rocket internet and its proven winners
TRANSCRIPT
and its Proven Winners
(PART 1)
Dr. Wendy Hong, Wendy Weng, David Sit
Export E-commerce Series (Issue No. 3, Sep 2015)
: 9 Key characteristics
2
Case Study Takeaways
Source: Fung Business Intelligence Centre
1. Taking of online business (Amazon, Alibaba, Zappos, Airbnb,
Groupon, etc) to new places to minimize risks.
2. Focusing on markets where a competitor has not yet established a significant presence to achieve
advantage
3. the companies into a market leader in short period of time
4. in every specific country to adapt to
local cultural background and customer preferences 5. Heavy investment in developing
infrastructure and fulfillment capability
6.
(cash on delivery, credit card installments, debit card, bank transfer,
on-line payment
7. A strategy to think first about the user experience on mobile, and then translate to the
desktop experience
8. Central support and supervision from the parent company and cooperation-competition
relationship among members to achieve
9. Rolling out different companies in different countries in parallel to achieve
(10 new companies every year)
Company snapshot
• A “global internet platform” that addresses basic consumer needs in markets outside the US and China
• A “company builder and operator” building and scaling online companies that fulfill basic consumer needs.
• “To become the world’s largest internet platform
outside the US and China”
Founded 2007 in Berlin
Focus sectors
• E-Commerce • Marketplaces • Travel • Financial Technology
IPO
• October 2014 • Frankfurt Stock Exchange • The largest European Internet
IPO ever
Market Capitalization
EUR 7.9 billion (2014)
Market countries 110+ countries on six continents
Total Visits 4.4 billion (2014)
Employees 30,000+
4
The world’s largest internet incubator
Source: Fung Business Intelligence Centre; Rocket Internet, Annual Report 2014
5
Top management
Source: Rocket Internet
CEO Oliver Samwer
1972- Born in Germany 1999- Alando.de, Co-Founder
(Acquired by eBay in 1999)
1999-eBay, Managing Director 2000- Jamba! AG, Co-Founder
(Acquired by Verisign Inc. in 2004)
2007-Rocket Internet, Founder 2014-Rocket Internet, CEO
Alexander Kudlich
Group Managing Director
1980-Born in Germany 2005-Axel Springer AG,
Assistant of the Chairman and CEO
2008- zanox.de AG, various managerial positions
2011-Rocket Internet, Group Managing Director
CFO
1968-Born in Germany 1992-Goldman Sachs, from
analyst to partner 2014-Rocket Internet, CFO
Peter Kimpel
Rocket’s geographical presence
*The companies shown may have existence in various regions.
• 36 known members in 110+ countries on six continents
6 Source: Rocket Internet, compiled by Fung Business Intelligence Centre
The Rocket family
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• Proven Winners
Largest and most mature companies
Usually are the market leaders in the regions they are operating in
• Emerging Stars
Having completed financing rounds beyond seed funding
• Concepts
Having been recently launched or in the process of being launched
Source: Rocket Internet, Annual Report 2014
9 Key Strategies
Rocket’s 9 Key Strategies
“We identify and build proven Internet business models and
transfer them to new, underserved or untapped markets where we seek to
scale them into market leading online companies.”
