How can Malaysia Seller Compete with China Lazada Seller Advantage.
## A month after my blog is out, Lazada has changed their commission aggressively, especially on Fashion 12% - 0%. But honestly I don't think it is due to this blog, but to their competitor ##
Often, we heard about the competition from China Seller in forums and Facebook group. Today, I will like to share the bigger and kind of more abstract picture for Malaysia sellers.
For Malaysian sellers, there are few different kinds of Business to Consumer (B2C) type of eCommerce in Malaysia.
The first kind are the big players which source from China, import it in bulk to Malaysia and sell it on various marketplaces. These group of businesses market their products thru large chain store like “MR. DIY”. Usually the amount of product they purchase can occupied few 40ft containers at one go. They can get much lower price, but then their operation cost with more than 300 stores is definitely higher. It is more of hypermarket retail but less on groceries.
Then come the “Daigou” kakis. There are quite a number of service provider for Malaysia consumers or even small-scale seller. Those popular Daigou are Ezybuy, WIWAA, 65daigou and so on. This seller act as a middle person, for consumers to make their purchases in China popular websites like Tabao, Tmall and etc. Normally they charged a certain percentage of service charge over the Product price and Shipment cost.
Previously Alibaba seems to work informally with these Daigou Kaki’s to sell China products overseas. Recently in last few years, Alibaba groups new business objectives is to conquer the B2C cross border from China to whole of Asia, which is indirectly riding on China one belt, one road initiatives and influences. Thus, Alibaba had made the well-known strategic move to become the major shareholder (83%) of Lazada . Lazada now serve as the vehicle for Alibaba ambition in conquering Asia cross border eCommerce market.
In return the Daigou Kaki’s increased their reach to other countries like Korea and US, and created their own multi country marketplaces. Subsequently, the area of interest overlaps and conflicts arised. One of the outcome which had gone viral was Singapore based 65daigou being banned by Alibaba China channel on 11/11 this year.
In the midst of this interesting development, how is this affecting small Malaysia seller which trade their products imported from China in online marketplaces?
How do we compete?
Before we continue, let’s UNDERSTAND your competition, China Seller and Lazada in China.
Although there is close relationship between Malaysia government and Alibaba at the moment, both had own agenda and interest. MDEC thru DFTZ utilize Alibaba Platform agenda is to help local SME to export overseas thru Alibaba (Business to Business) B2B platform. It is exporting in bulk to businesses. At the moment, it is not aggressively driving B2C cross border openly at the moment.
There are some activities of cross broader for Malaysia Seller but it is kind of slow moving and limited to selected privilege. During training session, some asked about the cross border, and one of the answer given directly was it is still under testing and a lot of issues. I always felt that is kind of cheezy. I don't believe Lazada and Alibaba is not able to do cross border B2C. It is whether if Malaysia Seller is in their strategic interest to be able to trade cross border on their platform.
Due to my curiosity, I had try to understand in more detail from China Seller perspective. From here I discover a lot of interesting public available facts.
1. China seller had B2C access to all Countries in Lazada. Its full fledged aggressive Cross Border B2C. One of the question I had in mind is, when all Malaysia seller can have such access? But to be fair, some selected local player do had Cross Border B2C in Lazada Malaysia.
2. China Seller thru Lazada had much better commission rate in Lazada Malaysia, compare to Malaysia seller. The maximum commission rate is 4% and lowest is 1%, Malaysia had maximum 12% commission rate.
China Seller Comission Rate:
Malaysia Seller Commission Rate (It is much larger so I only selected Fashion Screenshot:
Just taking Fashion as example, Sorry Malaysian Sellers, your commission is 12% while the China Sellers is 4%. That is a 8% Difference. For clearer picture, lets create a table from a product retail price at RM50 - RM500. Why RM500 max, it is where Lazada stops guarantee custom clearance for China seller.
3. In local courier, we have rates for 1kg although it is 100g of parcel. And we had two different rates for West Malaysia ship to West Malaysia (WM-WM) and West Malaysia ship to East Malaysia (WM-EM) Source https://lazadamypsc.zendesk.com/hc/en-us/articles/217489057-What-is-shipping-fee-
For China seller, Lazada thru LSG offered different price at incremental of 10g up to 1kg. It means if you sent 99g of parcel, you only paid 100g of parcel. From the downloaded price list, it is for whole of Malaysia. Wow!
For the link to all materials, you can access here, https://www.lazada.com/sell/university/tutorials/list-your-products/?setLanguage=en
So here I plot of graph of Malaysia cost compare to China courier cost for fashion product, by summing the Commission and Fulfillment charges. The Malaysia Seller cost is in Dash line for 2 different type of fulfillment, and the China is in full line for different weight. In certain condition, It is even cheaper to ship from China by Air compare to local shipment!
HKD to MYR Conversion Rate snapshot from xe.com at 22 January 11:35am.
4. Lazada had setup a number of high tech and efficient processing center in China to process parcel as fast as possible. With DFTZ, they might be able to reduce custom clearance time to 3 hours only. If the parcel is below RM500, Lazada guarantee they kaotim all custom problem for China seller. So it might not be surprising that fulfillment. time can be shorten to 4 days, (1 day China, 1 day flight and custom clearance, 1 day for misc).
