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Lazada’s CEO raises the level of online shopping

How many of us are offered the job of our dreams but given only minutes to decide, yes or no?

Inanc Balci, one time hot shot investment banker at Nomura in London, found himself in this delicious predicament in February 2012 when he was invited to start up an e-commerce platform in Southeast Asia. In an unexpected appointment with Oliver Samwer, head of Berlin-based Rocket Media, Balci (pronounced “Bal-ji” in Turkish) found himself facing a leap from the heady world of financial wheeling and dealing to the new horizon of online shopping.
The project was Lazada Philippines.

A no-brainer
Call it serendipity but Balci was just contemplating setting up a niche e-commerce company as a side business. “I asked the Rocket Media owner if I could have a couple of days to decide, and he said, ‘No.’ So I said, sure I’ll join. When you’re given an opportunity like that, sometimes, you don’t have time to think it over.”

What Balci did request for was a night to study which country – Indonesia, Malaysia, the Philippines, Thailand or Vietnam – he fancied being based in. “The Philippines was a no-brainer,” he recalls. “A huge population…English widely spoken which would allow me to interact easily with the people…underpenetrated e-commerce market…few players.” He got it, and arrived in Manila soon after he said yes to Rocket Media, setting up a small office along Jupiter Street, Makati in a former spa. He says, chuckling: “It was super modest. I interviewed people in what used to be the sauna room, which scared some of them. There was a whirlpool in our meeting room.”

He can afford to cheerfully look back on that unassuming beginning since today the e-company occupies a 32,290 square-feet space, sprawling over one and a half floors (the other half shared with Google Philippines) in a smart looking building in BGC. From Balci’s initial small team, the plantilla has grown to about 2,800, a mix of regular and contractual employees. Lazada, which means “loop” or “bow” in Spanish, set up its website two months after he launched operations.

The Purdue alumnus (he did a double major in industrial engineering and economics) is living his ambition of dabbling in unchartered waters and taking calculated risks. His entrepreneurial bent, he says, was inherited from parents, who operated for many years a successful pharmacy concern in Istanbul. “Something like Mercury Drug here. As soon as I could count, I was seated behind the cash register collecting money!” Later, he got involved in the purchasing department as well.

An uncle, who served as chairman of one of Europe’s most important media companies, also introduced him to how a highly professional operation should be run. The education of both environments whetted Balci’s desire even more, not only to own his own business, but pioneer fresh avenues.

After Purdue, he planned to work on Wall Street, but his graduation in 2008 coincided with the downturn in the US economy. “It wasn’t the best time to be an investment banker there,” he quips. After a short return to Turkey, he hopped over to London for a three-year stint with Nomura specializing in mergers and acquisitions (M&A).

Lazada Philippines’ youthful boss engages his even more youthful staff

Big-picture insights
Of the experience, he says: “I may not have gone into much of the details, but I did learn to see the big picture, how all the parts fit and seeing the opportunities for growth. I was also exposed to a lot of business models, which helped me in advising CEOs, who wanted to expand their business by acquiring other companies. My work also involved building business models for them.”

Having absorbed the skill of nimbly adapting to lightning changes in the marketplace, Balci is well placed to raise Lazada Philippines’ performance when the need arises – and that has proven to be often in the last five years of its existence. He explains: “When you grow your business very fast like we did, your business model also changes very quickly as the previous structure will probably not be able to support the new cycle. That applies to your management structure as well.

“Since we started, we’ve had to change business models and the management structure of the company several times.”

From selling their own goods, Lazada Philippines expanded the selection to include some two million products from local “market merchants” and recently, 18 million products from market merchants from across the globe. “From being a department store like Rustan’s, we went to being a mall,” Balci explains the current e-platform configuration. The smallest item carried on Lazada Philippines is a MicroSD card and the largest is an industrial washing machine the size of a small room.

The site will not sell any contraband such as such as guns and ammunition. Medicines like those carried by Mercury Drug and its counterparts are not also included in Lazada’s product gallery “as these fit another kind of business model,” says Balci.

