Lessons from ecommerce giant Zalora on its third birthday

Online Fashion store Zalora just turned three. The company, born out of the Rocket Internet family in early 2012, is headquartered in Singapore and also operates in Hong Kong, Malaysia, Thailand, Indonesia, the Philippines, and Vietnam, as well as in Australia and New Zealand under the name The Iconic.

Since its inception, the Zalora Group has attracted US$238 million in four rounds of funding from eight investors according to data from Techlist. Among these investors are JP Morgan, Tengelmann, and VC firms Kinnevik, Access Industries, Summit Partners, as well as Rocket Internet itself.

At the heart of Zalora’s mission is to address a fashion market of 600 million people in Southeast Asia and Australia, worth over EUR 60 billion (US$63.5 billion), as they reveal in a 2014 report.

To Zalora, the fact that internet penetration in large parts of this region is still low and infrastructure bottlenecks continue to exist don’t matter much. The ecommerce giant is betting on the future. In this future – as this study suggests – hundres of millions of Southeast Asians will experience an increase in disposable income and will get access to the technology and infrastructure required to turn them into regular online shoppers.

If this means significant portions of that $63.5 billion fashion market pie will eventually buy clothing, shoes and accessories online, Zalora is willing to wait.

Tech in Asia caught up with Zalora’s managing director Tito Costa to talk about Zalora’s past, challenges and plans for the future. Here are five key takeaways from that conversation.

1. It’s a long game

From 2012 to 2013, the Zalora Group raised money on four occasions. Costa calls this the building up of “[a] war chest to become a long term player in a capital intensive market”.

These investments were largely made on the hopes of future profits. In 2013, confidential papers leaked by the German Manager Magazin revealed that Zalora counted a US$95 million loss in 2012, but predicted profitability by 2015.

Asked about whether the 2015 target is still realistic, Costa declined to comment. The last public figures about the company’s performance from 2014 seem to confirm that losses are decreasing, having more than halved by mid-2014 since the whole of 2013, but they are still losses nonetheless.

Costa’s choice of words when likening Zalora’s funds to a war chest is telling. No one at Zalora expects the ride to be an easy one. This ecommerce giant is ready to weather the battles ahead, whether they be on the infrastructure front or against competitors.

2. The future is in offering customers the products they want

Zalora started out as an online shop representing a catalogue of known fashion brands. But since 2013, it has been experimenting with developing its own brand, first under the name Ezra, and in 2014 launching its own Zalora label. By owning the entire supply chain, Zalora can react quickly to trends and seasonal preferences.

In mid 2014, around the time of the Muslim fasting month, Zalora introduced a new line of Muslim wear and modest fashion on the platform. To address Chinese communities in Singapore, Malaysia and Vietnam, it created a Lunar New Year collection.