Business Model vsGroup 2Iman M.G. & Indah Sari M.

May 2016

Background Lazada Group was founded by

Rocket Internet back in 2011 with the intention of establishing the Amazon.com business models in South East of Asia

As of 2012, Lazada operates site in Indonesia and introduce themselves as an ecommerce platform

For 2014, Lazada's net operating losses were $152.5 million on net revenues of $154.3 million. However its percentage of losses relative to its Gross Merchandise Volume - the value of all the products sold through the site - was smaller in 2014 than in 2013 due to growth in its GMV from $95 million in 2013 to $384 million in 2014, driven by marketplace sales.

As of 2015, Lazada's challenges for growth were the preference for brick and mortar shopping among customers, with just about 1% of

people buying online compared to 10% of US shoppers; the lack of credit cards and concomitant requirement to arrange cash on delivery systems, reliable delivery especially in less developed rural regions, and the threat of competition from Amazon and Alibaba.

In March 2016 Lazada claimed it recorded a total of $1.36 billion in annualized GMV across its six markets in South-East Asia, making it the region’s largest e-commerce player.

In April 2016, Alibaba Group announced that it intended to acquire a controlling interest in Lazada by paying $500 million for new shares and buying $500M worth of shares from existing investors

Site Rank in Indonesia refer to Alexa.com : 22

BACKGROUND in-Store (1) PT Matahari Dept. Store Tbk is a listed Public Company at IDX (LPPF)

having 140 retail stores in 66 cities all over Indonesia. Selling women, men & kids clothing, accessories, cosmetics and

household product for the growing middle class segment and known for its own brands that are fashionable & affordable. Since 1972

Supported by >1,200 local suppliers and >90% direct purchasing from sources across Indonesia under own exclusive brands

Company ownership: 77.52% Public, 20.48% PT Multipolar Tbk (Lippo Group) & 2% Asia Color Company

Net Profit 2015 IDR 1780.8 bio compare to 2014 IDR 2014 IDR 1419.1 bio, average year on year increment from 2010 is 41%

Current Price shares IDR 18.600 (May 26, 2016) compare to IDR 11.000 (Mar 1, 2013) and IDR 2.500 (Feb 1, 2013)

BACKGROUND (2) WHY Lippo considering going online while the offline stores doing very well?

i. Leveraging its existing in-store unit businesses (matahari, hypermart & books & beyod)

ii. Developing omni channels to accommodate the change in customer behavior that is empowering them for purchasing decision making and executing their purchase in any channel as per their convenience

iii. To tap info Indonesia’s online transaction fastest growing from US$ 14 bio in 2014 into US$ 135 bio in 2020

Officially launched by September 9, 2015 under PT Solusi Ecommerce Global (Lippo Group) with total investment up to US$ 500 million

Adding new inventories for its selling catalogue from its in-store : gadget, laptop, electronics, hobbies, lifestyle, books, groceries (under Hypermart), entertainment, automotives, vouchers & more

Hybrid mode starting day 1, market place and own products Target sales : US$ 1 bio in next 2 or 3 years (2016 – 2018) Target revenue: 20% of US$ 25 bio after 5 years from online Vision: to be Alibaba of Indonesia as the 1st e-commerce in Indonesia Site Rank in Indonesia refer to Alexa.com : 39

Business Model Blocks

1. Customer Value Proposition (1)No Item Lazada Mataharimall

1 Target Segment People who wants to purchase items online

People who wants to purchase items through omni channels

2 Offering:a. Pricing Relatively lower price Higher Price then Lazadab. Delivery & its Cost

i. Delivery to registered addressii. Free delivery with paid option for

faster delivery

i. Delivery to registered address, Pick-up at in-store (O2O), & e-locker at PT POS Indonesia counters

ii. Free deliveryc. Interface Web application

Native apps (ios, android, bb, microsoft)Web applicationJust recently launch its natvie apps for ios and android

d. Payment Option

* Selective goods

i. Standards: COD, Bank Transfer, Credit Card, BCA & Mandiri, click Pay

ii. 0% Installment by 3, 6 or 12 months with credit card (minimum trx IDR 1 mio)*

iii. Installment without credit card 7 days process with DP*

iv. Hello Pay with Indomaret

i. Standards: the sameii. All goods available for 0%

installment with credit cards without minimum trx amount

iii. Installment without credit card 3-4 days process with DP*

iv. Pay at in-Store (O2O)v. Pay at PT POS Indonesia counter

e. Products i. Multiple Categories, variety of own and Sellers/Merchant’s product products

ii. Exclusive distribution channels for several Brands (eg. Motorola Moto G, Xiaomi Redmi 1s, &Xiaomi Redmi Note)

Relatively same with additional co selling products from Hypermart and Books & Beyond (under Lippo Group)

1. Customer Value Proposition (2)

No

Item Lazada Mataharimall

2 Offering:f. Customer Care & after Sales Service

i. Contact via call center, e-mail, social media, & live chat

i. The sameii. In-store (O2O)

g. Program/Promotion

i. Daily discount or voucher from different Credit Card’s bank issuer

ii. Promo Gajianiii. Flash Saleiv. Clearance Sale

i. The sameii. Give of the Day: Free daily gift

by submiting customer own e-mail

iii. Super selamat: live insurance for a year for buying motorcycle

iv. Super cintaku: installment without credit card

v. Super sakti: voucher IDR 100K for electronic purchasing plus a year product insurance

vi. Hot deals & Deal of the Day: offering special discount based on time limit

3 Benefit i. Convenience online shopping experience; fast, save, trusted

ii. Having feature to track order

i. The sameii. Accommodating customer’s

purchase decision making via its omni channels

2. Key Resources No Item Lazada Mataharimall1 Funding i. Kinnevik invests $40m on Nv 2012

ii. Summit partners invests $26m on Dec 2012

iii. Tengelmann invests $20m on Jan 13iv. US$ 1 bio from Alibaba Group by

paying $500 million for new shares and buying $500M worth of shares from existing investors

