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How Zalora delivers in a market with more than 17,000 islands

Zaloraya2018 campaign 1

Drapers speaks to Giulio Xiloyannis, chief operating officer of Zalora, to find out how brand exclusivity and next-day delivery by canoe fuels its ecommerce dominance of the south-east Asian market.

Every ecommerce market has its challenges, but south-east Asia – which includes Indonesia, Malaysia and Singapore – distribution is one that cannot be under-estimated: the Indonesian archipelago comprises more than 17,000 islands, and some postcodes are only accessible by canoe. Fashion etailer Zalora however, is one operator that has overcome the market’s complexities to harness a growing market.

The ecommerce sector in south-east Asia is growing fast. In 2017 the market was worth $10.9bn (£7.78bn), and by 2025 that will be $88.1bn (£62.9bn), a report from Google and Singaporean investment company Temasek predicts. This puts it roughly on a par with the Middle East, where the ecommerce market is set to be worth $69bn (£50.6bn) by 2020, as predicted by Middle East payment platform PayFort.

Zalora ss18 01

Zalora spring 18

Founded in 2012, Zalora is south-east Asia’s equivalent to Asos or Zalando. It offers brands such as Nike, Adidas, Levi’s and J Crew, as well as local brands across the market. The site operates in Malaysia, Taiwan, Indonesia, Singapore, the Philippines, Brunei, Hong Kong and Macau. Australia and New Zealand are catered for through “cousin” site The Iconic, which shares a leadership team and set-up, but works under a different name.

For the full year of 2017, revenues at Zalora jumped 23.9% to €323.5m (£283.42m) and gross profit reached €125.2m (£109.7m), up 21.3% on 2016.

Strong foundations

Zalora has some weighty credentials behind it. Initially funded by the Rocket Internet Group – creator of German ecommerce giant Zalando – it is now owned by the Global Fashion Group, whose other ventures include ecommerce sites Namshi in the Middle East, Dafiti in South America and La Moda in Russia and eastern Europe.

Giulio Xiloyannis, chief operating officer at Zalora since September 2017, explains that its core customer tends to be aged between 25 and 35, and 70% female. Beyond those characteristics, however, they are hugely varied.

“Outside of simply age and gender, the customer is very different across markets,” he says. “For example, the Taiwanese customer is oriented to Japanese or Korean fashions. If you go to Indonesia or Malaysia, the bulk of the customers are Muslim women, so the modestwear customer.”

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Zalora spring 18

Products on the site are available in all regions, and regional homepages are geared to local consumers.

“Our belief is that the customer should be able to choose what they want and have access to as much as we can give them,” explains Xiloyannis. “What changes is our sorting algorithms and how the analytical side of our marketing teams show products on the websites.”

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Zalora spring 18

Overall, the site stocks 40% international brands, 20%-30% localised product, such as modestwear, and 20% own label.

UK retailers including Topshop, Closet London and River Island sell through Zalora, and Jack Wills debuted on the site in March.

Commenting on the announcement at the time, Greg Roberts, Jack Wills’ wholesale and international director highlighted that the partnership would help secure the brand’s regional growth.

This partnership will continue to build on Jack Wills’ ever-growing popularity in this part of the world, supported by our established network of stores in Hong Kong and Singapore.”

There are some places that have to be reached by canoe, and we are guaranteeing them next-day delivery

Many brands, including Jack Wills, work exclusively with Zalora in the region, which Xiloyannis notes is the platform’s focus as the market develops: “What is becoming more and more important as we move forward is the exclusivity and the quality of the product,” he says.

He notes that the Arcadia Group brands are exclusive to Zalora online in Taiwan. Zalora is working on exclusive collections, including a collaboration with Taiwan-born designer Jason Wu.

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Jason Wu launches his collaboration with Zalora on 4 June 

Alongside this, Zalora tailors its platforms for a market that relies heavily on mobile internet and developing technologies.

Xiloyannis notes that this is particularly relevant on the Zalora app: “With a European phone – an iPhone or a Samsung – you don’t care if an app is 5MB or 12MB. But if you have Xiami or a phone that is more tailored to developing markets, you don’t just care about the amount of data that you use when browsing, you care about the amount of memory in your phone that an app will take up,” he explains. “We are evolving our technologies and our APIs [application programming interface] to be slightly different from what would be done in the west, to be ‘lighter’.”

Xiloyannis also stresses that logistical sophistication sets Zalora apart: “We have three big priorities: value for money, selection of product and a great service. This is probably what any online retailer will tell you, but it’s the way we apply it in south-east Asia.”

Service challenges

“The region’s main complexities are its fragmentation, in terms of the island structure, a customs system that is not always well advanced for cross-border trade and a developing infrastructure that’s not always very strong,” he explains.

There are certain places where the complexity of the region is your competitive advantage

“The real problem is getting product to people with good service, the right payment set-up – be it credit card or cash on delivery – and without them having to take a three-hour flight to the closest mall.”

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One of Zalora’s regional fulfilment hubs in south-east Asia 

Earlier this year, Zalora launched an express delivery subscription service in Malaysia and Singapore, and aims to roll it out to all countries by the end of the year. 

The fragmented geography requires Zalora to use a vast number of delivery providers. There are 12 providers, uniquely ranked in order of speed, serving Malaysia alone. This is supplemented by Zalora’s own delivery fleets in large cities to cater for peaks in demand.

“There are some places that have to be reached by canoe, and we are guaranteeing them next-day delivery,” he says. “That’s 0.0001% of our orders, but the fact that we’re putting it on the table is something that is new and exclusive in the region.”

Building a business that embraces market challenges has enabled Zalora to become a powerful force in south-east Asia’s ecommerce landscape.

“All the business books say to avoid complexity and, in general, I totally agree with them,” says Xiloyannis. “But there are certain places where the complexity of the region is your competitive advantage. We have embraced that complexity in a lot of areas, and I strongly believe that it is one of our competitive advantages.”



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