Mission1Rocket Internet is launching an IPO on the Frankfurt Börse next week and appears to be creating lots of attention about its emerging market web plan.  The company is riding on the coattails of the recent successful listing by Chinese rival Alibaba and said last week it was doubling the amount of money it planned to raise in its share sale to 1.48 billion euros ($1.9 billion).  According to Reuters the company said it was fully subscribed within the first hours of taking orders.

Rocket Internet heralds itself as a global e-commerce investor with the mission to become the world’s largest Internet platform outside the United States and China.  That is a tall order, to say the least, simply because the company does not operate a global platform.  Instead it has invested in about 20 local e-commerce and fintech companies holding only a minority interest.  Eventually Rocket Internet seeks to hold a majority interest in some of these local e-commerce startups.   Even if successful this does not constitute a global platform.  It looks more like a multi-domestic setup.  The diversity in products and services entails a significant complexity in managing such an enterprise, which the company readily admits.

The Rocket Internet group’s own revenues, which until now it made largely by charging consultancy fees to the companies it set up, rose 43 percent to 47 million euros in the first half of 2014, while it made a net loss of 13.3 million as expenses rose.

At every opportunity, Samwer underscored his drive to replicate the success of Amazon.com Inc. and Alibaba in markets that the U.S. and Chinese groups have yet to dominate such as Africa, Latin America, Russia and other parts of Asia.  “Our target is to be the leading internet platform outside the U.S. and China one day. Rocket’s best time is yet to come,” said Samwer according to Reuters.

Samwer’s ambitious strategy is to dominate ecommerce business in many emerging markets by partnering with local telecom and logistics companies to be the first to create the necessary infrastructure to allow online shopping via phones.  However, the company faces daunting logistical challenges and rising local competition.   Even the successful Alibaba and Amazon.com had to recognize that success would only come after having made heavy investments in logistics.   But Samwar argues this hybrid ecommerce-emerging markets approach will provide his company with barriers to entry against Internet-only companies that try to follow Rocket’s lead.

“Ecommerce is 50 percent digital and 50 percent physical,” Samwer said of his bid to reach shoppers in more than 100 countries with the basic elements to enable a functioning consumer market.  One major German fund investor said he bought the idea and he added “If you want to make money in ecommerce, you have to have a superior infrastructure. The jury is out as to whether the strategy will be successful.”  At this point in time it is quite obvious that the infrastructure which made Alibaba and Amazon.com successful is lacking. Subsequently the Financial Times in its Lex Column opines that given the complexity of its business model it may be a long, long time for Rocket Internet to take off.

Source:  Reuters and Financial Times Lex Column

Rocket Internet largest investments (10 out of 20 listed in its website):

Dafiti Group – 2013 Revenue Euro 136 million  –  23% ownership by RocketInternet

The Dafiti Group is Latin America’s leading online retailer for apparel, shoes, accessories, beauty, and home décor, with the largest online portfolio in the region, ranging from popular high-street brands to designer labels, as well as exclusive private label brands. The company has established its own storage, distribution and delivery capabilities, including its own warehouses and transporters, as well as its own customer care services. Dafiti became one of the most well-known e-commerce companies in Brazil with almost 90% brand recognition.

Westwing – 2013 Revenues Euro 111 million – 34% ownership by RocketInternet

Westwing is an online shopping club for a frequently changing, curated selection of home and living products in 12 countries. It offers its members daily deals with deep discounts on top brands as well as helpful advice for those seeking to find inspiration. Through its desktop and mobile websites and mobile applications, Westwing inspires to shop its hand-picked selection of deco products and textiles as well as furniture pieces sourced from a vast variety of international and local suppliers and from its own private labels.

Lamoda – 2013 Revenues Euro 103 million – 24% ownership by RocketInternet

Lamoda is a leading online shop for shoes, fashion and beauty in Russia, Ukraine and Kazakhstan. Offering a broad selection of international, young local brands as well as private labels, and an own last-mile delivery service, Lamoda is available in nearly all major Russian, Kazakh and Ukrainian cities. Available on the site are thousands of brands of men’s, women’s and children’s shoes and clothes, with the range of goods constantly being updated to suit the needs of customers.

