that all 25 meeting rooms on three floors of the office were suddenly fully booked by HR, "and it felt like there was going to be a big move." An employee guessed.
The next day, a large number of employees were called into the conference room to talk about the layoffs, and each employee had about 20 minutes of conversation, and they didn't hear a more detailed explanation of the layoffs other than "improving organizational efficiency", and most of the questions asked to HR only got the same answer, "This question is not in the scope of communication." ”
This is Lazada's first layoff since it was acquired by Alibaba in 2016. A large number of employees will be leaving in the next two weeks. Among them, there are a large number of junior employees, as well as P8, P9, and 3.75 employees. They will receive no less than N+2 layoff compensation and one and a half months of year-end bonus compensation, and they are located in Shenzhen, Beijing, Guangzhou, Singapore, Thailand and other offices, accounting for nearly 20% of the company's total of about 10,000 employees.
The layoffs are a follow-up to Lazada's organizational restructuring in mid-December 2023. More than half a month ago, in order to make business decisions more centralized and efficient, Lazada's user product and merchant strategy teams in six Southeast Asian countries were concentrated in the headquarters, and the local middle and back office support departments such as risk control, platform governance, and legal affairs were also abolished.
Lazada's CEO of Vietnam, Kaya Qin (also known as Qin Xiao), has been relocated to Malaysia as CEO, and Indonesian COO Victor (also known as Cai Xiao) has been relocated to Vietnam as CEO.
Alibaba spent $1 billion in 2016 to control Lazada, the largest e-commerce platform in Southeast Asia at the time, and has injected more than $7.4 billion in the following seven years, including $1.8 billion in blood transfusion in 2023 alone. Lazada has changed 4 CEOs in 7 years, and it now has half the market share of Shopee in Southeast Asia, ranking second.
In the past 8 years, Southeast Asia has received the attention of the most Chinese entrepreneurs going overseas and sucked up a lot of hot money, Shopee, Lazada, TikTok e-commerce, J&T, etc. have sprouted and grown in this land.
Even as fierce as Temu, he is cautious about expanding into Southeast Asia, and has not expanded aggressively since entering the Philippines and Malaysia – compared to the United States, the world's largest consumer market, Southeast Asia has more monks and less transparent policies. Starting in 2022, Shopee, ride-hailing, and food delivery service Grab have all laid off employees.
The next round of more fierce e-commerce subsidy wars may not come in the short term, and the participants who remain at the table have breathing room for the time being, and they finally have time to sort out their business and organization internally, stop the bleeding and reduce losses, and move forward with restraint.
From local priority to headquarters priority, Lazada has gone from point-based operations to group operations
Behind Lazada's current round of large-scale organizational adjustment is a redivision of the power structure of headquarters and localities.
After Alibaba took control of Lazada in 2016, Ali partner Peng Lei personally sat in the town, and then Alibaba CEO Daniel Zhang once flew to meetings every month, but in 2019, Shopee, which was established for 4 years, surpassed 7-year-old Lazada and became the champion in Southeast Asia in multiple dimensions such as downloads, monthly activity and user retention.
Since then, many managers have adhered to the principle of "country first", and have completed departments in various local and national facilities, forming a closed business loop.
At the beginning of 2022, Jiang Fan, the former president of Taobao Tmall, took over Alibaba's overseas digital business sector, and in June of that year, Dong Zheng, the former CEO of Lazada Thailand and Vietnam, was appointed as the CEO of Lazada.
According to one industry insider, Lazada's localization strategy was "a bit overdone" at one point. In his opinion, there is no need to set up special departments in various countries for functions such as platform governance, Ali already has enough experience in controlling fakes, and the headquarters issues standardized rules, and the local government can modify it slightly in combination with local characteristics.
In mid-December 2023, Lazada underwent an organizational realignment with the idea of putting headquarters first, with the user product and merchant strategy teams centralized at headquarters. Specifically:
The user products in the six Southeast Asian countries are under the management of Wei Meng (nickname: Qiancheng), who was previously in charge of Taobao shopping and will be transferred to Lazada headquarters in mid-2023 to be in charge of user products.
Chen Xi (nickname: Spirit) is responsible for the supply and operation team of brands and small and medium-sized merchants, and sets the merchant operation, product supply and category planning strategies for the six Southeast Asian countries. Chen Xi was previously the general manager of Tmall's FMCG division.
This means that the operation teams of user products, brands and small and medium-sized businesses that were duplicated in the original and headquarters will be reduced.
