 | Zalando And Rocket Internet 2013Release date: September 10th, 2013 (121 pages) PDF/Powerpoint format. Price: GBP1,500.00 |
Abstract
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 Vancl.com | 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 |
