Rocket Internet, the German-based e-commerce startup incubator from the Samwer brothers, is today announcing another round of funding for its strategy to build out its footprint into emerging markets. Today it’s the turn of Middle-East-based fashion commerce site Namshi, which is getting $13 million from Summit Partners. This is the second time Summit, a Rocket regular, has invested in Namshi, after a $1 million injection in January. To date, Dubai-based Namshi appears to have raised some $34 million, if you also count the reported $20 million from JP Morgan and Blakeney Management in September 2012. A Rocket Internet spokesperson would not confirm any of the sums apart from the most recent one, except to note that previous funding totals a “high double-digit amount.”
Namshi has been around since 2012 and currently sells products in six places — United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain. As with Amazon-owned Zappos, Namshi sells shoes and other fashion — some 550 brands in all, including well-known labels like Nike, Lacoste, Polo Ralph Lauren and Puma.
The official release from Rocket Internet notes that this will be used to “sustain its accelerated growth target,” although what that target is does not get specified. Namshi also notes that this will be used to improve the company’s fulfilment operations, moving stock to a new centralized Namshi warehouse and distribution center, away from the shared space with Aramex it currently uses.
“We see our partners’ growing support as an encouragement for us to continue serving our customers with world-class products and services,” said Hosam Arab, co-founder and Managing Director of Namshi, in a statement. “Our customers made the company what it is today. Therefore, they will be the ones to see the main benefits coming from this investment. We will further focus on providing a shopping experience like no other in the region.”
Part of Rocket’s pressure to expand comes from other competition on the ground from companies like Souq, another Dubai-based e-commerce operation. Like Namshi, Souq is riding a wave of fast internet growth in emerging markets at a time when more mature/developed regions like the U.S. are slowing down due to saturation.
It also comes at a time when Amazon itself appears to be getting more international in its ambitions for both its own brand and those that it owns, also tapping into these emerging market trends. One recent example: Amazon apparently staffing up for a bigger push into Russia with its Kindle services, which comes alongside resources also being put into a Russian expansion for fashion portal Shopbop.
International expansion makes sense for Amazon, which sells products at narrow margins and makes up for that with economies of scale. Given Rocket’s exit track record — selling portfolio companies to the likes of Groupon and eBay to aid in those giants’ international growth plans — it looks like one idea is for these startups to position themselves as acquisition targets for their U.S. counterparts. But, at the same time, Rocket is also building out businesses that follow that model and grow in their own right. Rocket Internet often rolls out multiple startups in the same region, and the idea is for these to use the same back-end systems, fulfillment operations, customer support and sales, and more to achieve their own economies of scale.
Developing markets have been a big target for Rocket Internet, with operations in Africa, Asia and Latin America in fact outnumbering those in Europe. And Summit has been no stranger to helping fund a number of these, including a recent $26 million for Lazada in Asia; $26.5 million in Linio (the “Amazon of South America”, which is funny since the Amazon runs through South America already); and $26 million in Jumia, another Amazon clone, this time in Africa.
“Namshi and its management team have done an exceptional job of growing the company, and we are happy to support the company’s continued expansion,” said Scott Collins, an MD and head of the Summit Partners London office, in a statement.
The food delivery wars continue to heat up: today foodpanda, the Rocket Internet-incubated startup that offers a one-stop service to order food from a selection of restaurants and take-out joints to be brought to your door and now working with some 15,000 restaurants globally, is today announcing that it has picked up over $20 million in funding, with participation from Rocket regular AB Kinnevik, Russia’s Phenomen Ventures as well as Rocket Internet themselves. This is not only foodpanda’s first reported round of investment, but it also looks like it might be Phenomen’s first public investment in a Rocket Internet company; the VCs have previously backed other e-commerce ventures like Fab, Hailo and OneTwoTrip, as well as the YC-incubated video company Virool.
Foodpanda’s funding follows a number of other big rounds for other Europe-based startups offering similar services. They include $50 million for Delivery Hero and $64 million for Just-Eat. The funding race is a sign of how, in this market of a lot of me-too players, getting critical mass and a technological edge over competitors will be key to longer-term survival and profit.
Rocket Internet, founded by the Samwer brothers, has emerged over the years as one of Europe’s bigger e-commerce incubators, with notable exits to companies like eBay and Groupon. But more recently the Samwers have been setting their sites on emerging markets and tapping the opportunities there. In that regard, foodpanda is no exception. Including its sub-brand hellofood, the company is now active in 27 markets — in fact, only emerging markets, with a focus in Eastern Europe, Asia, Latin America and parts of Africa. The total list is India, Indonesia, Malaysia, Pakistan, Singapore, Taiwan, Thailand, Vietnam, Ghana, Ivory Coast, Kenya, Morocco, Senegal, Nigeria, Russia, Argentina, Brazil, Chile, Colombia, Mexico, Peru, Hungary, Venezuela, Poland, Ukraine, Romania and Saudi Arabia.
