Zalando and Rocket Internet 2013

Zalando And Rocket Internet 2013

Release date: September 10th, 2013 (121 pages)
PDF/Powerpoint format. Price: GBP1,500.00


Is Zalando the better Asos?
Zalando is the fastest growing business in the retail sector currently and striking fear in the hearts of its competitors. Arguably if one started a retail company from scratch today, one would design a business such as Zalando, a pureplay whose balance sheet is not loaded with a costly store estate and where much of the decision making is as data driven as possible.
No German start up has grown as rapidly since the day of the dot com hype as Zalando, none has received so much investment and seed capital, more than €600.0m to 2012. Zalando could become the first Samwer backed start up that will float on the stock exchange. No brand image has been pushed as aggressively in such a short time frame as Zalando’s, helping the pureplay to brand recognition values unheard of for a 4 year old company. 95% of all German consumers feel familiar with Zalando, this is on a par with Daimler Benz, which has a history of 125 years behind it, a tried and tested business model and product and global recognition.
That said, so far and probably not surprisingly, since the company was only founded in 2008, the business model is not proven. The company is still loss-making, something Zalando shares in common with many other online retailers in their start up phase. And to be fair most companies in the online sector have taken between 5-8 years before they reported their first meaningful profits.
The company and business model is an unashamed copy of the US retailer Zappos, the US pureplayer who made online footwear retailing work and has been part of Amazon for a couple of years now. That said, Zalando seems to have copied none of the quirkiness and the great values of the original around the working culture or customer focus.
The Samwer brothers, the most notorious and also most successful start up entrepreneurs in the EU are behind the venture through their Rocket Internet incubator. For the company builder Rocket launching new businesses is all about copy and paste and all about execution. Arguably there is no innovation as such – only models that are tried and tested elsewhere receive funding and seed capital and are then rolled out aggressively. As there is no patent on business models, this approach works – even in, arguably, risk averse Europe.

