Posted on May 17, 2018 By Baumgardner

Building a giant? Rocket bets big on new online markets

But they face a rocky road, not least due to competition from Alibaba itself as the Chinese firm – soon to be bolstered by funds from a bumper listing – looks for new opportunities outside its home market.

“E-commerce penetration in Russia should be higher than in the U.S. because offline retail infrastructure in Russia is much less developed,” he said. “This is something that gives you so much potential going forward.”

Rocket’s strategy is to identify markets and niches where big players have yet to get established, cutting its losses if the competitive environment turns out to be too fierce, as it did in 2012 when it closed down operations in Turkey.

“You cannot think of beating the Chinese on cash, because they have so much of it,” Giulio Xiloyannis, managing director of Zalora Malaysia, told Reuters. “You beat them on branding and product quality.”

“E-commerce penetration in Russia should be higher than in the U.S. because offline retail infrastructure in Russia is much less developed,” he said. “This is something that gives you so much potential going forward.”

But while Rocket Internet has launched about 70 companies – ranging from online fashion to food delivery and marketplaces for real estate – in more than 100 countries, many in the last couple of years, it is still far from being a giant.

“It’s very easy to order anything from the online store and then to refuse the payment. If it happens, the merchant has to cover both the shipment and the unsuccessful delivery costs,” Kaczmarek said. “It … requires exceptional processes to control the size of the stock and the management of new orders.”

That spells mounting losses as the venture capital company gears up to launch an initial public offering (IPO) this month that will help provide the war chest it needs to build and defend what it hopes will be the largest online shopping empire outside the United States and China.

Rocket Internet spokesman Andreas Winiarski says the company sees its cash-on-delivery offer as a key competitive advantage. “Cash is reconciled on a daily basis when sales representatives return to the transit warehouse in the evening. Ultimately, fraud occurs with credit cards and not cash,” he said.

Rocket has the top e-commerce sites in terms of overall rankings in Indonesia, the Philippines and Thailand, while its Jabong fashion site ranks No. 2 among all e-commerce sites in India. In Malaysia, Lazada is No. 3 shopping site and Zalora is No. 1 in fashion, according to SimilarWeb measurements.

SINGAPORE/MOSCOW/BERLIN, Sept 5 (Reuters) – Germany’s Rocket Internet faces daunting logistical challenges and rising local competition from Lagos to Laos as it races to capture customers in emerging markets before e-commerce titans Amazon and Alibaba can catch up.

Rocket’s top eight e-commerce ventures in emerging markets – including Lamoda in Russia, Dafiti in Brazil and Zalora in Southeast Asia – together made sales of 539 million euros ($708 million) in 2013 and an operating loss of 351 million, according to figures from major Swedish investor AB Kinnevik.

Online fashion store Lamoda in Russia is leading the way in many of those areas. It expects to have over 1,000 delivery staff and more than 500 vehicles by the end of 2014 and over 2,000 staff by 2015 as it seeks to reach more clients in such a vast country. It also wants to distinguish itself by offering a free try-on service at the door.

The Rocket businesses are growing fast – revenue was up 74 percent in 2013 – and they have succeeded in attracting over 1 billion euros in capital from a raft of high-profile investors – most recently German service provider United Internet AG and Philippine Long Distance Telephone Company.

“It has been a very tough challenge here in Russia to create great customer experience, but this try-on concept, this interaction with the customer at the door … creates a very high barrier for anybody who wants to offer the same level of service,” said Lamoda Chief Executive Nils Tonsen.

In those markets, Rocket has sought to focus on fashion with its Dafiti and Lamoda sites rather than the general merchandise of aliexpress curly hair. Dafiti is No. 16 overall in e-commerce in Brazil, but is No. 1 in online fashion. In Russia, Lamoda is at No. 15 – but in fashion, it is No. 2 behind local rival Wildberries.

In Southeast Asia, Rocket has had a freer run to do both fashion with Zalora and general wares with Lazada, although Alibaba has positioned itself to expand in the region by taking a stake in logistics firm Singapore Post.

The firm announced plans on Thursday to bring together its five emerging market fashion brands to create a company worth 2.7 billion euros ($3.6 billion) and simplify its structure before a likely stock market listing.

It says it can launch a company within 100 days by drawing on expertise in areas like legal, finance, communications, marketing and business intelligence at its Berlin head office, helping it start an average of three to six new firms a year.Rocket’s top eight e-commerce ventures in emerging markets – including Lamoda in Russia, Dafiti in Brazil and Zalora in Southeast Asia – together made sales of 539 million euros ($708 million) in 2013 and an operating loss of 351 million, according to figures from major Swedish investor AB Kinnevik.