Home24 – 2013 Revenues Euro 93 million – 50% ownership by RocketInternet

Home24 is one of Europe’s largest online furniture stores. With thousands of items available for purchase, customers can find instant inspiration online. Whether you are looking to embellish your house with new furniture, buy a new lamp or simply browse home accessories, you can find what you need. Home24 delivers all kind of furniture pieces – regardless of weight and dimensions – always for free and right to the customer’s point of use. In addition, Home24 operates in Brazil under its brand Mobly.

Zalora – 2013 Revenues Euro 69 million –  25% ownership by RocketInternet

Zalora Group is Asia Pacific’s leading group of online fashion retailers, offering clothing, shoes, accessories and beauty products across South-East Asia under the Zalora brand, and to customers in Australia and New Zealand under the The Iconic brand. Customers find a broad selection of international and local as well as private label brands and enjoy free and speedy deliveries, a thirty-day free returns policy, and multiple payment methods including cash-on-delivery.  Zalora Group strives to expand its customer reach by focusing on mobile devices as one of its key channels.

Lazada – 2013 Revenues Euro 57 million –  27% ownership by RocketInternet

Lazada is an online retailer and marketplace for home appliances and electronics, such as TVs, computers, cameras, musical instruments, video games, navigation and mobile phones in South-East Asia. With Lazada, customers can purchase the highest quality products at competitive prices. Lazada offers a large variety of brands and products to choose from, with an aim of giving every customer a pleasurable shopping experience. A user-friendly website guarantees safe and secure transactions.

Jabong – 2013 Revenues Euro 56 million  –  21% ownership by RocketInternet

Jabong is India’s online shop for shoes, fashion and beauty. Offering a broad selection of international and local brands at competitive prices and delivery all over the country, Jabong is now the biggest fashion online retailer in India. Available on the site are thousands of brands of men’s, women’s and children’s shoes and clothes, with the repertoire of goods constantly being updated to suit the needs of customers.

Linio – 2013 Revenues Euro 48 million  –  35% ownership by RocketInternet

Linio is the leading general merchandise online retailer in Latin American offering products ranging from consumer electronics to household goods and from toys to sports equipment. In addition, Linio operates an online marketplace platform where third-party sellers can offer their products, thereby expanding product assortment and mitigating inventory risk. Through its nascent fulfillment services, Linio is able to provide merchants with e-commerce logistics solutions, further driving operational efficiency and increasing service quality to customers.

Fintech Sector

Lendico  – Details not disclosed – Company founded in 2003 – Operates in Austria, Germany, Poland, South Africa and The Netherlands

Lendico is the digital alternative to banks. Lendico’s online marketplace brings borrowers and investors together. Through the low cost structure, together with a propitiatory algorithm, Lendico is able to provide investors with considerably less risk compared to other asset classes with similar yields. Borrowers also benefit from the low cost structure and can finance their loans at lower rates.

Paymill – Details not disclosed – Company founded in 2012  (company website not transparent)

Paymill is a fast and easy way to accept credit card payments on any website. Smaller online shops often cannot afford to support credit card payments. Paymill has found an innovative way to solve this problem and enables online shops of all sizes to accept electronic payments. Customers can pay directly on the website and payments are accepted in more than 100 currencies. Safe and comprehensive risk and anti-fraud measures ensure a high level of security.

Latest addition:

Spotcap – Details not disclosed – Company formed 2014 in Spain

Spotcap is the new innovative online credit platform providing fast and flexible financing to small businesses. The company’s mission is to enable business owners to invest and grow without having to worry about how to finance their projects.  Applying for Spotcap’s credit lines takes as little as five minutes – making it the fastest online credit.

Spotcap uses an innovative credit scoring technology that directly evaluates real-life business data from the customer’s online accounts.  All of that without the tedious paperwork, long waiting times and stringent credit criteria typically imposed by banks. The company launches its business in Spain (September 2014) with an initial focus on online merchants and plans to expand its service both geographically and across products.

SMEs account for 65% of GDP and 80% of total employed people in Spain. As such, SMEs fuel the Spanish economy and are often the driving force behind important innovations. The convenient and fast credit lines from € 500 – € 50,000 that Spotcap provides to small online business owners therefore play a vital role in supporting macroeconomic growth and increasing employment.

Source:  Rocket Internet Website