www.pomelofashion.com

Market perspective on E-commerce Trends in South East Asia

Citibank Research Conference

South East Asia (‘SEA’) is a large unified market with increasingly growing spending power

Though the 3rd largest population center in the world, minimal focus on technology sector until now has created a unique greenfield opportunity

China India South East Asia

EU US0

200400600800

1000120014001600

13471210

617504

314

Population by Region (M)

Sing

apor

e

Malay

sia

Thailand

China

Indo

nesia

Philli

pine

s

Vietn

am0

10

20

30

40

50

60

7060.8

179.6 9.1

4.8 4.3 3.7

GDP per Capita PPP basis (K of USD)

Population(M): 5 29 67 247 97 89

• SEA has 2x the population of the US• SEA is evolving into one addressable

market with ASEAN free trade zone in 2015

• Singapore, Malaysia, and Thailand have higher GDP per capita than China

• Indonesia, Philippines, and Vietnam are catching up quickly

Sources: World Bank

Rapidly accelerating internet and smart phone penetration driving this trend

A step-change increase in internet access is expected over the next 5 years

2010 2020E0

50

100

150

200

250

300

350

400

166

360

SEA Internet Users (M)

2008 2009 2010 2011 2012 2013E2014E2015E2016E0

10

20

30

40

50

60

70

3.4 611

20

28

3643

51

59

SEA smartphone sales (M Units)

Penetration: 25% 62%

• Approx. 200M additional internet users gaining access this decade

Sources: “We are social”, Accenture; Euromonitor 2013

Additionally, SEA is the social media capital of the world

• Bangkok and Jakarta are #1 and #2 for Facebook users in the world

Sources(1) Social Bakers; Instagram

Social networks are powerful and expansive, core to the internet adoption revolution

# City Country Facebook Users

Users/Population

1 Bangkok Thailand 8,682,940

104%

2 Jakarta Indonesia

7,434,580

34%

3 Istanbul Turkey 7,066,700 63%

4 London UK 6,139,180 74%

5 Bogota Colombia 6,112,120 82%

6 Sao Paulo Brazil 5,718,220 30%

7 Mexico City Mexico 4,294,820 23%

8 Santiago Chile 4,129,700 73%

9 Mumbai India 3,700,460 19%

10 Buenos Aires Argentina 3,533,840 29%

Top Facebook Cities in 2013

• Bangkok has 2 of the most Instagram’ed locations in the world

# Location City

1 Siam Paragon Bangkok

2 Times Square New York

3 Disney Land California

4 Bellagio Fountains Las Vegas

5 Disney World Florida

6 Staples Center Los Angeles

7 Central Park New York

8 Dodger Stadium Los Angeles

9 Bangkok International Airport

Bangkok

10 The High Line New York

Most Instagram’ed Locations in 2013

“Social networking is what Southeast Asian consumers everywhere do during their online leisure time” – Accenture, Surfing Southeast Asia’s Powerful Digital Wave

E-commerce penetration is relatively low but ramping up quickly

Internet access, smart phone availability, hyper connectivity through social media driving rapid rise in E-commerce

2005

2006

2007

2008

2009

2010

2011

2012

2013

E

2014

E

2015

E0

5

10

15

20

25

1 1.8 2.2 2.5 2.8 3.5

7.19.2

13.5

18.7

23.5

TH, PH, & ID - Online Retail Sales Forecast (B USD)

Korea USA Japan Australia Global China SEA0

2

4

6

8

10

12

14

16

18 16.3

11.710.4

8.2 7.9 7.2

1-2%

E-commerce as % of Total Retail Sales (2014)

• SEA’s total e-commerce market size is expected to reach $24B USD by 2015 • If E-commerce represents 7% of retail sales, the market size in TH, PH, and ID alone

would be $50-100B USD

Sources: ICD Research; JP Morgan E-commerce Report

46% CAGR

China an example of the speed at which E-commerce penetrates a market

2008 2009 2010 2011 2012 2013 2014E2015E0

50

100

150

200

250

300

350

400

450

500

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

1839

70

127

199

283

369

461

1.1%

2.0%

2.9%

4.3%

6.0%

7.4%

8.5%

9.3%

On

lin

e S

ho

pp

ing

tra

nsa

ctio

n V

alu

e

(US

$b

n)

As

% o

f C

hin

a’s

reta

il s

ale

s

1. Surging domestic consumption

2. Low availability of products outside major city centers

3. Rapid increase in internet penetration

4. Rapid development of delivery and logistics infrastructure

5. Major capital investment in E-commerce sites

Sources: Morgan Stanley

The same drivers that drove 10x growth in China’s E-commerce market over last 5 years to drive 5x E-commerce growth in SEA

Key Drivers of Chinese E-commerce

SEA?