Logistics challenge
While it is a much-lamented fact the Philippine Internet experience is below par with its neighbors, Balci is plays down this factor as a lesser challenge to the thriving of Lazada or e-commerce for that matter. “Did you know that the Philippines is number one in the world for Facebook penetration? There are about 63 million FB users in the country, so that means the Internet is good enough to support that number.”

Payment for ordered goods on Lazada Philippines, Balci adds, is done, not through plastic, but cash on delivery (COD). The system, however, depends on seamless logistics, which is really the tricky part in the local service chain. Third-party logistics companies have been tested but found wanting.

Inanc (far right) out relaxing with family in Istanbul

To address the problem, the Lazada team sat down with suppliers, walked them through company procedures and appraised them of quality standards. In the end, their performance determines the number of contracts to head their way. “Give us and the customer good service, and you’ll get more business from us,” says Balci. It’s as simple as that.

In addition, Balci proved his visionary chops, creating a logistics outfit, dubbed Lazada Express, which now handles 70 to 80 percent of pick-ups from local merchants and deliveries to the customers. Metro Manila residents are assured of free shipping and if the item is ordered by express delivery before 1pm, it arrives on the same day; after 1pm, the next day. Goods arriving from overseas will take from two days up to two weeks. The customer is informed of lead times even before the item is added to the cart.

The complaints mechanism is highly accessible and easy to navigate, reports Balci. “For any issue with goods from Lazada’s own store, these can be returned from up to 30 days without questions asked. For products from our market merchants, it’s two weeks.”

Alibaba backing
Increased investment by giant e-commerce store Alibaba in Lazada Philippines last June – from an initial 51 percent to 83 percent – has only ramped up Lazada’s prospects in the region. There are even speculations founder Jack Ma wants it to colonize more country markets, and not just in Asia.

Balci expresses great admiration for former tour guide Jack Ma – probably China and Asia’s richest person, if not, its most iconic. “He is truly inspirational. When you hear him speak, you can’t help but feel you are part of something bigger.

“He started from scratch with nothing, but through hard work, he built an empire. That says a lot about the man.”

At 31, Balci, whose first name Inanc (pronounced “Inaj”) means “to believe or trust in someone” in Turkish, is one of the “seniors” in a workforce whose average age seems to be around 25 (It could be even younger, we bet.). The open-plan office layout reflects the apparent lack of rank in this dynamic company.

“I’m seated beside the Chief Marketing Officer,” confides Jio J. Zorilla, who’s in charge of Lazada Philippines’ brand management and communication affairs.

Sports team analogy
Balci describes the company culture, saying: “We’re a sports team that works for the best outcomes. Yes, we also compete with each other, but we all enjoy what we’re doing.”

A snowboarding holiday in Niseko, Japan

When not focused on Lazada, the boyish CEO, who has a brother still at university, regularly heads for La Union to surf. He intends to try Siargao’s Cloud 9 next when schedules permit. Other board sports such as wakeboarding and snowboarding remain of interest. As a student, Balci played semi-professional football “against people twice my size.” Hanging out with friends, traveling and table tennis are other playtime activities.

E-commerce penetration in the local retail sector remains at the miniscule level of one to two percent compared with Taiwan’s 16 to 18 percent, followed by South Korea, which is a bit lower, the UK at 12 percent and the US at 10 to 12 percent. But Balci nurtures the dream of turning the Philippines into one of the biggest e-commerce markets in the world.

“Five years ago, there was hardly a market. With the Philippines having the greatest FB penetration in the world, why can’t it have the biggest e-commerce penetration as well? There is enormous potential for this.”

Shopaholics rejoice, this fellow is certainly in your corner.

SO YOU WANT TO SET UP AN E-COMMERCE BUSINESS…THINK AGAIN, SAYS BALCI

• You will need some P10 billion to start off and compete with current players like Lazada Philippines.
• Consider other, better opportunities available rather than compete head on.
• Instead, why not become a market merchant or company supplier in the Lazada eco-system? Since our business is running an e-commerce platform, we are always outsourcing services. There are now lots of opportunities in the payment and logistics space. BPOs are also very useful to us.
• Market merchants need help in generating content and images for their products for posting online. Why not offer your services to them?

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