Zalora, a Zappos-style fashion e-commerce site in South East Asia backed by the Samwer brothers’ Rocket Internet incubator in Germany, is today announcing its latest investment — $100 million, led by Rocket Internet itself, along with regular Samwer investing partners Summit Partners, Investment AB Kinnevik, Verlinvest and Tengelmann Group. The is the largest investment in Zalora to date, and one of the biggest in an e-commerce startup in the region.
Zalora has operations in Singapore, Indonesia, Malaysia, Brunei, the Philippines, Thailand, Vietnam, Taiwan and Hong Kong, and this round comes amid a new flush of money for fashion e-commerce companies: just yesterday it was reported that Fab is raising $250 million at a $1 billion valuation (a deal that only one month ago appeared to be for a $100 million raise).
This is not the first flush of money to come to Zalora. The startup had raised at least two other rounds since launching in March 2012, a “significant double-digit million” investment from JP Morgan in September 2012, and $26 million from Tengelmann in March 2013. It’s been using the funds to build out its footprint into more countries, invest in its logistics and also in R&D, out of its HQ in Singapore, and new platforms — among those, the launch of a iOS app.
As seems to be par for the course with Rocket Internet portfolio companies, Zalora has been no stranger to being subject to the negative rumor mill. In March 2013, Zalora was reported to be shutting down its regional operations in Taiwan, although the company said that it was streamlining and moving some functions to Singapore. That comes after other reports that Oliver Samwer had to go hands-on soon after Zalora’s launch for a little staff motivation. The company appears to already have changed MDs at the company. Today it is being run by Michele Farrario; in September 2012 the MD was Mato Peric.
But any signs of turmoil seem to be behind the company, for now at least. The company is claiming “months of steady growth,” recently delivering its one millionth order, although it doesn’t spell out what those revenues are specifically, noting just “double-digit million USD revenues.” It says that mobile sales make up 25% of all of its sales, which cover 500 brands and some 20,000 products per country site.
“Our company is one of the fastest growing e-commerce companies in South-East Asia and has bright prospects,” said Ferrario in a statement. “It is an honor for us that investors of such great repute have invested into an e-commerce company as young as ZALORA. Our goal is to continue serving up world-class products and services, so everyone in South-East Asia can benefit.”
Rocket Internet got its beginnings building out e-commerce startups across Europe. Mimicking the functions of well-funded e-commerce startups in the U.S., some of those Rocket Internet startups even got acquired as part of the Americans’ inorganic growth strategies.
Rocket Internet still has a strong presence in Europe, but the Samwer brothers have been putting a lot more of their efforts lately into emerging markets like those in South East Asia, Eastern Europe, South America and further afield (case in point: Azmalo, a new Amazon-style online marketplace site in Pakistan launched just this week). The idea is to try to reach a swathe of consumers that represent a new middle class who are only starting to go online to shop, and therefore represent a faster growing user base than consumers in more mature, and more penetrated, markets.
Often the Samwers’ movements are in countries that Rocket’s U.S. counterparts have yet to tackle, making companies like Zalora into potential acquisition targets. In the meantime, adding more Rocket Internet e-commerce startups in each country to bolster existing ones means that they can share backend systems, logistics and get faster economies of scale, essential in getting e-commerce businesses to profit. You can see the full extent of the Rocket Internet empire here.
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.