Abstract

Zalora is an e-commerce company dealing with fashion online. The start-up has been
growing rapidly since 2012, with customers in most of South East Asia. The founders of
Zalora has built the company based on learnings from some of the most successful e-
commerce business in the US. In 2014, Zalora had successfully gained access to several
countries in South East Asia. South East Asia is an emerging market, that will give some
challenges when building the business.

Zalora’s management team will have to understand culture, religion and internet usage in the
region. For example, in Indonesia and Vietnam, the e-commerce industry is slowly adopted in
society, but the payment method is still cash-on-delivery. This means the company will have
to adapt to some of the e-commerce strategies as it moves forward. Other challenges will be
on the infrastructure side in some of the countries, but by working with major brands in the
same countries the risk can be shared between the companies.

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

Every e-commerce market has its own challenges, but distribution in South-East Asia–which
includes Indonesia, Malaysia, and Singapore–can not be underestimated: the Indonesian
island comprises more than 17,000 islands, and some postcodes can only be accessed by
canoeing. However, Zalora is a fashion retailer who has overcome the complexities of the
market to harness an increasing market.
Founded in 2012, Zalora is the equivalent of Asos or Zalando in Southeast Asia. It provides
market-wide products like Nike, Adidas, Levi's and J Crew, as well as local brands. The site
works in Malaysia, the Philippines, Taiwan, Indonesia, Singapore, Brunei, Hong Kong, and
Macau. Australia and New Zealand are catered for through The Iconic's "cousin" site, sharing
a management and set-up team, but working under a distinct title.

Strong foundations
Zalora has some powerful credentials behind it. Initially financed by the Rocket Internet
Group–creator of German e-commerce giant Zalando–it is now owned by the Global Fashion
Group, whose other businesses include e-commerce locations Namshi in the Middle East,
Dafiti in South America and La Moda in Russia and Eastern Europe.
Since September 2017, Giulio Xiloyannis, Chief Operating Officer at Zalora, describes that
his key client tends to be between 25 and 35 and 70% woman. However, they are enormously
diverse beyond these features.
"The client is very different across markets outside of just age and gender," he says.
"Taiwanese customers, for instance, are oriented towards Japanese or Korean fashions. If
you're going to Indonesia or Malaysia, Muslim women are the majority of clients, so the
client of modest wear.
products on the site are available in all regions, and regional homepages are geared to local
consumers.

"We believe the client should be able to choose what they want and have as much access as
we can offer them," Xiloyannis describes. "What changes are our sorting algorithms and how
websites display products on the analytical side of our marketing teams." Overall, the site
holds 40% of global products, 20%-30% of localized products, such as modest wear, and
20% own label. UK distributors including Topshop, Closet London, and River Island were
selling through Zalora, and Jack Wills premiered in March on the site.
"This collaboration will continue to build on the growing popularity of Jack Wills in this
portion of the globe, backed by our established Hong Kong and Singapore store network."
Many brands, including Jack Wills, are working entirely with Zalora in the region, which
Xiloyannis notes are the focus of the platform as the industry grows: "The exclusivity and
quality of the producers are becoming increasingly crucial as we move forward," he says.
He states that in Taiwan, the products of the Arcadia Group are exclusive to Zalora online.
Zalora is working with Taiwan-born designer Jason Wu on exclusive collections. In addition
to this, Zalora is tailoring its platforms for a market that depends highly on mobile internet
and technology development.
Xiloyannis notes that this is particularly relevant for the Zalora app: "You don't care if an app
is 5 MB or 12 MB with a European phone–an iPhone or a Samsung. But if you have Xiami or
a phone that's more tailor-made for developing markets, you don't just care about the quantity
of information you use when browsing, you're concerned about the quantity of memory in
your phone that an app takes up, "he explains."We're developing our systems and our [
application programming interface ] APIs to be slightly distinct from what's going to be done
in the West, to be ' lighter. '"
Xiloyannis also points out that Zalora is distinguished by logistical sophistication: "We have
three main objectives: value for cash, product choice, and excellent service. That's likely
what any online retailer is going to inform you, but that's how we apply it in South East
Asia."

Service challenges
"The primary complexities of the region are its fragmentation in terms of the island structure,
a customs system that is not always well developed for cross-border trade, and a not always
very powerful growing infrastructure," he explains. "The real issue is delivering the product
to people with excellent service, the correct payment arrangement – whether it's a loan card
or money on the delivery – and without having to take a three-hour flight to the nearest mall.
Zalora introduced an express shipping subscription service in Malaysia and Singapore earlier
this year and seeks to roll it out by the end of the year to all countries.
Zalora is required to use a large number of distribution suppliers in the fragmented
geography. There are 12 suppliers that serve Malaysia alone, uniquely ranked in order of
speed. This is complemented by Zalora's own shipping fleets to cater for demanding peaks in
big towns.
"There are some locations to be reached by canoe, and next day delivery is guaranteed," he
says. "That's 0.0001 % of our orders, but it's something fresh and exclusive in the region that
we're placing it on the table."
Building a business that embraces market difficulties has made it possible for Zalora to
become a strong force in the e-commerce landscape of South East Asia.
"To stop complexity, all company books say, and I fully agree with them in particular,"
Xiloyannis suggests. "But there are some areas where your competitive advantage is the
region's complexity. In many regions, we have adopted this complexity, and I firmly think it
is one of our competitive benefits.

