Germany's Rocket Internet bets big on online markets

Germany based Rocket Internet faces major logistical challenges, as the local competition rises to capture customers in emerging markets before e-commerce titans Amazon and Alibaba can catch up.
Germany's Rocket Internet bets big on online markets

Germany  based Rocket Internet faces major logistical challenges, as the local competition rises to capture customers in emerging markets before e-commerce titans Amazon and Alibaba can catch up,

According to the Chief Executive Oliver Samwer, Founder of Rocket Internet hopes huge opportunities for digital businesses in emerging markets.
"We like to collect countries, small markets that together can create a giant," he told a retail conference in June.

While, Rocket Internet has launched about 70 companies - ranging from online fashion to food delivery and marketplaces for real estate - in more than 100 countries, many in the last couple of years, it is still far from being a giant, as per the Reuters report.

According to the figures from major Swedish investor AB Kinnevik., Rocket internet’s top eight e-commerce ventures in emerging markets - including Lamoda in Russia, Dafiti in Brazil and Zalora in Southeast Asia - together made sales of 539 million euros ($708 million) in 2013 and an operating loss of 351 million, according That compares with the $2.54 billion revenue that 15-year-old

Besides, Chinese e-commerce juggernaut Alibaba reported for the quarter ended June 30. Alibaba's net income attributable to ordinary shareholders nearly tripled to $1.99 billion.

The company’s  businesses is growing fast - revenue was up 74 per cent in 2013 - and they have succeeded in attracting over 1 billion euros in capital from a raft of high-profile investors - most recently German service provider United Internet AG and Philippine Long Distance Telephone Company.

But they face a rocky road, not least due to competition from Alibaba itself as the Chinese firm - soon to be bolstered by funds from a bumper listing - looks for new opportunities outside its home market.

The Samwer brothers have gained notoriety for cloning businesses pioneered in Silicon Valley in new markets - most notably German online auction site Alando which they sold to eBay, the site it was modelled on; and Amazon Zappos-copy Zalando, now Europe's biggest online fashion site which is on track to list soon.

Rocket's strategy is to identify markets and niches where big players have yet to get established, cutting its losses if the competitive environment turns out to be too fierce, as it did in 2012 when it closed down operations in Turkey.
 

According to the company, it can launch a company within 100 days by drawing on expertise in areas like legal, finance, communications, marketing and business intelligence at its Berlin head office, helping it start an average of three to six new firms a year.

It aims for its ventures to be operationally independent within another 100 days - but can pull the plug if the business is failing, as they have done in about 20 per cent of cases.

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