TECH
04/02/2014 03:06 pm ET Updated Apr 02, 2014

How To Clone Amazon When Your Shoppers Don't Have Addresses Or Credit Cards

SINGAPORE -- A few months ago, managers of the online shopping site Lazada, many of whom once paced the gilded halls of firms like McKinsey and J.P. Morgan, found themselves grappling with a predicament: Their warehouse in Jakarta was haunted.

Spooked by a spirit they called the "White Lady," workers there refused to come in for their shifts until the ghost’s inappropriate workplace behavior had been addressed.

So the Lazada team did what most C-suiters do when faced with an intractable HR dilemma, and hired an outside consultant. More specifically, they called a local shaman to exorcise the ghost.

"It's part of the story about us getting used to local customs," explains Lazada's 35-year-old chief executive Maximilian Bittner, who came to the startup world by way of McKinsey, Morgan Stanley and the Kellogg School of Management. Lazada, which he founded, celebrated its second anniversary last month.

Bittner didn’t personally handle the White Lady, but he's had plenty more cultural quandaries to manage as the site works to spread online shopping through five countries in Southeast Asia, an area where Lazada estimates 99 percent of all transactions still happen offline. There was the unexpected flood of orders over the month-long Ramadan holiday that forced Bittner to pull all-nighters at a warehouse packing boxes. Or, in keeping with the country’s custom, the Feng Shui master hired to ensure “good energy” at the Lazada office in Vietnam.

Billed as the Amazon.com of Southeast Asia, Lazada was launched by Rocket Internet, a German startup incubator notorious for cloning Silicon Valley hits in countries where the original Zappos or Airbnb has yet to launch.

Though Lazada might have started as an Amazon replica -- down to it website's color scheme -- the company has had to invent new features and protocols in its push to get Malaysians, Vietnamese, Indonesians, Filippinos and Thai hooked on buying fridges and face wash online. (Lazada will launch this spring in Singapore, as well.) This might come as a shock to the Menlo Park disruptors decrying Rocket’s conquer-with-copies approach, but it seems even the clones can be creative.

What Lazada is up against would be total system overload for any startup CEO shipping stuff around the United States. The company regularly delivers to people who don’t have addresses -- "they write on the checkout, 'drop the package two doors down from the 7-Eleven,'" says Bittner. They ship to islands, like Papua, that have only a single flight ferrying goods each week. They buy from suppliers who still track their inventory with paper and pen. And they’re selling to people who don’t necessarily use credit cards, or even banks. Lazada lets any buyer pay when their package arrives, and over 90 percent of orders in Vietnam are purchased in cash. That poses its own problems, such as figuring out how to be certain a shopper is serious about paying for the item they’ve ordered and will have the money for it when it arrives.

"There are not three issues we have to work on, there are 300 things we need to do," says Bittner, a Munich native who, at 6-foot-4, calls to mind a blonde-haired, blue-eyed Paul Bunyan.

lazada
A screenshot of Amazon.com's homepage, before a 2011 redesign.

lazada
The homepage of Lazada's site in the Philippines.

Lazada has taken heat for following the Rocket formula of populating its executive ranks with young expats from brand-name consulting and financial firms. It's "extractive colonialism," says Wong Meng Weng, an entrepreneur who runs Singapore’s Joyful Frog Digital Incubator. As Wong sees it, Rocket businesses like Lazada enter Asia, make money, then export it back to the motherland, rather than reinvesting in local startups and entrepreneurs.

Bittner counters that 95 percent of Lazada’s 1,700 employees are from Southeast Asia, and that several employees have already left to launch their own startups. The training Lazada offers employees and suppliers, or the investment it's made in shipping and banking, are “not things which come and go with us,” he adds.

"I believe in the growing of the ecosystem," says Bittner.

Buyers believe in it too. Even in remote Papua, Southeast Asia’s shoppers expect nothing less than the seamless online shopping experience they’ve heard so much about. Cancellations soar each additional day it takes the camera or blender to arrive, so Lazada has been scrambling to speed up delivery. It has an army of customer service reps who do hand-holding for ‪local shipping companies -- Malaysia's version of UPS, for example. (Some of these, says Bittner, are “just starting to figure out how to use a computer.”)

In many places, Lazada also has its own delivery fleet zipping around by motorbike. And in the early days before it had secured suppliers, Lazada scrounged together the goods it promised shoppers by relying on its so-called “hunting teams.” Employees would descend on neighborhood stores with wads of cash to buy the goods Lazada didn’t yet have on hand, but had sold through its site.

"And this includes us being chased out of stores because, after a while, they knew who were were obviously. In every country," says Bittner.

Lazada is trying to win over buyers by deftly handling even the most complex orders, and aims never to turn down a sale. The site’s second order ever was for an Acer computer Lazada didn’t own and didn’t know how to deliver. Rather than lose the customer, they sent someone to buy the machine at a nearby shop, contemplated putting it on a plane with an intern and ultimately spent only slightly less than the price of the computer to ship the Acer to Banda Ache.

Since Lazada, like Amazon, aims to have the cheapest wares, this kind of dubiously profitable arrangement begs the question: Why bother?

Because, Bittner explains, the Amazon model has been shown to work. If Lazada can win hearts and minds now, Bittner believes it can reap big profits as a growing number of Southeast Asians log online, earn higher wages and start expecting the convenience of getting sheets and towels delivered to their door. Investors have plunged $433 million into Lazada, betting Bittner is right. Though he declines to share sales, he says Lazada's five sites are getting close to a million visitors a day.

"The beauty of our business model is, if we check those boxes -- if we provide people the ability to shop, if we provide people the ability to get product to them in a reasonable amount of time -- then they will come," says Bittner.

"Why do I have the best job, or why does she have the best job?" he adds, gesturing at a Lazada managing director. "We get to do real shit. Real fun shit. It’s a lot of fun to figure out a business model which has worked everywhere in the world. And there's no reason why it shouldn't work here."

CONVERSATIONS