This time, the local middle and back office departments will also be thinned, including risk control, platform governance, legal affairs, etc., these support departments will be mainly located in the headquarters, and the local government will focus more on the refined operation of local merchants, localized consumer reach, and improving logistics experience.
According to a Lazada source, there are three main reasons for this round of adjustments:
First of all, the user products, brands and small and medium-sized business operation teams will be brought into the headquarters, because improving the user and merchant experience is the focus in 2024, and the direct management of the headquarters will be more efficient, and the headquarters will drive the subsidies and user growth strategies of various countries with data in the future.
Secondly, in the past, each country pursued a closed-loop business and allocated almost all business departments, but each country's resources and energy were limited, and the opponents were scattered at various points and were not competitive. Now it is concentrated at the headquarters and concentrates resources to fight in groups.
Finally, the reporting lines of multiple departments are transferred to the headquarters, which is also to reduce the decision-making links and achieve efficient decision-making.
In this round of adjustments, the commercialization departments of Lazada and AliExpress have also been integrated, and some Lazada employees have been laid off. After Jiang Fan took over the international digital business sector of Alibaba, he is also promoting the continuous integration of AliExpress and Lazada.
At the beginning of 2022, Jiang Fan unified all teams related to cross-border business to AliExpress, and Lazada led the localized e-commerce operations in various markets around the world. Correspondingly, some of AliExpress's localization teams in Europe have been transferred to Lazada.
AliExpress and Lazada have a clearer role, with the former focusing on cross-border and focusing on markets outside Southeast Asia, including Spain, France, South Korea, the United States and Latin America, while the Middle East, Japan, Mexico and Germany are emerging markets, while the latter focuses on localization and focuses on Southeast Asia.
An overseas employee of Ali said that Alibaba's current vision for overseas business is matrix warfare, that is, to reduce internal competition and strengthen integration, "We need to work together more to fight against Shopee and others." ”
A former Lazada executive sees the change as a positive sign that Jiang Fan is determined to improve the organization's efficiency.
Southeast Asian e-commerce giants reduced losses, and new players grabbed the increment
The situation faced by Shopee and Lazada, the two leading players in the Southeast Asian e-commerce market, in the past year is that their own growth has slowed down or even stagnated, and when they stopped the bleeding and reduced losses, TikTok e-commerce grabbed the new increment like a bamboo.
Lazada's sales in 2021 were $21 billion, but growth has slowed in 2022 and 2023. Shopee's sales in 2022 were $73.5 billion, with a growth rate of 17.6% falling from 76.8% in the previous year.
Due to continuous losses, Shopee's parent company Sea began to lay off employees in a centralized manner from mid-2022, with an overall layoff rate of about 10%, and the e-commerce business in the Southeast Asian market almost no longer invested in any subsidies, and all business goals switched from "growth" to "profitability".
A Shopee source revealed that the keywords of the company's strategy in 2023 are: cost, user experience, and profitability sustainability. Shopee's active hemostasis has had a certain effect, and since the fourth quarter of 2022, the company has achieved three consecutive quarters of profitability, and Sea founder Li Xiaodong said in an internal email in December 2023 that the group is on track to move towards its first full-year profit since going public.
Lazada's most important metrics for 2023 are the number of orders and the number of transaction buyers, but the budget is tightly controlled, with one employee who has since left the company saying, "It used to be about spending money first and then seeing the results, but now it is necessary to prove that it can make money before spending it." ”
When the first and second places in the industry began to defend, the latecomer TikTok e-commerce seized the window of opportunity and started a fierce attack.
TikTok e-commerce was launched in Indonesia and the United Kingdom in 2021, and the overall transaction volume reached $1 billion that year, of which Indonesia contributed 70%, and in the second year, TikTok e-commerce was deployed in six Southeast Asian countries, with a global GMV of $4.4 billion, of which 90% was contributed by Southeast Asia.
In 2023, TikTok shelf e-commerce will be fully launched in the United States, and it is expected to complete the global transaction volume target of $20 billion set at the beginning of the year. Even though TikTok e-commerce was closed in Indonesia for two months in 2023, it has completed more than $15 billion in annual sales in Southeast Asia, more than 20% of Shopee's sales in 2022.
In the past year, Shopee has increased its commission and handling fees in almost all markets, and the commission rate in the six Southeast Asian countries is now more than 6%, with the highest in the Philippines reaching 7.84%; Lazada's commission rate is also 6% - 7%, and a seller who runs stores on both platforms said that with the addition of handling fees, the commission rate of the two platforms has reached 11% - 12%.
