how-does-lazada-make-money

How Does Lazada Make Money? The Lazada Business Model In A Nutshell

Lazada Group is a Singaporean multinational technology company established to replicate the Amazon business model in Southeast Asia and take advantage of the retail giant’s weak presence in the region. Similar to many eCommerce giants, Lazada has been able to create an assortment of revenue streams. On the Lazada Marketplace, the company takes a sales fee of 1 to 4%, and it also makes money via grocery delivery subscriptions and more.

Origin Story

Lazada Group is a Singaporean multinational technology company.

Founded in 2012 by Maximillian Bittner and Pierre Poignant, the company was established to replicate the Amazon business model in Southeast Asia and take advantage of the retail giant’s weak presence in the region.

The first Lazada website came online in 2012, selling consumer goods directly to consumers in Malaysia, the Philippines, Thailand, and Vietnam. The following year, Lazada allowed third-party sellers to offer goods on its platform – the so-called B2B2C model. This part of the business grew rapidly and accounted for 70% of total spending on the platform in 2014.

In 2016, the company became majority-owned by Alibaba Group to support its global expansion strategy. Lazada continued to grow as an online platform, despite a continuing preference by Asian consumers to shop in large physical malls.

In 2019, Lazada became the most popular eCommerce platform in Southeast Asia, amassing a community of over 50 million active buyers.

Lazada revenue generation

Similar to many eCommerce giants, Lazada has been able to create an assortment of revenue streams.

Following is a summary of each.

Lazada Marketplace

In the Lazada Marketplace, the company takes care of the payment and fulfillment process for authorized sellers. It also schools merchants on conversion rates and marketing through Lazada University and Super eBusinesses, respectively.

For access to these services, Lazada takes a sales fee of 1 to 4% based on the product category.

LazMall

LazMall is a higher-end marketplace serving as “a curated selection of leading international and local brands, top-rated online brands and authorized brand distributors.

In this case, commissions on each transaction are capped at 5%.

Top Up & eStore

The Top Up & eStore gives Lazada users access to a range of services, including:

  • Mobile credit recharge.
  • Gaming credits for systems such as Xbox and Steam Wallet.
  • Food and beverages.
  • Travel deals.
  • SEAGM – a virtual currency that can be used to fund the purchase of the above services.

Lazada also earns an undisclosed yet specific commission for partnering with each service provider.

Grocery delivery

In 2018, Lazada acquired delivery start-up RedMart to move into the food delivery business market. The business is now Singapore’s leading online grocery marketplace.

Here, the company charges a fixed fee for each delivery and takes a commission based on the total order amount.

LiveUp membership program

LiveUp is an exclusive membership program allowing consumers to save money on selected services. These include free delivery on RedMart deliveries above a certain threshold, two months of free Netflix, and a 4% rebate on every LazMall order.

Customers can pay a fixed monthly or annual fee. However, the service has been temporarily disabled because of the COVID-19 pandemic.

Fintech

Lazada is also riding the popularity of financing and payment solutions, particularly in the under-served Southeast Asian region.

The company has, for example, partnered with Malaysian P2P lender Funding Societies. This gives merchants access to credit to fund their operations. It is also working with Singapore-based AsiaKredit to offer a Klarna-style monthly repayment option for consumers.

Ultimately, these partnerships increase sales for Lazada.

Key takeaways:

  • Lazada is a Singaporean multinational technology company with a focus on eCommerce. It was founded to replicate the Amazon business model in the under-served Southeast Asian market.
  • Lazada collects a transaction fee from merchants in the Lazada Marketplace of 1 to 4%. The sale commission in the high-end LazMall can be as high as 5%.
  • Lazada charges for various services including a food delivery business and membership program. Indirectly, the company also increases revenue by giving consumers and merchants better access to funds and payment options.

Read Also: Amazon Business Model, Alibaba Business Model, Wish Business Model, eBay Business Model.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"