This week, news emerged that Lazada is laying off people across multiple locations including Singapore, Indonesia, Thailand, Vietnam, China. People affected received notice on 2nd of January and the talks with HR are still happening as we speak. Some thoughts: The strategy behind the layoffs seems to be centralising resource allocation as well as some of the operational functions;This is very different from some of the assessments two years ago that Lazada had a bulky regional team (hence cost) but not enough resources in the country markets where they were fighting Shopee;However, things have changed a lot over the last two years:Macro ecommerce growth slowed down; Consumers are more cautious with spending amid inflation and withdrawal of government subsidies in a few countries; In competitive landscape: TikTok Shop is surging, while Shopee has been going through painful adjustments; Achieving Pinduoduo level of HR efficiency (GMV or Revenue / No of employees) will be very hard for Lazada, or Shopee or any other platforms operating in multiple countries; Leadership and organisation: Lazada’s ultimate parent, Alibaba Group, is going through a massive transformation on its own. The new leadership, which is more closely aligned to the group than their predecessors, must also have attained much better understanding of Lazada; Besides, generative AI has the potential of massively reshaping the ecommerce platforms of the future. Nobody knows exactly how and when this will take shape, but nobody wants to be too bogged down by the status quo and thus be left behind.In this new environment – what would be the best strategy for Lazada?Clearly, fighting against Shopee and TikTok Shop for market number 1 would be difficult – whether the number 1 position is even tenable is also a big question mark; Lazada has put a lot of resources on Choice – its cross border full consignment model. However, “savings” or “cheap” is not something that consumers associate Lazada with, and trying to reverse that perception will be very costly, and might jeopardise Lazada’s existing relationships with brands;Would brands give Lazada a smaller but profitable niche in Southeast Asia? Unlikely and even if they do such niche might not be secure;And how does Lazada strategy fit into that of AIDC or Alibaba Group as a whole? The market will probably continue to change. How to correctly interpret the intentions of Shopee, TikTokShop, and even Pinduoduo/Temu? In such an uncertain and probably unfavourable environment, Lazada’s organisation would need to be more efficient for sure. The question is how?Many large organisations in traditional industries go through similar dilemmas. It’s just that in tech things change much faster and become more prominent; In 1938, during the Sino-Japanese war, Chairman Mao Zedong wrote a number of speeches known as “On Protracted War”. The communist leader pointed out that in the difficult war situation, both defeatist and ‘quick win’ stances are incorrect. Instead, it was important to understand the different phases of evolution, and act accordingly. He was later proven right. Famous author Simon Sinek in his 2019 book “The Infinite Game” raised a similar concept – how to succeed in the business game, where there is no defined endpoint, no winners or losers—only ahead and behind.It seems that Lazada is digging in for the long term, conserving resources, and becoming more agile. Whether they will succeed or not depends on the circumstances, but also crucially on their leadership, people and organisation. Related —Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].
