RedMart fulfillment centre. Image via Tech in Asia
It is now confirmed that Lazada is set to acquire Singaporean grocery start-up Redmart for $30-40 million. Lazada, fresh off its $1 billion injections from Alibaba, is not known for adopting an asset-heavy model and has been actively transitioning towards a full marketplace. So why would the company want to purchase an online grocery retailer?
1) Joining a thriving new playing field
Lazada offers it all, electronics, beauty, apparel, and home and living, except perishable goods.
The offline groceries sector in Singapore was worth an estimated $3.90 billion in 2014, while online grocery retailing was worth $86 million, 1 to 2 per cent of the entire grocery market in the country.
2) Lelong, lelong!
It’s not surprising that five-year-old Redmart quietly put themselves on the market after reports of $21 million operating losses in 2015 and $126 million liabilities this year.
Lazada is making the acquisition confidently with the knowledge that it can optimise costs by leveraging its own fleet for deliveries through LEX.
3) Further distribution of Alipay
Redmart’s current payment options include PayPal and credit cards. It won’t be long before Lazada implements Alipay on their sites.
4) Tapping into e-commerce talent
The talent challenge is not new to companies
in SEA. By acquiring Redmart, Lazada instantly gains 200 in-house employees who are already trained in e-commerce-specific fields.
5) Amazon is coming
The US e-commerce behemoth has finally announced its plans to enter SEA via Singapore in Q1 2017, which means Lazada will need to maintain a competitive edge. Amazon has already begun offering a tailored version of Amazon Prime in China so it will likely introduce the same exclusive services in SEA.