9 Source: Fung Business Intelligence Centre
Adopting proven models 1
Focusing on untapped market 2
Deep localization 3
Rapid scaling 4
Heavy Investment in logistics 5 Localized Payment
Solutions 6
Mobile-first strategy 7
Achieving economies of scale 9
Central support and internal synergy 8
• Focusing on markets outside the US and China, particularly emerging, underserved or untapped market with sizable market opportunity ,yet obvious complexity (see )
• Nurture on-line shopping habit in these market
• The goal: to be first-to-market and achieve a leadership position
10
• A “clone factory” taking “proven online business models” to new places to minimize customer adoption risks
• Avoiding huge investments in new business model development and testing
• “Proven business models” include those which:
have attracted significant funding from well-known investors
have achieved observable operational traction
have been successful in other regions of the world
• Examples: Amazon, Alibaba, Zappos, Airbnb, Groupon, Uber
Source: Fung Business Intelligence Centre
Adopting proven models 1
Focusing on untapped market 2
BOX 1
11
Rocket Internet: nurturing e-commerce development in untapped market
• Rocket focuses on markets where a competitor has not yet established a significant presence to minimize competition risk and achieve first mover advantage
Russia & CIS
Africa & Middle East
Asia- Pacific
Latin America
• Operations in emerging, complex markets with growth potential:
— Low e-commerce penetration and limited competition
— Underdeveloped logistics infrastructures
— High import tariffs
— Tight government regulation
— Underdeveloped offline retail infrastructure
Europe • A solid foundation in Europe with the headquarter in Germany
Source: Fung Business Intelligence Centre; Rocket Internet, H1 2014 Results and Business Update, Nov. 2014
BOX 1
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• Deep localization in operations and logistics in every specific country to adapt to local cultural background and customer preferences
• Localization concerns ( )
• Operation team
• Customer interface
• Sourcing team
• Payment methods
• Logistics and fulfillment
• Marketing strategies
• Customer services
• Sacrifice profitability at the beginning to achieve market leadership
• Aiming for beak-even within 6-9 years after launch
• The goal: To grow a company as quickly as possible to achieve a leadership position in the markets
Source: Fung Business Intelligence Centre
BOX 2
Deep Localization 3
Rapid Scaling 4
Localized operation team with deep local
knowledge to better understand the unique
opportunities and challenges of local market
Country-specific shopping portal with local languages and specific
product description
Local sourcing teams to find the right mix of
products in specific market
Diversified and localized payment methods; 80% of total payments via
cash on delivery
Heavy investment to establish
localized and self-operated logistics
solutions to overcome the logistics obstacles
Localized marketing strategies in line with
different cultural characteristics and consumer
preferences
Localized customer services conducted in
local languages
* Please see “Export E-commerce Series (Issue
No.4)” for detailed case study on Lazada
• Launched at March 2012
• The largest and fastest-growing on-line B2C marketplace for general merchandize in the “ASEAN 6”
• Market share in the ASEAN 6: 20%
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: The 7 localization strategies
Source: Fung Business Intelligence Centre
BOX 2
14
• logistics as the biggest obstacle to e-
commerce in Rocket’s target markets:
underdeveloped infrastructure, yet
diversified logistics requirements
• Heavy investment in developing in-
house logistics infrastructure and
fulfillment capability to address
logistics challenges and deliver better
shopping experiences
• As an important strategy to achieve
localization and fast scaling
• Diversified and localized
payment methods: credit card
installments, debit card, bank
transfer, on-line payment, etc.
• Cash on delivery as the
mainstream payment method
in less developed areas:
Southeast Asia, Africa, Latin
America, Russia.
Source: Fung Business Intelligence Centre
Heavy investment in logistics 5
Localized payment solutions 6
15
• To cover all important mobile
platforms from day one
• To think first about the user
experience on mobile, and
then translate to the desktop
experience
• For some member companies
(e.g. Zalora): 80% of
businesses generated on
mobile devises
• Central support and supervision from
the parent company ( ) and
cooperation-competition relationship
among member companies s to
achieve synergy ( )
• Rolling out different companies in
different countries in parallel to
achieve economies of scale
• 10 new companies every year ( )
Source: Fung Business Intelligence Centre
Mobile-First Strategy 7
Central support and internal synergy
8
Achieving economies of scale 9
BOX 3
BOX 4
BOX 5
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• The parent company acts as the headquarter, providing financing and a platform for building and operating a new company.
• Four pillars of the platform:
– Infrastructure: management teams, functional experts, local professionals, and strategic partners
– Technology: one centrally established proprietary technology platform for setting up new businesses
– Process: highly structured and repeatable company building process
– Network: global and local network as well as internal member companies to achieve synergies
Central support from the parent company
Cooperation-competition relationship among members to
achieve synergy
• Relationship among members similar to franchisees under the same brand
• members benefit from each other in 4 areas: sourcing, knowledge exchange and best practice sharing, customer acquisition, and talent attraction
• Rocket fosters internal competition by sharing performance data among members
Source: Fung Business Intelligence Centre
BOX 3 BOX 4
17
Rocket as a “company builder”
• Replicate tested model and experiences into new members with standardized execution process paired with regional team proving local knowledge
• Retaining major ownership stakes in member companies (up to 80-90%)
• An unique yet highly standardized company building process:
– Step 1: Identifying proven Internet business model and best practices
– Step 2: Selecting the target market
– Step 3: Recruiting the operation team to run the model and build the company in the target market
– Step 4: Scaling the model in a short period of time in the market
• A clearly-defined and rigorous process for shutting down companies
Source: Fung Business Intelligence Centre
BOX 5
Rocket’s Proven Winners
Rocket’s Proven Winners
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*The companies shown may have existence in various regions.