US$ 500 mio from Lippo Group

2 Management & Employee

i. Supported by Rocket Internet which have world class reputable management in the industry*

ii. Hiring from the local experts

* See appendix 1

i. Supported by Lippo Group business conglomeration

ii. Hadi Wenas (CEO), prev. set-up e-comm platform for Lazada

iii. Emir Satar (Chairman), former Garuda Indonesia’s CEO that made Garuda as world class airline.

3 Digital Engine Technology

i. Real-time optimizationii. A/B Testing Models and prototypes iii. Agile development method (focusing

on speed, security and stability)iv. Unlimited inventory and categoryv. Computing Resource, scalability and

reliability

The same with slightly different specs & capacity

4 Customer Centric Innovation

i. Customer reviewsii. Recommendationsiii. 1-Click Orderingiv. Tokenized cardsv. Personalized offeringvi. Detailed description over sale

product

miMMi – personal stylisth, give fashion tips and advice to customer

5 Warehousing Set up 10,000-square-meter warehouse in Ciracas – East Jakarta

Set up 10,000-square-meter warehouse close to Halim Perdanakusuma airport in East Jakarta

3. Key ProcessNo Item Lazada Mataharimall1 Catalogue

ProductionThe process to put detail of good sold available into the market for customer selection

Relatively the same

2 Specific Own Process for Product delivery

Fulfillment by Lazada (FBL):Help sellers/merchants to conducts:Stock management: ensuring availability, packing, Reporting : daily sales report, returned, cancel and delivered orderFast delivery by utilizing network order fulfillment supported by 4500 specialist and more than 40 hub across asia

The 1st eCommerce in South Asia that provides "O2O" (online-to-offline and offline-to-online), that enable customers to pay, pick up, and return the product at hundreds of matahari in-store across Indonesia.

3 Supply chain i. Best selling products are kept in stock by Lazada

ii. Long tail items are provided by merchants

iii. Lazada can easily identify best selling products, as all sales go through the platform

Collaboration with in-store and group member (Hypermart & Books & Beyond) as well as UKM and big sellers/merchants

4 Customer centric user experience

i. Monitor seller ratings posted by userii. Discontinue seller/merchant with bad

ratings

See point 2 above

4. Profit FormulaNo Item Lazada Mataharimall1 Revenue: Ads Off-Deck Ads paid by data network

provider to LazadaOff-Deck Ads paid by data network provider to mataharimall.com

2 Cost of Customer Acquisition

Cost to generate traffic coming to lazada site: ads placement, SEO, SMO, bonus, promotion

Relatively the same

3 Operational Cost Structure

i. Serverii. Warehouseiii. Employee Salary

Relatively the same

4 Commission Fee At least 2% of Seller Price, depend on the category

Relatively the same

5 Sales Margin Relatively lower sales margin with higher traffic

Relatively higher sales margin with lower traffic

5. Key Partnership Site Rank in Indonesia refer to Alexa.com : 39, need to

boost more traffic to attract sellers/merchant Sellers including SMEs (Small Middle Enterprises)

#JOA (Jual Online Aja) section in market place for SME with education to develop SME product and selling skills

Collaboration with the national postal service PT POS Indonesia to :1. allow shoppers to reserve an item online, then pop down to

selected local post offices to pay for it, before shipping commences. “Pickup & Pay COD” feature will launch in 199 cities across Indonesia

2. install MatahariMall.com “eLockers,” allowing customers to physically pick up their items purchased online from lockers located in 10 post offices in the Greater Jakarta area and Bandung.

3. Pos Indonesia will provide logistic and delivery services to Mataharimall.com for domestic shipments.

MatahariMall Affiliate ProgramSites owners are invited to put mataharimall banner and goes to its landing page to create more traffic & pay commission to site owners based on click.

Site Rank in Indonesia refer to Alexa.com : 22, attracts 4 millions visits a day

Partnership with Baidu browser allows users of Baidu to access Lazada via a shortcut, an icon on its home page. In return, Lazada provides a special page that displays special deals for Baidu users in Indonesia

Direct cooperation with principal for exclusive selling program e.g. with OnePlus android, Redmi

Lazada Affiliate ProgramSites owners are invited to put mataharimall banner and goes to its landing page to create more traffic & pay commission to site owners based on click.

Conclusion1. While the business of in-Store Matahari is doing well it needs new business model going online

for:i. Leveraging its existing in-store unit businesses (matahari, hypermart & books & beyod) ii. Developing omni channels to accommodate the change in customer behavior that is

empowering them for purchasing decision making and executing their purchase in any channel as per their convenience

iii. To tap info Indonesia’s online transaction fastest growing from US$ 14 bio in 2014 into US$ 135 bio in 2020

2. Lazada leverages its digital advantage to optimize supply-chain in a Key Process. Reducing inventory and logistic cost are the most important key to be competitive and be able to lower price than Mataharimall

3. Funding is one of the most important Key Resource to get ahead with technology advantage in e-com business but creativity and innovation in serving the market will determine the leader. Both Lazada and Mataharimall are being challenge to proof this.

Appendix 1Who are they?

What’s their mission?

Where are they?

What is their Key Focus?