5. Although the rumors and some of the feedback for China Seller is no returns? LGS had also provided the return process for China as well, to improve consumer confidence issue in this. AdditionallyEvery Sunday is Account Statement cutoff date and Every Friday is Payment date.
If you know mandarin, you can download LGS ( Lazada Global Shipping) Presentation pack at this source: https://www.lazada.com/sell/university/tutorials/lgs/?setLanguage=zh
6. Recently, Lazada offer to answer customer question on behalf of seller. Some Malaysian seller might benefit from this feature. But perhaps Lazada targeted customer is not Malaysian Seller, but China seller. This is to help solve the current common problem of no reply if it is not in English, or the reply is too China English for China Seller.
So Base on above findings, again these are some of the humble suggestion.
1. Although you might be upset of Lazada strategy if your read until here, please stay cool. It is business nothing personal. Malaysia seller is one of the stakeholder, but there is other stakeholder and interest as well. If we wanted to breakthru to other Nation marketplace, then our nation is subject to the same condition to other nation seller.
Lazada is now competing with China Daigou and Agents, so that China product can sell direct from the source to consumer. One of the possible reason is to reduce as many middleman as possible in their strategy so that the product listed on their platform has the best value in term of pricing for all Asian Customer. Thus Alibaba thru Lazada is providing more attractive packages to China Seller for them to hook up on Alibaba and Lazada system.
2. If everything is equal, that you are able to source the product as close as the China Seller, then you had to be aware of the cost of commission and fulfillment. The product category with have no or small difference in Commission rate will be better for Malaysia sellers. If it is cheap and light China Sellers had better advantage. If it is cheap and heavy, Malaysia seller had better advantage sourcing thru SEA or Land in Bulk and then sell it to consumer. However, when the product price is more expensive, due to the commission difference, Malaysia seller will be in disadvantage. Also if your supplier or competitor is nearer to the Lazada Fulfiment centre in Yiwu, Shenzehn and Hongkong, the higher possibility their will utilize Lazada services to access to Malaysia consumer market directly.
PLEASE UNDERSTAND THIS TO POSITION YOUR BUSINESS BETTER.
3. In case your product fall at above range whereby you are at a disadvantage position or you want to fight this battle at known disadvantages as you have some weapons as well, do keep close notice of your competitors from China. If they started to picking up reviews faster than you, it means that their sales are much higher than you. Of course, fake review might be a possibility, but you can determine if it is a confirmed buyer or not. If you find the upcoming battle too difficult, perhaps you can find the source of the competition. If it is from manufacturer, maybe there is a possibility to partner with the manufacturer and provide your localized value in marketing and service support by. If you can’t beat the enemy, join them! This is of course if you can keep your pride in check haha.
3. There is a question in my mind, if I depend on Lazada answering customer question, just like the China Seller, how can my customer differentiate me from China Seller. Thus, I will like to suggest that customer service and support is done right from a person with strong product knowledge and the full intention to provide the best support for customer, possibly with a strong local flavor and attend to customer asap! Although ChatBot or call centre is available now, at the moment I don’t think it can substitute on real focus customer service from the business owner.
4. The window of Ship from China and ship from Malaysia is getting smaller. Malaysia seller must ship out within 24 hours. If you delay for even more than 48 hours, your fulfilment performance will start to be worse than an efficient China Seller which ship within 4 hours from order received. (Yes, they are that competitive in China).
5. Regardless, customer in Malaysia will prefer to support Malaysia seller if price difference is not too great. Thus, please ensure to highlight you Malaysia Seller Status if possible. China Seller also had difficulty accessing Facebook China disallow direct connection, and it is not popular. So having own brand identity in Malaysia Social Media and on the web will help differentiate yourself from the China Seller.
6. Regadless, Lazada with Alibaba had deep pockets and they continue to flood the digital world with their advertisement and placement. Thus my suggestion is always to continue to sell in Lazada if there is still business. But let’s prepare for the rain so it’s good that Malaysia sellers build out their exposure and expertise in other Marketplace. Shopee current no commission rate and free shipping after RM30 is a better playing field for Malaysia Seller. 11th Street and Lelong also doesn’t seem to invest in infrastructure to bring China seller direct to Malaysia marketplace. Similarly, there is other vertical marketplace with different flavor but not as much search coverage as the others.
At the end, I always felt that Competition is Inevitable. Although some will demand same condition, but the ability to get preferential treatment is a competitive edge also. There is nothing wrong in business for Alibaba to acquire Lazada for their objectives. For small seller, we need to be able to analyze market forces, and find the space and niche which our business model can survive. Try to avoid working very hard in the well, and later being swept away by the changes which you are not aware of.
Thus it is again my humble objective to share these findings for Malaysia. It is not a competition only among Malaysia sellers anymore. It is a competition between Malaysia seller with Worldwide sellers. Any Suggestion will be beneficial to Malaysia seller as a whole, if we can and willing share our ideas. To be together means to be stronger.