Ralf Wenzel, the global MD, says that this funding will not only be used to expand to more countries, but also to build out the operations into more cities in those where it’s already active. “We do cover certain cities already but one of the things is to expand into new ones. For example, in Russia we have very good coverage in three cities but now we’d like to move to 17 more,” he said in an interview, adding that extra countries are also on the agenda. “We are launching in more Eastern European and Asian counties. We still see a lot of markets that will be very interesting for us.” Foodpanda claims that it is now the “market leader” in many of the countries in which it operates.
On the subject of technology investments, one of Rocket Internet’s interesting selling points is how its companies can potentially leverage some of the other assets in the portfolio to help their own growth. Wenzel notes that in the case of foodpanda this might play out in areas like customer service and logistics — using some of the same teams and backend systems that are being rolled out for other e-commerce operations in areas like fashion and other merchandize. Another might be in how payments are taken for food. Working in emerging markets, payment card penetration is not especially high, so foodpanda is trying to come up with alternative ways of helping people pay for their food that are potentially more secure than simply taking cash on delivery.
“Payment acceptance is an important topic for us, how customers pay for the food that is delivered to them,” he said. “We want to find ways of collecting payments from restaurants without too much overhead, and we also want to provide the best user expeirence for that. We have started to introduce online payments, which is also an area where we will use investment. We also have good synergies with Payleven [Rocket's Square competitor]. Although there is nothing decided yet, there is definitely a lot of potential. Fortuntately we are seeing the growth of the availability of payment options.”
While foodpanda is not transparent on its commission structure — it varies city-by-city and depends on whether the deal is with a chain or independent, Wenzel says — he does note that there are some emerging popular categories. In Russia, most order sushi, he says; while in African countries the most popular cuisine is Mexican and in Latin America it’s Indian food.
Rocket Internet, the Samwer brothers’ Berlin-based incubator that runs a vast global empire of e-commerce startups, is picking up a new, sizeable investor in Brazil. The Cisneros Group, the Latin American media powerhouse that owns TV, digital, and other assets, is investing up to $20 million in Mobly, a Brazil-based home furnishings site. Victor Kong, chief digital officer of the Cisneros Group and head of its Cisneros Interactive division, says that the first $10 million is coming now, with the company reserving the right to bump that up to $20 million within the year, with the door also open for investing in other Rocket Internet operations along the way.
The Cisneros Group becomes the fourth investor in Mobly, which has also had investment from the Samwers, along with regular Rocket Internet backers Kinnevik and JP Morgan. This latest round of investment will see Moby expanding from Brazil to other countries in the region, leveraging the Cisneros TV and advertising networks to help promote it. It looks like before now there was around $25 million invested in the site, and it has a pre-money valuation of $108 million.
“This acquisition is part of our commitment to diversify and strengthen our network of digital businesses in the areas of e-commerce and digital advertising,” Adriana Cisneros de Griffin, cheif strategy office and vice chairperson of Cisneros, noted in a statement. “Mobly is ready to break into the traditional market sales of furniture and home decor and extend its dominance in Latin America because it has the best selection of high quality goods and customer service and delivery that is known for its excellence.”
This is Cisneros’ first investment not just in a Rocket Internet company, but in a home furnishings site. It’s a lateral move for a company better known as the largest privately-held media company in Latin America, which includes TV assets and RedMas, an online ad network that is Yahoo’s partner in the region. Kong says this is because of a new strategy on the part of the company, spearheaded by Cisneros scion Adriana.
“Adriana is a third-generation Cisneros taking control of the company and I can see her pushing the company forward more here,” says Kong. Other non-media assets include Tropicalia, an eco-friendly real estate operation in the Dominican Republic, where Adriana is CEO. Cisneros’ other e-commerce investments include daily deals site Cuponidad, Latin American-focused crowdfunding site Idea.me.
Kong notes that when a media company in today’s world is thinking about the move to digital and how that will affect its future, e-commerce inevitably will come into the equation. That’s something that others like Conde Nast have also been exploring with their e-commerce investments. And companies like Fab underscore how big the online furniture and home fashion space can be.
“Adriana’s big question is, what is this company going to look like in 10 years? We all know what is happening with the move to tablets and phones, so we need to be more innovative and move into new spaces,” Kong says.
While the idea of a media company becoming a furniture site investor seems like a leap in one regard, in another it’s actually a no-brainer investment.
Like other countries in the BRIC bloc, Brazil is seeing a rapid growth of its middle class, and a big boom in e-commerce. Brazil, says Kong, accounts for 65% of all e-commerce in the region. Sales in the country grew by 20% in 2012, with home decorating the fastest-growing category.
