We had the pleasure to talk to Francesco Lanzi, Regional Head of Marketplace Operations at Linio LATAM, about the challenges and solutions of establishing operations for an ecommerce dealing with sellers in Latin America.
Having had experience before in South East Asia where he was Marketplace Head of Operations at Lazada, an ecommerce platform of the same group - Rocket Internet, and growing up in Europe, Francesco Lanzi moved to Colombia recently to restructure operations. He had a steep learning curve about the business in the region and he shares his insights with us.
Background information: Linio is an ecommerce platform with products ranging from electronics to health & beauty, activating in Colombia, Mexico, Peru and Venezuela. Part of Rocket Internet group, it was founded in 2012 and raised $ 96.5M to conquer Latin America’s fast growing market.
AP: Rocket Internet is famous for tapping into markets that are just “starting to bloom” in terms of ecommerce potential. However, these markets come with many challenges. So what are the specifics of Latin America in terms of market acceptance and readiness? And what are the challenges Linio has to overcome to grow the business?
FL: The biggest challenge comes in logistics, especially deliveries. A normal time to deliver here is a week. That is double than in South East Asia. And it is completely unacceptable in Europe.
Partially it is because the region is very big in terms of area to cover. And infrastructure outside of the big cities is really not adequate. Bogota is like New York, but if you go outside of it there are not even names for the streets.
In South East Asia you wanted a 3PL for everything and you could get a better deal. Here you want 3 different ones to create competition between them in terms of prices and quality. Transportation costs are really high, especially for big items. We do a lot of studies on how we can reduce the costs for the customers.
Then the customers are slightly different. They are less tech savvy, the adoption of smartphones, tablets and internet is lower than in South East Asia. And while there the biggest demand was for electronics, here the biggest one is for health & beauty products. But the regions is fast-growing, especially Colombia.
AP: So how do you work on overcoming these challenges?
So the market is growing fast, but not all businesses here have the knowledge or capabilities to grow with it. We help our sellers and 3PLs develop. We need to train our sellers. So we send our people to them and vice versa so that we can share learnings.
For example, sellers here have the mentality that they can dispatch whenever they have time. We are working with them on why and how to dispatch faster.
On the other hand, we also had to understand the realities our 3PL and sellers face. In the beginning, I told the 3PLs that it is unacceptable to make one week delivery. But I went and saw myself that there is no road!
So sometimes you can improve the operations processes by sharing knowledge - we grow together. The other times it is about accepting the reality, like lack of infrastructure, but still you need to be on top of the situation. So for the lack of infrastructure to reach places outside the big cities, we created a shipping routine table that is different from the rest and a whole different calculation for that.
AP: So the sellers in Latin America struggle with shipping orders. How do they handle their inventories, any struggles there?
FL: First of all, because of wide geographical space in these countries, sellers here usually need multiple warehouses. In Mexico they need at least 5. And they handle them as different companies because each city has different needs, different 3PLs etc.
Most use emails and spreadsheets to handle their inventories, but they are really precise with inventory management.
In Asia it was more difficult to handle stocks as a seller. They were really unstructured with inventory management. The reason was simple: in Asia each seller was handling multiple online shops, plus brick and mortar shops, plus running some other deals. Here they are more focused: they have usually just one shop and they try to make it work, so the inventory management is good.
AP: I see there are quite a lot of differences. How easy is to tackle the new reality as an expat? And what is the best mix to have in the company between locals and expats in order to bring in and share knowledge, which seems to be an important factor of growth?
FL: We are only 1-2% expats in the team currently. High management positions are local. And it works pretty well. That is because people here are really fond of their culture. When I was in Malaysia, in a typical telephone call to sellers I could get quite aggressive, and it was working. Here that doesn’t work - if you get aggressive they do the opposite of what you want.
By having local people in the team, they know how to ask for things, how to talk to people.
Expats bring in knowledge, but we need people to understand the local culture too. Our current mix seems to work perfectly.
AP: Seems like a great experience and we thank you for sharing your insights. Any closing remarks?
FL: Theory of how to handle operations is good, but you need to adapt it to the specific reality you are facing.