Source: Rocket Internet, compiled by Fung Business Intelligence Centre
Rocket’s Proven Winners
Global Fashion Group (GFG)*
• Adopting the business model of Zappos
• Founded in 2011, grouping Rocket’s 5 leading fashion ecommerce companies ( Zalora, Dafiti, Lamoda, Namshi and Jabong)
• Operating in 27 countries across 5 regions: Latin America, Russia & CIS, Asia Pacific, India and Middle East
• offering international and local fashion brands, as well as a selection of internal brands
• Benefits from combing 5 companies under the GFG:
To deliver economies of scale in sourcing international brands
To obtain preferential global agreements for marketing and logistics
To strengthen the joint private label efforts
To facilitate best practice sharing across functions
General Merchandise
Global Fashion Group
Home & Living
1
2
3
20
4 Food & Grocery
*Please see forthcoming report for detail.
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General Merchandise* • Adopting the business model of
Amazon
• Operating in 3 regions:
South America
Southeast Asia
Africa
• Providing large portfolios of products from popular brands
• Combining self-operated retail platform with marketplace model, with the inclination towards the latter
• Sophisticated in-house logistics capability to reach vast areas of the markets
General Merchandise
Global Fashion Group
Home & Living
1
2
3
4 Food & Grocery
Rocket’s Proven Winners
*Please see forthcoming report for detail.
22
Home & Living*
• Operating in two regions:
Europe
Brazil
• Innovative and careful display of products
Theme-based category
“Shop The Look”
Carefully selected products
Elaborate presentation
• Strong in-house logistics capability
Ability of delivering a wide range of products
Effective delivery
General Merchandise
Global Fashion Group
Home & Living
1
2
3
4 Food & Grocery
Rocket’s Proven Winners
Source: Fung Business Intelligence Centre; Rocket Internet, Annual Report 2014
23
General Merchandise
Global Fashion Group
Home & Living
1
2
3
4 Food & Grocery
Food and Grocery*
Foodpanda
• “A marketplace for food delivery and takeaway”
• Focusing on Eastern Europe, Southeast Asia and Africa
• Mobile centric
HelloFresh
• Subscription commerce
• Delivering recipes with the required pre-portioned ingredients
• Just-in-time business model
Rocket’s Proven Winners
*Please see forthcoming report for detail.
Performance of Rocket’s Proven Winners: Revenue/GMV Bridge (Q1 2014 vs. Q1 2015)
24 Source: Rocket Internet, 2015 Q1 Proven Winners Update, July 2015.
* This diagram excludes the section of food & grocery
Performance of Rocket Proven Winners: Net Revenue/GMV Growth (Q1 2014- Q1 2015)
25 Source: Rocket Internet, 2015 Q1 Proven Winners Update, July 2015.
* This diagram excludes the section of food & grocery
Performance of Rocket Proven Winners: EBITDA Margin
26 Source: Rocket Internet, 2015 Q1 Proven Winners Update, July 2015.
* This diagram excludes the section of food & grocery
Conclusion
• With the “Rocket Formula” (proven business models + emerging markets + deep localization + fast scaling + synergy ), the Rocket proven winners have achieved astonishing growth during the past several years and are becoming formidable e-commerce competitors in their respective markets.
• However, it is not realistic to expect Rocket members to maintain current explosive growth for a long period of time, considering the experience of e-commerce development in China, US and Europe.
• They are facing increasingly keen competition as global giants and newly emerged players are rushing to the emerging markets.
• It’s still too early to predict whether they can gain a dominant position in their respective markets.
Conclusion
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Forthcoming reports on Rocket Internet & its Proven Winners
General Merchandise
Global Fashion Group
Home & Living
Part 1
Part 2
Part 3
Part 4
Part 5 Fo
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& its proven winners
CONTACTS
Business Policy and City Clusters in China
Wendy Hong
Vice President
(852) 2300 2475
Wendy Weng
Research Analyst
(852) 2300 2467
David Sit
Senior Research Analyst
(852) 2300 2479
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Fung Business Intelligence Centre 10/F, LiFung Tower, 888 Cheung Sha Wan Road, Kowloon, Hong Kong Tel: (852) 2300 2470 Fax: (852) 2635 1598
Email: [email protected] http://www.fbicgroup.com/
© Copyright 2015 Fung Business Intelligence Centre. All rights reserved.
Though the Fung Business Intelligence Centre endeavours to have information presented in this document as accurate and updated as possible, it accepts no responsibility for any error, omission or misrepresentation. Fung Business Intelligence Centre and/or its associates accept no responsibility for any direct, indirect or consequential loss that may arise from the use of information contained in this document.
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