From layoffs to profit: Is Lazada finally ready for an IPO?

Simon Huang also contributed to this report.

“No company can stay at the top forever in any industry,” Jack Ma said in an internal memo sent to Alibaba’s employees on its 25th anniversary last week.

Still, Ma firmly believes that Alibaba is one of the few companies that can endure for 102 years. His motivational message comes at a time when the Chinese ecommerce giant has been grappling with intense competition from two major rivals: PDD Holdings and ByteDance.

In Southeast Asia, Alibaba-owned ecommerce platform Lazada no longer leads any country in gross merchandise value (GMV), according to a 2023 Momentum Works report. It trails behind Shopee across the region and also TikTok Shop in Vietnam and Indonesia.

So when Lazada announced that it crossed a profit milestone for the first time in July, the news surprised some industry watchers.

Photo credit: Lazada

For Lazada, the milestone follows several key decisions, including laying off 30% of its staff in January and launching Choice, its response to Temu and Shein, across Southeast Asia.

Back in 2022, Tech in Asia explored the potential benefits of spinning off Lazada from Alibaba. However, this was before TikTok Shop became a formidable competitor and Temu launched its aggressive expansion strategy globally that has since reached Southeast Asia’s shores.

See also: TikTok Shop has set SEA on fire within months

Now two years later, does Lazada still have what it takes to pull off a long-rumored IPO?

“Shrinking to profitability”

Market insights firm Cube Asia estimates that Lazada’s GMV declined in the first six months of 2024 compared to the same period the previous year. According to Cube Asia co-founder Simon Torring, this drop exceeded 10% in some markets, though he did not specify which ones.

“It seems that what’s happening this year is that Shopee is growing to profitability and Lazada is shrinking to profitability,” he says.

A Lazada spokesperson declined to comment on the company’s GMV and targets, stating that it has “moved away from short-term metrics” and is now focusing on long-term measures such as customer satisfaction and conversion rates.

Retaining big sellers or competing in a low-cost war?

So is Lazada ripe for an IPO?