Alibaba Bets on Frenchman to Lead High-Stakes Southeast Asia Expansion
(Bloomberg) -- In December, Alibaba Group Holding Ltd. put Pierre Poignant in charge of Lazada, the subsidiary spearheading the Chinese e-commerce giant’s high-stakes Southeast Asia expansion. The choice was out of character for several reasons. Poignant is a professional manager—a type Alibaba supremo Jack Ma has long disdained. He was part of Lazada’s founding team, also typically disqualifying. Finally, as a Frenchman, he’s one of a very few Westerners to have cracked Alibaba’s upper echelons.
Poignant, 40, takes charge at a fraught moment for Lazada. Since being absorbed by Alibaba, the Singapore company has been roiled by management turmoil—Poignant is the third CEO in nine months—even as it fights a multi-front war against well-funded, fleet-footed rivals. In Indonesia, by far the region’s biggest and most promising market, Lazada has fallen behind homegrown players.
The MIT engineer-by-training will have to vanquish regional rivals if he is to achieve Alibaba’s long-held ambitions of becoming a truly global player in the mold of Amazon.com Inc. or EBay Inc. Lazada is the single most important piece of a slowly coalescing international business that for now encompasses mainly sideline businesses in India, Pakistan, Brazil and Russia. With sales growth slowing in China, the eventual goal is to get half of Alibaba’s revenue from abroad.
“Our vision at Lazada is to accelerate progress in Southeast Asia through commerce and technology,” Poignant said in his first major interview since becoming CEO. “This is fully part of the Alibaba vision.”
Southeast Asia is one of the last major unclaimed e-commerce markets in the world, with no dominant player. One reason is that the population of more than 600 million is scattered across four time zones and 11 countries.
Lazada was started in 2012 as an Amazon for Southeast Asia by Rocket Internet, a German company famous for cloning other people’s ideas. Today, Lazada sells 300 million products—from smartphones to Muslim prayer rugs—to consumers in six countries. With a separate site for each, Lazada echoes the look and feel of Alibaba and Amazon. Its Lazmall sells brands directly to consumers, while Marketplace connects smaller merchants with customers. Like its Chinese parent, Lazada hosts ads and lets shoppers rate and review products.
The similarities end there. Where Alibaba serves a largely homogeneous market, Lazada caters to a highly fragmented region with different languages, currencies and buying habits. Necklaces and headscarf pins are hot sellers in Indonesia, but shoppers in Malaysia tend toward more prosaic items: diapers, juicers and the like.
Delivering packages is a challenge in the region’s chaotic, traffic-choked cities; getting the job done in Indonesia—a sprawling archipelago of more than 17,000 islands—can take weeks. With the exception of Singapore, cash on delivery still rules much of the region. Countless startups are trying to tackle the problem with mobile payment services, but there’s no dominant player.
As the first e-commerce company to serve six countries in Southeast Asia, Lazada has the first-mover advantage. Poignant was instrumental in stitching together a regional logistics network, which includes 31 fulfillment warehouses scattered around Southeast Asia and an outsourced fleet of planes, trucks, motorbikes and bicycles that can get packages to customers in as little as 24 hours in big cities like Jakarta and Bangkok. (Deliveries typically take two to three days.) Lazada has staked a claim on groceries, in 2016 acquiring RedMart, a startup that’s become a leading e-grocer in Singapore. It intends to take that business to at least one more country this year, Poignant said.
These assets have helped turn Lazada into the region’s largest e-commerce company as measured by traffic. In the last quarter of 2018, it attracted 183.4 million monthly web visits in six countries, according to the research consultant iPrice. Tokopedia came in at second with 153.6 million (from Indonesia alone), while Shopee had 147.6 million in six countries. (Lazada declines to disclose revenue or profit numbers.)
Still, competition is ramping up fast. Attracted by a growing middle class armed with smartphones, venture firms and strategic investors alike are pouring money into homegrown online marketplaces. Shopee, which is part of Tencent Holdings Ltd.-backed Sea Ltd., is already its closest regional rival with annual revenue of $270 million in 2018. It was the most downloaded shopping app in Southeast Asia in 2018, according to App Annie.
