Southeast Asia's Lazada rockets past $700m mark

This was the explanation given by Tito Costa, Rocket Internet's managing director for Southeast Asia, when AVCJ asked him last year about the shuttering of two smaller e-commerce ventures in the region. With more than $700 million in private equity and venture capital backing, online retailer Lazada - which was launched in 2012 - is amply resourced to deliver the critical mass Rocket Internet seeks.

Costa described Southeast Asia's internet environment as offering a unique window of opportunity: strong macro fundamentals and the freedom to establish e-commerce verticals and related infrastructure in a landscape virtually untouched by meaningful competition.

The latest chunk of capital bestowed upon Lazada so that it can stay ahead of the field comes largely from Temasek Holdings. It led a round of funding worth EUR200 million ($249 million), with participation from the likes of Kinnevik and Verlinvest. These two groups have backed several Rocket Internet ventures, including Zalora, a Southeast Asia-focused online retailer of apparel, shoes, accessories and beauty products.

The Lazada investor roster also features Tesco, Access Industries, Holtzbrinck Ventures, Summit Partners, Tengelmann Group and J.P. Morgan. Maximilian Bittner, Lazada's CEO, hailed the arrival of Temasek as recognition of the company's leading regional footprint and affirmation of its growth strategy and business potential.

Lazada has operations in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, plus a sourcing center in Hong Kong. Sales on its websites and mobile applications have doubled since June thanks to the roll-out of a marketplace for third-party merchants. Marketplace sales have increased more than tenfold since January and account for around 70% of overall monthly sales.

Lazada's net revenue for the 2013 calendar year came to EUR56.8 million, while the company posted a loss of EUR51.8 million.

The question now facing Lazada is what next. Southeast Asia requires a degree of localization and Rocket Internet operates under a two-tier structure comprising a regional team and and then local management in each country. Lazada benefits from the economies of scale that come from being part of a collective and it has successfully leveraged its early-mover advantage.

Competition could come from two directions. First, China's Alibaba Group, which also runs broad-based platforms, wants to become a global player and has made tentative forays into Southeast Asia. Second, there is space for numerous e-commerce verticals that focus on particular categories.

It remains to be seen whether Lazada can turn its financial firepower into a marketing, customer services and logistics package that allows for long-term dominance.

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• Topics
• Consumer
• Expansion
• Technology
• Southeast Asia
• Rocket Internet
• Temasek Holdings
• Southeast Asia
• TMT
• Consumer
• Growth capital