In the first two years of entering Southeast Asia, TikTok directly subsidized the GMV reached by merchants in Indonesia, and at the same time issued large coupons to consumers, and free shipping without thresholds, while TikTok's e-commerce commission in Southeast Asia was only 2%-3%, which is much lower than that of its competitors. New merchants also have a 90-day commission-free and 30-day postage free policy.
"LatePost" learned that in 2024, among the global sales target of $50 billion set by TikTok e-commerce, Southeast Asia needs to contribute $32.5 billion, which is directly double the performance of the previous year.
This is not an easy goal to achieve, and a large number of subsidies and preferential policies make merchants willing to come to TikTok to find new increments, but it is difficult for merchants to use TikTok as the only channel.
The impulse sales characteristics of live e-commerce determine the unstable sales volume, which makes it difficult for merchants to stock up stably locally, and often out of stock as soon as the order bursts, and can only transport new goods from China by sea after the stock is out of stock, which takes a month or even longer, and the unit price of 1-2 US dollars for Southeast Asian e-commerce is also difficult to support the shorter air freight.
Merchants often choose to open TikTok, Shopee or Lazada stores at the same time, the shelf e-commerce of the latter two is the basic plate of merchants, and TikTok live broadcast and short video e-commerce are their new growth engines.
In order to solve the problem of shortage of goods, TikTok e-commerce has worked hard to find retail companies and supermarkets in Southeast Asia in the past two years, and even rented stalls in wholesale markets to ask bosses to sell goods live to find a more stable local source of goods.
TikTok e-commerce has also started to pilot the shelf e-commerce model in Southeast Asia from October 2022, and "LatePost" has learned that at present, 30% of the sales in the Southeast Asian market in TikTok e-commerce are contributed by the mall - which is close to the share of domestic malls contributing to Douyin.
Lazada and Shopee have both launched a fully managed model in the past year, hoping to leverage growth with better services and greater control. This is the enlightenment to the industry from Temu, a cross-border e-commerce business launched in the United States in September 2022: merchants are only responsible for providing goods, and the platform dominates everything, mastering pricing power, logistics and distribution, and can meet low prices and fulfillment timeliness at the same time.
The fully managed project is one of the "Top 10" key projects of the Lazaza Group, and a former employee said that the management is extremely concerned about the fully managed project, and the project is reported to the management every two weeks.
Lazada has set an internal goal to contribute at least 20% of the transaction volume to the main site by March 31, 2025. A Lazada person said that the biggest significance of full custody is that it can bring new users, and after new users settle down, it can also bring benefits to other sellers on the website, forming a positive cycle.
In 2023, Lazada and AliExpress's cross-border merchant supply will be integrated, which will bring a richer cross-border merchant supply to Lazada. A Shopee person said that the biggest problem encountered by Shopee full hosting at present is that most of the small and medium-sized long-tail sellers on the site have small sales, and it is difficult to get enough low-priced goods from the factory, and the richness of goods is not enough.
In September 2023, Li Xiaodong, the founder of Sea, issued an internal letter, saying that Shopee is facing a strong challenge from opponents in the high-dimensional world, calling on employees to enter a fighting state.
At that time, Temu had just entered the Philippines and Malaysia, offering a large discount of the highest discount, and most of the items were priced between $0.8 and $26, but three months later, Temu has not continued to open new national sites in Southeast Asia, and has not yet had a direct impact on existing players.
This is not only limited to policy, Indonesia, the largest market in Southeast Asia, has made many restrictions on cross-border merchants in order to protect local merchants, which makes it difficult for Temu to enter in a cross-border form, and at the same time, it is also necessary to consider the input-output ratio, if like Shopee and Lazada, it will take longer to attract investment locally and build a fulfillment system, so it is better to use the cross-border model to open other larger markets faster.
It is also for similar reasons that Shein withdrew from the Indonesian market in 2021 and focused on markets such as Europe, America, the Middle East, and Latin America.
LatePost understands that Brazil and several countries in Africa in Latin America are already on Temu's list of new markets for 2024. Brazil's GDP per capita in 2022 was $9,149, almost double that of Indonesia.
Southeast Asia is still the fastest growing region in the world's e-commerce, but the total annual transaction volume of e-commerce here is only more than 100 billion US dollars, and the competition is fierce.
In the short term, the exciting cash-burning war is unlikely to be repeated, and tech companies will have to learn to get back on a slow but healthy growth track.
Zhu Yingli also contributed to this article.
Source: Alibaba's official website