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 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
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
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).
|Monthly Web Visits (iPrice) for Lazada||Q2 2019 (June 30, 2019)||Q1 2019 (March 31, 2019)||Q2 2018 (June 30, 2018)|
|Median Monthly Web Visits||26,727,900||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.