Lazada records strong order uptick in June quarter

Employees at online retailer Lazada fill orders at the company's warehouse in Jakarta, Indonesia April 15, 2016. REUTERS/Darren Whiteside

A significant shift from the direct sales model to the marketplace-based e-commerce model seems to have delivered  for Lazada – the south-east Asian e-commerce company owned by Alibaba Group – if its June 2019 quarter performance is a pointer.

Lazada has recorded strong order growth in Southeast Asia along with operational improvement after strengthening its 3P business, management team and technology infrastructure, according to excerpts drawn from the latest Q1 FY2020 (quarter ending June 30, 2019) earnings release by Alibaba Group Holdings Limited.

For the third consecutive quarter, Lazada achieved over 100 per cent year-over-year (YoY) order growth driven by user loyalty and purchase frequency. During the June 2019 quarter, Lazada managed to execute effective user acquisition programmes with mobile daily active users (DAUs) doubling YoY.

In the March 2019 quarter, Lazada’s revenue decreased by 4 per cent primarily due to a decrease in revenue generated from its direct sales business (where revenue is recorded on a gross basis including the cost of inventory).

During the December 2018 quarter, Lazada strengthened its core marketplace businesses and reduced exposure to direct sales in select merchandise categories.  Lazada added that this business model shift continued to drive 3P Gross Merchandise Volume (GMV) growth although 1P revenue declined during the same period.

In the Q1 FY2020 earnings call, Alibaba Group CEO Daniel Zhang added that going forward, Lazada remains focused on maintaining strong user growth and user engagement in the coming years.

Alibaba executive vice-chairman Joseph Tsai also noted the “sustained improvement in our Lazada business in southeast Asia” while commenting on the overall performance of the group in the quarter.

Alibaba as a group recorded total revenues of RMB 114.92 billion ($16.74 billion) during 1Q FY2020, an increase of 42.0 per cent YoY, while net income was RMB 19.122 billion ($2.79 billion).

According to Bloomberg, the earnings results were driven by more than $600 million of pre-tax profit from Ant Financial, the payments-to-lending affiliate which Alibaba currently has a one-third stake through its co-founder Jack Ma.

Alibaba posts higher revenue in international commerce retail unit

Source: Alibaba Group Holding Limited’s Financial Results

Alibaba’s International Commerce Retail Unit, where both Lazada and AliExpress earnings are recorded, saw revenue growth of 12.6 per cent quarter-on-quarter (QoQ) and 29 per cent year-on-year (yoy) to RMB 5.567 billion ($811.00 million) in Q1 FY2020 from RMB 4.316 billion in the prior year’s quarter. The increase was primarily due to its consolidation of Trendyol, Turkey’s leading e-commerce platform, and an increase in revenue from AliExpress.

(Note: Alibaba’s International Commerce Retail Unit is represented by both Lazada and AliExpress).

Combined marketplace-based core commerce adjusted EBITDA losses continue to mount YoY

Source: Alibaba Group Holdings Limited’s Q1 FY2020 earnings slides

Although marketplace-based core commerce adjusted EBITDA rose by 27 per cent YoY to RMB 46.80 billion ($6.38 billion) in Q1 FY2020, combined losses from the four Alibaba units (local customer services, international (Lazada), new retail & direct import, and logistics (Cainiao)) increased to minus RMB 5.78 billion (minus $820.00 million) in Q1 FY2020 from minus RMB 4.16 billion (minus $590.00 million) in Q1 FY 2019.

During the previous quarter in March 2019 (Q4 FY2019), combined losses for the four Alibaba units stood at minus RMB 7.20 billion (minus $1.02 billion).

Alibaba defines marketplace-based core commerce adjusted EBITDA as follows:

Marketplace-based core commerce adjusted EBITA represents adjusted EBITA for core commerce excluding the effects of (i) local consumer services, (ii) Lazada, (iii) New Retail and direct import and (iv) Cainiao Network.

Marketplace-based core commerce adjusted EBITA reflects the performance of its most established businesses, namely, those of the China retail marketplaces and wholesale marketplaces which primarily adopt a marketplace-based approach.

By excluding certain businesses that are in the earlier stages of their development and with business approaches that continue to evolve, marketplace-based core commerce adjusted EBITA enables investors to clearly evaluate the performance of its most established businesses on a like-for-like basis.

What do analysts make of Lazada’s latest performance

According to an industry source, Lazada’s mobile DAUs showed strong growth in the recent quarter (Q1 FY2020) driven by a bump-up in online marketplace place revenues during the recent months leading up to the June 2019 quarter, but the industry source also noted that the YoY growth in Lazada’s mobile DAUs was not exactly characterised as “double-digit” growth as noted by Alibaba during the Q1 FY2020 earnings call.

DEALSTREETASIA did some rough estimates using the iPrice Map of E-commerce charts drawn from Lazada’s major Southeast Asia (SEA) markets, including Singapore, Malaysia, Indonesia, Thailand, Vietnam, and Indonesia.

The data showed that the median monthly web visits for the Lazada shopping platforms across SEA in Q2 2019 (June 2019 quarter), came in at 26.73 million, compared to 27.37 million monthly web visits in Q1 2019 (March 2019 quarter), and 31.36 million monthly web visits in Q2 2018 (June 2018 quarter).

Expand Table

Monthly Web Visits (iPrice) for LazadaQ2 2019 (June 30, 2019)Q1 2019 (March 31, 2019)Q2 2018 (June 30, 2018)
Singapore7,554,700 7,430,900 6,561,400
Malaysia20,657,700 21,387,611 27,990,500
Indonesia49,620,200 52,044,500 49,990,700
Thailand43,132,000 44,107,800 39,721,400
Vietnam28,306,700 29,087,600 32,711,291
Philippines25,149,100 25,652,100 30,015,200
Median Monthly Web Visits26,727,900 27,369,850 31,363,246

Source: iPrice Map of E-commerce charts of various key Southeast Asia markets

It is also to be noted that iPrice’s calculation methodologies of monthly web visits are different from the MAUs and DAUs calculated by analytics and data marketing firm, App Annie. However, Lazada has, in the past, been constantly promoting itself as being one of the leading e-commerce players by monthly active users (MAUs).

In May 2019, Lazada was awarded the “Top Publisher” in Southeast Asia in 2018, having the highest number of MAUs among the region’s e-commerce shopping platforms, according to App Annie. However, Lazada does not disclose the MAU figures.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.