Supply Chain Management at Zalora

Zalora Supply Chain management and LB5230 theories

CNBC's (C. Tan, 2015) talked about setting up Zalora with stores and constructing an e-
commerce company tailored to the culture, faith and conduct patterns of individual countries.
By knowing the nation, culture, and religion, it is necessary to customize the storefront,
which is the product presentation online website, to target the requirements of the customer in
each country. In order to offer clients an appealing user experience, the online store will have
local language for each country and current fashion styles according to culture and religion.
Zalora also has dealt with products they sell internet, such as Mango and Diesel, to bring in
the products that these brand shops did not sell in the era before fresh arrivals. By examining
dependencies and lead time values, it may be helpful to apply Six Sigma to analyze the
information and optimize the dependencies between providers, distribution centers, factories,
and deliveries to end clients on each move through the supply chain.

Infrastructure
When planning and setting up the Zalora, each country's infrastructure will have to be
evaluated separately. Singapore and Malaysia have a well-developed infrastructure and can
provide fast and simple access to products, but there is poor infrastructure in Indonesia,
Thailand, and the Philippines, so delivery schedule and transport schedules need to be
assessed with regard to warehouse location, choice of logistic and shipping provider as well
as shipping agreements with suppliers.

Warehouse
A warehouse's positioning is chosen based on best access to infrastructures such as highways,
railways, and airports. The warehouse products are either tagged with a barcode or an RFID
chip. In the inventory, the products are then easily managed and updated in an inventory
platform that integrates with the e-commerce solution. This offers end-to-end stock
management as the product is monitored from the moment a client purchases the item online
until the item is packed, transported and delivered (Taylor, B. & Russell, R.,2013). The
inventory is managed by a WMS, a warehouse management solution (Cheong, T., Goh, M. &
Song, S., 2015) and is integrated into the e-commerce platform. This provides the system a
transparent flow of data, and customers can be notified if a product is out of inventory or has
to be shipped from another warehouse, leading in longer waiting times before shipment. All
warehouses regularly undergo stock checks. The stock can be updated from a longer range
with far greater precision and speed than with barcode scanning by using RFID on the
product products. The RFID chips can be placed in any direction and the WMS will update
the stock status when the antenna scans the region, which can be up to 20 meters away The
system will have some pre-configured thresholds to show whether the inventory needs to be
recharged by a product group. Figure 4 Illustrated an RFID system warehouse. As illustrated,
a pallet of products can be transported to the warehouse and, as soon as the pallet passes the
antenna at the warehouse entrance, the WMS will have each of the items on the pallet
registered and approved by the warehouse manager. When the pallet is in the warehouse at a
certain line, the location of the products can be detected by other antennas. This can also be
used for improving the effectiveness of warehouse inventory management in Zalora's stores.
Management of the supply chain will monitor the inventory volume status at each stage and
ensure that request data is correctly carried through supply chain stages. If the data is
misinterpreted, there is a danger of the bullwhip effect that in the supply chain system will
result in enhanced costs in several areas.

Resources and suppliers

The resource cost may be greater in some countries than in others. This means the business
needs to take a cost-conscious strategy in countries like Singapore to optimize procedures,
e.g. in the warehouse and with service employees.
The item sold in the online store is mostly represented by third-party providers in the case of
Zalora. This implies that they have to take care of the original manufacturing method and
have to cover raw material costs, manufacturing capital as well as product storage prior to
shipping.

Showed the supply chain process from raw material all through manufacturing over
distribution to the end customer.
Shipping cost and Delivery services
It will cause the purchase and delivery process where the warehouse or closest provider
receives the order from the e-commerce platform, then package and deliver the item. Zalora
has implemented delivery via 7/11 shops or the Signpost pop stations to decrease costs and
present a more sustainable business model, which are postal lockers where clients can pick up
their parcel as quickly as they are dropped off. These strategies decrease transportation, for
example, if some products have to be delivered via e.g. DHL or FedEx, the shipping firm will
deliver to the door of the client; but if the client is not accessible, the processes for these
businesses will continue with a second delivery attempt.

Risk
With $7 billion reported on a prospective market in South East Asia (Leighton Cosseboom,
2015), the investment in Zalora has excellent potential to create a powerful business case.
The primary risk variables in the supply chain system will be natural disasters, floods, energy
disruptions, traffic disruptions and sudden loss of service or warehouse employees.
Other risk variables are on the provider side with delivery delays or if the supplier has to ship
straight, that their shipping processes follow the timely delivery policy of Zalora. Zalora also
has to develop a contingency plan to ensure that all risk factors are supported throughout the
supply chain.
This also means that vendors with various stores or distribution centers must be able to
deliver their product if the warehouse is obstructed and delayed.
Competitors
Zalora e-commerce platform's original approach is comparable to any e-commerce business
in the globe. By looking at the configuration, the platform has comparable characteristics as
Zappos, an internet shoe store that has been growing quickly since 1999 and merged into
amazon in 2009 (zappos.com, 2010). Usually, e-commerce firms develop a strategy on
inventory and supply chain by either shipping the item straight from the supplier, then
allowing the supplier to own and handle the inventory, which is called drop-shipping, or
setting up strategic local offices to handle delivery (Netessine, S. & Rudi, N., 2006).
Some of the rivals facing Zalora in Asia are Reebonz, a Singapore-based internet fashion
shop (T. ISA, 2014), and Vietnamese Chon.vn with a very high hit rate on their internet shop
(L. Cosseboom, 2015).