A site like Mobly, with its emphasis on cost-friendly home furnishings, plays right into that. The site was founded 18 months ago and in 2012, its total revenue was $89.5 million. Now, it sees over $8 million dollars in sales each month, with that number growing rapidly, Kong notes. Like other e-commerce sites, Mobly’s strength comes in the ability to offer consumers a large range of stock, with more than 45,000 SKUs, according to Kong, on offer at any time. Unlike some of Rocket’s other investments into new markets, this one is led by a local team rather than transplants from the Samwers’ German HQ. The three Brazilian co-founders, Victor Noda, Marcelo Marques and Mario Fernandes, as also all co-presidents.
“This is our biggest move into ecommerce so far, but hopefully there will be more to come,” Kong says. He says that Brazil, being the largest e-commerce market in the region, will remain a key focus. As for what may come next for Cisneros, other Rocket holdings in Brazil include sporting goods site Kanui, private shopping club for home goods Westwing, fashion site Dafiti, and discount site CupoNation, among several others.
Zalora, Rocket Internet‘s pan-Asian fashion retail site, has launched an iOS app, as it seeks to capture the growing base of consumers in Asia who are using smartphones as their primary, and sometimes only, way of getting online.
The Zalora app was quietly released to the Apple App Store on the 17th of April before the wider announcement today, and was built by the company’s Singapore operations. It said last month it started building a regional software development center here to work on its Web platform and mobile apps, so it’s likely we’ll see more apps coming out for the store.
The iOS app allows you to browse and buy items on the store organized by brand or category, and rate favorites as well. Zalora says the app’s catalog is pulled from the store’s various collections across its inventory for different countries, so it sounds like you might be able to view more items in the app than on its country-specific sites.
Zalora is Singapore-based, and is barely a year old. It’s gone through an aggressive expansion in the region, and is in now eight markets in Asia: Singapore, Hong Kong, Malaysia, Thailand, Vietnam, Taiwan, Indonesia and the Philippines. It’s most recent round of funding was $26 million in March led by German retail conglomerate Tengelmann, just six months after an undisclosed, double-digit million sum from JP Morgan.
Update: While Android phones are more popular in Asia, Zalora said it decided to debut on the iPhone because it enjoys more than traffic coming from iOS devices compared to Android phones. “The iPhone segment is particularly inclined to online shopping with high basket sizes,” the company has found.
It has plans to work on an Android app, but would not say when that is coming out. Zalora attracts about 4 million visits weekly in Southeast Asia, and about 30 percent of that comes from mobile phones. This underscores the company’s decision to divert some resources to mobile efforts. This is its first native app, but it already launched a mobile site in January.
Still, Android traffic is likely to keep going up for Zalora. According to a consumer study done in Southeast Asia by Ericsson, by the third quarter last year 31 percent of phones here were Android-based. The iPhone had about 19 percent of the overall handset market.
One country does buck that trend, however. Zalora’s headquarters of Singapore has a 46 percent adoption of iOS, and just 29 percent for Android. Singapore has a smartphone penetration of around 90 to 92 percent, depending on who you ask, so those numbers are generally higher than neighboring countries.
UPDATE: A spokesman from Zalora Taiwan said:
To better serve Taiwan on its business operations model, the company has decided to conduct a review to make changes – From April, we are shifting part of Taiwan’s operations to our regional headquarters in Singapore. During this migration period, our company will temporarily disable operations of the Taiwanese site. We sincerely apologize for any inconvenience this may cause to our customers, and we promise that any returns and refunds will be processed as per the time period stipulated on our site. If you have any further queries, please contact CS@zalora.com.tw, our customer service department will answer your questions within one working day.
ZALORA TAIWAN denies any rumours regarding bankruptcy or closure. We will process and complete all payments to our customers and vendors. All our employees will be managed in accordance with and with respect to the labour law in Taiwan. We will not make any further comment on rumours, and reserve the right to take legal action against any parties making false statements about us.
One year after launching in Taiwan, Rocket Internet-backed Zalora may be shutting down its operations in the country. Though the Singapore-based fashion e-tailer has yet to issue a confirmation, e27 notes several signs that a closure of its Taiwan branch is already in progress.
Zalora Taiwan’s Web site currently says that it will no longer provide telephone services for customer support after today. Furthermore, Taiwanese TV news station TVBS reported last week (link via Google Translate) that more than 100 employees were suddenly laid off as Zalora canceled orders from suppliers. Reasons cited by TVBS for Zalora Taiwan’s potential demise include the high cost of marketing in Taiwan’s saturated online retail market, which is already dominated by e-commerce sites Yahoo! Taiwan and PChome.
Zalora recently landed several high-profile investments, including $26 million from German retail conglomerate Tengelmann Group, but as Jacky Yap of e27 notes, Rocket Internet has already encountered several setbacks in Southeast Asia, including the closure of Home24. “Rocket Internet will not hesitate to pull the plug when it comes to evaluating a likely failure,” just as it shut down its operations in Turkey last August, Yap writes.
Despite Zalora’s rapid growth, the reported closure of its Taiwan operations is a reminder that Rocket Internet’s foothold on the Asian market is still not a sure thing. I’ve reached out to Zalora’s HQ for comment and will update if I hear back from them.