Table of contents

Executive summary p12
Introduction and timeline p20
Zalando: the humble beginnings in 2008, internationalisation, subsidiaries p21
Zalando: the shareholder structure 2013 p22
Zalando: humble beginnings in 2008, 2009 progress, extending ranges, geographies in 2010 p23
Zalando: 2011 laying the grounds for logistics, annual sales of €500m p24
Zalando: Kinnevik releases first official Zalando sales data in February 2012 p25
Zalando: more markets and fulfillment centres in 2012, the outlet store in Berlin p26
Zalando: 2013 m-commerce push, luxury and private label, Emeza and Kiomi p27
Key recent developments p28
August: Bestseller buys 10% Zalando stake of Rocket Internet p29
August: Zalando valuation at more than €3.0bn p30
June, July: Rocket Internet and Lazada raise significant new funds p31
February, May: Zalando breaches the €1.0bn in sales mark, potential logistics sites p32
October 2012: Kinnevik becomes second biggest shareholder p33
September: Fund raising for Erfurt and Moenchengladbach, the centre for foreign markets p34
August 2012: JP Morgan comes onboard p35
Financials, KPIs, Benchmarks p36
Zalando: Net Sales, Net Income, Growth, Margin 2008-2012, strong Q1 2013 p37
Zalando: margin development, among Germany’s top 20 clothing retailers, losses p38
Zalando: returns on average and in Germany, France, equity ratio, start up losses p39
Zalando: other KPIs, estimated average basket value and basket size p40
Zalando: logistics – financing and strategy p41
Zalando: logistics – the geographical set up, subsidies p42
Zalando – the returns quotas p43
Returns: free deliveries and returns, the “online retailer as pawnshop” p45
Returns: the EU consumer rights directive, little change expected, the costs per parcel p46
Returns: German return rates, the legacy of mail order and strong consumer protection laws p47
Returns: what Zalando will do about returns, the situation abroad p48
Returns: the future plans to get the situation under control, same day prime copy offer? p50
Zalando – private label development and marketing p51
Zalando: Private label development, Pier one, zlabels p52
Zalando: zign, mint & berry, stups, mai piu senza, twintip, youturn, even & odd p53
Zalando: Taupage, Anna Field, Magnificint and Fullstop p54
Zalando: marketing for equity swap, brand familiarity, affiliate programme on steroids p55
Zalando: the marketing strategy p56
Zalando: data driven decision making and execution p57
Dafiti – Zalando clone in Brazil p58
Dafiti: Brazilian dreams, strong growth from a standing start and ... massive losses p59
Dafiti: positive margin in 2014? Obstacles, import taxes, no service infrastructure p60
Dafiti: big Rocket bet on Brazil, Payleven, Dafiti a €2.0bn company by 2016? p61
Jabong – Zalando clone in India p62
Jabong: applying the principle to India, aggressive growth and marketing spend p63
Jabong: missing internal targets, logistics problems p64
Lamoda, Zalora – Zalando clones in Russia and South East Asia p65
Lamoda: from €45m to €1.5bn in 4 years? The investors p66
Lamoda: Presence in only 10 cities, mostly local competition so far p67
Zalora: the Samwers in South East Asia, from €9.0m to €120m in a year? p68
Zalora: the Samwers confidential data and plans for Zalora as published by Spiegel p69
Zalora: Rocket data as published by Spiegel, gross revenues, CGS, Expenses, EBIT, EBITDA p70
Zalora: Gross revenues, CGS, Expenses, EBIT, EBITDA, 2012 p71
Zalora: Gross revenues, CGS, Expenses, EBIT, EBITDA, plans for 2013 to 2017 p72
Threats to Zalando’s business model from overreach to the competitor set p73
Threats: taking on IKEA and Zara? Difference between private label and vertical integration p74
Threats: the fear of the copycat of being copied p75
Threats: no serious competition yet in many markets, result of strategic decision p76
Threats: hiring the right people? the competitor set from Asos to p77
Asos: the most serious rival – and a profitable player p78
Asos: Primark trial widened out, strong Asos performance in 2013 p79
Asos: the Kate Bostock departure, signaling a cultural rift? p80
Moonbasa: a Chinese player looking to internationalise p81
Myntra: leading in India, fighting off the Samwers’ Jabong p82
Myntra: private label and curated shopping p83
Vancl: the Chinese pureplay, on a shopping spree after the abandoned $1.0bn IPO p84
Zalando Outlook p85
Zalando Outlook: path to profitability and exit, the private label opportunity p86
Zalando Outlook: a marketplace option? Floating on the stock exchange p87
Zalando Outlook: sorting out returns for a financial return p88
Zalando clones outlook: big promises and aggressive growth plans for sales and margins p89
Zalando clones: data published by Spiegel, run rate gross revenue projections, monthly p90
Zalando clones: Rocket data published by Spiegel, gross revenue projections, annual p91
Rocket Internet p92
Rocket Internet: innovation or risk adverse copy and paste? p93
Rocket Internet: the business model, VC or company builder? p94
Rocket Internet: the investors and Rocket’s KPIs p95
Financials, KPIs, Benchmarks Rocket internet companies p96
Rocket Internet: 2012, sales by company, from Dafiti to Jumia p97
Rocket Internet: rapid execution, from copy and paste to internationalisation p98
Strategy p99
Strategy: decision matrix, ROI expectations, company targets, internal benchmarks p100
Strategy: the credibility deficit, 4 weeks from decision to roll out p101
Strategy: the importance of being number one, fast growth, 50% - 80% market share p102
Strategy: cost control, CTO, online market share grab p103
Strategy: the instincts of Bezos versus the Samwers about emerging markets p104
Lazada & Payleven p105
Lazada: Amazon clone for South East Asia p106
Payleven: the square clone p107
Jumia & Zando: building up ecommerce in Africa p108
Threats to the business model p109
Threats: 7 major threats p110
Threats: brain drain, the funding conundrum, burning through €50m each month p111
Threats: logistics, market entry strategy p112
Threats: losing in China, erratic management decisions, serious competition p113
The credibility deficit p114
Strategy: what Rocket Internet has paid out so far p115
Rocket Internet: the complex relationship with Silicon Valley p116
Rocket Internet: Long term value creation, German professionalism? Roll out in 2 weeks p117
Outlook p118
Rocket Internet Outlook: €800m from emerging markets this year? p119
Sources p120
Table 1: Zalando: the shareholder structure 2013 p22
Table 2: Zalando: Net Sales, Net Income, Growth, Margin 2008-2012 p39
Table 3: Zalora: Rocket data as published by Spiegel, gross revenues, CGS, Expenses, EBIT, EBITDA p70
Table 4: Zalora: Gross revenues, CGS, Expenses, EBIT, EBITDA, 2012 p71
Table 5: Zalora: Gross revenues, CGS, Expenses, EBIT, EBITDA, plans for 2013 to 2017 p72
Table 6: Zalando clones: data published by Spiegel, run rate gross revenue projections, monthly p90
Table 7: Zalando clones: Rocket data published by Spiegel, gross revenue projections, annual p91
Chart 1: Zalando: the shareholder structure 2013 p22
Chart 2: Returns: the costs per parcel in € p46
Chart 3: Rocket Internet: 2012, sales by company, from Dafiti to Jumia in SEK m p97
Chart 4: Rocket Internet: 2012, sales by company, from Dafiti to Jumia in €m p97