How interconnected is Lazada with DFTZ?

How interconnected is Lazada with DFTZ?
A view of the Digital Free Trade Zone site in Sepang on Nov 2, which was the former site of the Low Cost Carrier Terminal (LCCT). - BERNAMA
KUALA LUMPUR: The launch of the Digital Free Trade Zone (DFTZ) by Prime Minister Datuk Seri Najib Tun Razak and Alibaba's Jack Ma last week is set to take Malaysia's digital economy on an exciting path.

The DFTZ aspires to double the growth rate of small-and-medium enterprises’ goods exports to reach US$38 billion, create some 60,000 jobs and facilitate US$65 billion of goods movement via its platform, all by the year 2025.

One key player that is set on leveraging this platform is e-commerce giant Lazada, which is 83 percent owned by the Alibaba Group – one of the main actors in DFTZ besides Malaysia Digital Economy Corporation (MDEC).

A HUB FOR ASEAN

Lazada hopes to cater to the 625 million population of ASEAN once DFTZ takes full effect in 2019.

The company has integrated its process and systems into the DFTZ ecosystem as it will become one of the distributing points for the ASEAN network.

"DFTZ is very exciting for us. By opening up the DFTZ, we will enable local Malaysian brands, sellers and SMEs to expand their reach beyond Malaysian borders,” said Lazada Malaysia CEO Hans-Peter Ressel.

"We will also be able to bring in both regional and global brands into DFTZ, have their operations based here and then do cross ASEAN-wide business. This will make Malaysia a true operations and eFulfilment hub for these brands," he told Astro AWANI's Market Talk.
READ: Najib, Jack Ma flag off 1,972 export-ready SMEs onboard DFTZ

Despite Lazada having operations in various ASEAN countries including Indonesia, the Philippines, Singapore, Thailand and Vietnam, its remit remain in Malaysia.

In explaining this, Ressel said one has to just look at the export figures.

"Within Southeast Asia and ASEAN, there's a lot of import-export happening between the member countries and Malaysia is a major trade partner. So, we need to enable these local SMEs to tap into the B2C (business-to-consumer) opportunity, allowing them to sell to the end consumer directly to their house via integrated logistics from Malaysia."

Ressel said currently, Malaysia is the most supportive government in the ASEAN region in the cause towards e-commerce growth and digitalisation of the economy.

TYING UP LOOSE ENDS

Recently, there has been a lot of noise and chatter online on Lazada's services, particularly on the last mile fulfilment process. Errors in delivery, problems with product orders and a poor search engine were only some of the complaints reported by customers.

But Ressel is confident that all will be in order in time for China’s Single's Day on Nov 11 – also the biggest shopping day for Alibaba.

"There are always challenges, especially in a market that is growing very fast and with a company like Lazada that is growing triple digits annually.

"In the payment and logistics side, there is always a bottleneck that we have to face. But we have been working very closely with payment and logistics providers to really help them understand the volume increase and help them ramp up their capacities.

"Nov 11 is Alibaba's biggest campaign and we’ve done a lot of preparations. We migrated to a new data centre, we expanded our service, we are ready," he said.

Unfortunately, the rantings by consumers usually end up with sellers receiving a bad rating instead of Lazada.

But Ressel believes all is not lost on both the consumers' and sellers' end.

"I believe if you continue to strive to provide consumers with a great assortment, genuine products and brands, there"s always hope that people will trust you again.

"On the sellers' side, if you can really show to them how they can grow their business despite several hiccups here and there, we can still work together. The industry is still young, people will understand," he said.

Ressel said with not many e-commerce players being bigger than Lazada, it has somewhat become their social responsibility to boost sellers, particularly SMEs, following the DFTZ launch.

"The DFTZ is one of our biggest opportunities. SMEs make up 80 to 90 percent of the gross domestic product (GDP) in Malaysia. There are thousands of SMEs that are not even thinking of going online. We're working with SME Corp, SSM (Companies Commission of Malaysia) and MDEC to educate them, train them, bring them online, help them grow their business not just nationwide but beyond Malaysian borders," he said.

"That's where DFTZ will come into play for us."