Tokopedia, also backed by Alibaba, meanwhile is quickly evolving into a one-stop shop for services, from travel and insurance to mutual funds. In 2017, Amazon launched its Prime Now service in Singapore, offering same-day delivery of everything from chilled beer and meat to books. Meanwhile, a range of companies are muscling into the groceries delivery market.
Nowhere is the e-commerce battle more fiercely contested than Indonesia, a nation of 280 million where the e-commerce market is expected to quadruple to $53 billion by 2025, according to joint research from Google and Temasek Holdings Pte. Tokopedia and Shopee both attracted more monthly visitors than Lazada in the fourth quarter of 2018, says iPrice. The two companies also outpaced Lazada in monthly active app usage, according to App Annie.
Shopee is pouring on the discounts, offering free delivery and has rolled out such shopper-friendly features as chat and games. Tokopedia also offers a wide range of promotions. To fight back, Lazada last year scrapped commissions it charges its marketplace sellers across the region. The players are all advertising heavily online, and billboards have sprouted all over Jakarta.
“They’re under so much pressure,” says Eric Wen, founder and CEO of Blue Lotus Capital Advisors, who says Lazada’s overall sales growth slowed last quarter. “The bright side is Alibaba can pass on to Lazada all the lessons they’ve learned and help the company avoid the same mistakes.”
Alibaba's attributed that deceleration to a shift in business model, where Lazada is increasingly brokering transactions between third-party merchants and buyers rather than directly selling products itself. Poignant is betting that Alibaba’s technology and resources will help his company vanquish Shopee and other rivals. Lazada has been integrating its systems with those of the e-commerce giant to speed up delivery and more precisely target customers. And Alibaba affiliate Ant Financial has merged with Lazada's helloPay to bolster payment processing. Several Alibaba innovations have found their way onto Lazada, including a search-by-image feature and a live-streaming tool that lets influencers showcase their favorite brands. Offline, it’s tapping into Cainiao, Alibaba’s huge transnational delivery platform.
Poignant brings deep knowledge of the industry and region to his new role. After studying information technology at the Massachusetts Institute of Technology, he joined McKinsey & Co. and moved to Singapore. During his stint at the consulting giant, Poignant advised companies on their digital strategies. On the side, he sold mobile phones and watches on EBay. Convinced Southeast Asia was ripe for e-commerce, Poignant joined Lazada’s founding team in 2012. Before taking the top job in December, he supervised a number of departments, from customer service to supply chain operations and logistics.
“Pierre focused on Southeast Asia early on in his career, his technology background, and the fact that he helped various companies with digital transformation enabled him to capture the internet wave,” says Jessica Tan, co-CEO of Chinese finance house Ping An Group and a former McKinsey colleague. “He has in-depth experience in each of the Southeast Asian markets but still has a regional view.”
Even as he takes on competitors around the region, Poignant will have to find a way to align the very different Lazada and Alibaba cultures. Jack Ma, a devotee of the martial-arts novels written by the late Hong Kong writer Louis Cha, has created an ultra-competitive, cultish environment where pride runs deep. Lazada is a very international shop and employs staff from some 60 countries; it hews closely to Rocket Internet’s execution-first approach. In fact, Poignant doesn’t rule out another management reshuffle in future. To ensure he’s on the same page with his bosses, he and his team visit the Hangzhou headquarters at least once a quarter; Alibaba CEO Daniel Zhang, meanwhile, is a text message away.
“Pierre knows what it takes to win in Southeast Asia,” says Zhang, who will take over as chairman from Ma this September.
Poignant aims to serve 300 million customers and create 20 million jobs by 2030. It’s an audacious bet, even for the self-styled Amazon of Southeast Asia. The region is “still in its infancy in terms of e-commerce adoption,” says Kuo-Yi Lim, a managing partner at Monk’s Hill Ventures, a Singapore-based VC firm. “And more time is needed before [Lazada] truly becomes as dominant as Amazon.”
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