Current SEA E-commerce penetration

rate

Started in Q1 2012

Regional adaptation of Amazon.com

Price driven discount retailer of all vertical categories

Over $400M USD of raised capital

Rocket Internet was 1st mover helping drive initial wave of e-commerce adoption

Started in Q4 2011

Regional adaptation of Zappos.com; viewed as price-driven discounter due to aggressive growth targets

Shoes and apparel retailer

Over $200M USD of raised capital

Rocket Internet has 2 major e-commerce plays in the region with backing from major European and American investors

Investment Details Investors

Sources: Ardent Capital

Investors now funding more targeted vertical plays as reach of E-commerce expands

Company Focus Most Recent Round Investors

Reebonz Regional luxury flash sale site

$40M (2014)

Luxola Regional online beauty site

$10M (2014)

Redmart Singapore online grocery site

$23M (2014) Eduardo Saverin, Garena, Softbank Ventures

A-commerce Regional E-commerce logistics & support service provider

$3.1M (2013)

POMELO Regional online fast fashion

UNDISCLOSED

Investors seizing opportunity to scale up cheaply and be #1 in a specific vertical, as E-commerce seen as certainty in SEA

Sources: TechinAsia, Techcrunch, E27.com

Fashion is the single largest retail category in SEA and has the highest average retail GM

Fashion and Beauty account for 50% of non-consumable retail sales

12%0.115347334410

33911%

0.109208400646204

3010%13.44%

10.33%

7.42%

17757%

SEA Retail Sales 2013 (In B USD)

Fashion Home & LivingElectronicsBeauty & Pers. CareHome AppliancesConsumer HealthKids & ToysOther (Food, Travel, etc)

0

25

50

75

5349 49

4034

3128 28 27

24 24

US Gross Margins by Retail Category 2010 (%)

Fashion typically has highest retail gross margins

Sources: Euromonitor; Annual Retail Trade Survey 2010

Fashion has leading share of online spending in the US and China

In more developed markets Fashion and Beauty consistently rank as top E-commerce categories

Fash

ion

and

Shoe

s

Med

ia

Cosm

etics

Elec

tron

ics

Home

Decor

ations

Cell Ph

ones

and

Acc

esso

ries

Toys

Com

pute

rs

Home

Appl

ianc

es

Food

s0

10

20

30

40

50

60 57

4641

3529 27 25 23 22 20

Best sold items in China over Internet (% of shoppers)

Compu

ters

Fash

ion

& A

cces

sorie

s

Med

ia

Auto

& P

arts

Furn

iture

& H

ome

Furn

...

Health

& B

eaut

y

Offi

ce

Toys

& H

obby

0

10

20

30

40

50

60 56

49

2420 19

129 8

US Ecommerce Sales by Category – 2013 (B USD)

Sources: I Research; eMarketer

SEA fashion E-commerce to reach 6 to 14B USD by 2018

Fashion E-commerce market size in SEA can be calculated by taking a top down approach to the forecast

• Assumes 10% CAGR from 2013-2018

Sources: “We are social”, Accenture; Euromonitor 2013

2018 Fashion and

Beauty Retail Sales:

$70-80B USD

x

2018 Fashion and Beauty E-commerce

sales:

$6-9B USD

Expected E-commerce share of

retail sales:

7-10%

=

• Assumes E-commerce penetration in line with China in 2013

• 10% market share implies $600-900M USD revenue

• 1% market share implies $60-90M USD revenue

Global fashion E-commerce valuations higher for own-brand due to product differentiation and higher margins

Merchandizing

Company

Focus Revenue @

Investment

EV EV / Revenue

Comment

Own-brand + curated 3rd party

Asos Fast Fashion with own-brand#1 online fashion site in UK

1,240 6,800

5.5x

4-6x valuation at

scale

Own-brand VANCL Own-brand Fast Fashion#1 online fashion site in China

800 3,000

4.0x

Own-brand + curated 3rd party

Zulily Mom Fashion & Babies Flash Sales

500 2,600

5.2x

Own-brand Bonobos Men’s own-brand fashion#1 online men’s fashion site in US

80 800 10x

8-10x valuation

during growth phase

Own-brand + curated 3rd party

Nastygal Women’s LA Street Fashion 100 800 8.0x

Own-brand Warby Parker

Own-brand Eyewear#1 online eyewear site in US

50 500 10.0x

Resell 3rd-party brands

Zalando Broadline shoes & apparel 1,800 3,900

2.2x 1-2x valuation regardless of size due to threat of competition and lack of differentiation

Resell 3rd-party brands

Zappos Broadline shoes & apparel 1,000 (‘09)

1,000

(‘09)

1.0x

Resell 3rd-party brands

Myntra Broadline shoes & apparel 150 300 1.7x

Sources: Techcrunch, Google Finance, FT.com, Dailypando, Bloomberg

(In M USD)

Thank you!

For more information please contact: David Jou at david@pomelofashion.com