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Rocket's Lazada gets $100 million in bid to be Southeast Asia's Amazon

By Jeremy Wagstaff

(Reuters) - Lazada, the Southeast Asian online retail company founded by Germany's Rocket Internet Gmbh, has secured another $100 million from investors in its bid to lift the region from its status as an e-commerce backwater.

While online shopping is big in Europe, the United States and even in China, where it is likely to account for 6 percent of all retail business this year, Southeast Asians still prefer to do 99 percent of their shopping offline, the company estimates.

Lazada, which operates in Indonesia, Malaysia, the Philippines, Thailand and Vietnam, hopes to change that.

"We see the same positive trends across the region," said Singapore-based Lazada CEO Maximilian Bittner. "What a country like Vietnam or Indonesia may not have in GDP they make up for in enthusiasm for online."

On Thursday it announced that it had secured $100 million in funding from existing investors Holtzbrinck Ventures, Kinnevik Investment AB, Summit Partners and Tengelmann Group, as well as new investor Verlinvest, a Belgian family-owned investment holding company. It was Lazada's largest single round of funding to date.

He declined to give details about how the round, which follows smaller injections earlier this year and late last year, would affect Rocket's stake in the company.

Berlin-based Rocket Internet has launched multiple e-commerce websites in the past few years, most of them in emerging markets.

They include Africa's Zando and Jumia, Zalando in Europe and Dafiti in Brazil. Earlier this month Lamoda, a Russian version of Zalando, secured $130 million in a funding round that included Summit Partners and Tengelmann.

Lazada was launched in early 2012 offering consumer electronics, household goods, toys and sports equipment to emerging markets in Southeast Asia.

CHALLENGE FROM AMAZON

Bittner said the funds would partly be used for improving logistics and the group's supply chain. "We're still in the pioneering phase. The key for us is to improve our service level for customers."

Indeed, Lazada has its critics. Bernard Leong, a Singapore-based founder of regional news site SGE.io who has followed Rocket's activities in Southeast Asia, said that Lazada had been spending heavily on advertising, and was experiencing problems in maintaining quality of customer service across the region.

"If the funding helps to resolve their operations such as customer service, they are on track to be the largest players in the region," he said.

Bittner declined to give concrete figures, but said that gross merchandise value, the total value of goods sold over a given period, had last month hit the "three digit millions" of euros.

Lazada's biggest competitors are mostly local players but it is likely to face a significant challenge from Amazon.com Inc, which has stepped up its activities in the region. Earlier this month Amazon announced it would ship some items from the United States to Singapore and India for free. Amazon offered similar services in Europe in late 2010.

But Bittner said that things were moving quickly. In the past year, he said, the group had overcome logistical challenges to ship about 90 percent of packages across the region on the same day, and get 85 percent of those orders in metropolitan areas delivered by the next day.

While e-commerce has been hampered by a lack of options for consumers to pay for the goods online - less than 10 percent of Lazada transactions in Vietnam were done by credit card, compared with about half in Malaysia - consumers in Southeast Asia have readily adapted to new technologies, in particular mobile, Bittner said.

He said that a mobile application launched 10 days ago already accounted for 10 percent of transaction volume. "It shows how incredibly Internet savvy and open to these things Southeast Asia is," he said.

(Reporting by Jeremy Wagstaff; Editing by Chris Gallagher)

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