To that end, the Rocket online fashion stores are investing in building their own fashion labels and spending on advertising, a lesson learnt from Zalando, which gained widespread recognition in Europe with its “scream for joy” slogan and ads showing delighted shoppers ripping open parcels.

That compares with the $2.54 billion revenue that 15-year-old Chinese e-commerce juggernaut Alibaba reported for the quarter ended June 30. Alibaba’s net income attributable to ordinary shareholders nearly tripled to $1.99 billion.

It says it can launch a company within 100 days by drawing on expertise in areas like legal, finance, communications, marketing and business intelligence at its Berlin head office, helping it start an average of three to six new firms a year.

— Haier Electronics Group Co. Ltd. is an electronics and appliances maker. Alibaba invested 2.82 billion Hong Kong dollars ($364 million) for a 2 percent stake in Haier and up to a 34 percent stake in a Haier logistics subsidiary.

Here’s a look at those businesses as well as the various other Alibaba investments that give it a stake in social media, maps, mobile Web browsers, online video, brick-and-mortar retail and package delivery:

In many markets where Rocket firms operate, credit-card ownership is rare and shoppers prefer to pay in cash on the doorstep. That helps explain why e-commerce has been slow to take off in Latin America, apart from Brazil where cards are more common and online sales have reached $12 billion a year.

But while Rocket Internet has launched about 70 companies – ranging from online fashion to food delivery and marketplaces for real estate – in more than 100 countries, many in the last couple of years, it is still far from being a giant.

“They are smart to go into markets where most other big players don’t have a footprint and (elsewhere) round out the offers of Alibaba and Amazon,” said Forrester e-commerce research director Zia Wigder.

Rocket has the top e-commerce sites in terms of overall rankings in Indonesia, the Philippines and Thailand, while its Jabong fashion site ranks No. 2 among all e-commerce sites in India. In Malaysia, Lazada is No. 3 shopping site and Zalora is No. 1 in fashion, according to SimilarWeb measurements.

The Samwer brothers have gained notoriety for cloning businesses pioneered in Silicon Valley in new markets – most notably German online auction site Alando which they sold to eBay, the site it was modelled on; and Amazon Zappos-copy Zalando, now Europe’s biggest online fashion site which is on track to list soon.

The Samwer brothers have gained notoriety for cloning businesses pioneered in Silicon Valley in new markets – most notably German online auction site Alando which they sold to eBay, the site it was modelled on; and Amazon Zappos-copy Zalando, now Europe’s biggest online fashion site which is on track to list soon.

Rocket Internet spokesman Andreas Winiarski says the company sees its cash-on-delivery offer as a key competitive advantage. “Cash is reconciled on a daily basis when sales representatives return to the transit warehouse in the evening. Ultimately, fraud occurs with credit cards and not cash,” he said.

— Zhejiang Cainiao Supply Chain Management Co. Ltd., otherwise known as China Smart Logistics, operates a national logistics infrastructure. Alibaba has agreed to invest 2.4 billion yuan ($386 million) for a 48 percent stake.

SINGAPORE/MOSCOW/BERLIN, Sept 5 (Reuters) – Germany’s Rocket Internet faces daunting logistical challenges and rising local competition from Lagos to Laos as it races to capture customers in emerging markets before e-commerce titans Amazon and Alibaba can catch up.

— AliExpress, launched in 2010, targets worldwide customers who want to buy products directly from wholesalers and manufacturers in China. Alibaba says many of the site’s customers are in Russia, the U.S. and Brazil.

That compares with the $2.54 billion revenue that 15-year-old Chinese e-commerce juggernaut Alibaba reported for the quarter ended June 30. Alibaba’s net income attributable to ordinary shareholders nearly tripled to $1.99 billion.

Chief Executive Oliver Samwer, who founded Rocket Internet in 2007 with his brothers Alexander and Marc, sees huge opportunities for digital businesses in emerging markets, noting that the cities with the most active Facebook users are Bangkok, Jakarta and Istanbul – with no U.S. city in the top 10.

— ChinaVision Media Group Ltd. is a producer of movies and TV shows that is listed on the Hong Kong Stock Exchange. Alibaba agreed to invest 6.24 billion Hong aliexpress curly hair Kong dollars ($805 million) for a 60 percent stake.

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