Now ‘profitable’ in the Philippines, Zalora to double down on expansion

Photo credit: Zalora.

The rhetoric about a financially struggling Zalora and its supposed retreat from Southeast Asia has gotten very heated over the past year. Though it’s not entirely true.

In the Philippines, at least, Zalora is doubling down on investments. It’s also been “fully profitable in terms of variable margin” as of 2016, announced Paulo Campos III, CEO of Zalora’s Philippine branch, at an event. That’s after costs such as cost of goods sold, deliveries, and marketing – which tend to be greater when a business is engaged in high-volume transactions such as ecommerce, he says.

However, it bears mention that Zalora remains unprofitable overall (that’s on account of total overheads, including fixed costs). It expects to post a turnaround “soon,” Paulo says.

The store, which last month sold a portion of its operations to Filipino conglomerate Ayala Group, expects the new alliance to give it a boost not just in terms of funding for growing its user base, but also co-marketing and other partnerships.

The brand operates in five other Southeast Asian countries.

Continuous investments

Seeing growth, Zalora intends to stay in the Philippines, contrary to what some reports have suggested.

Paulo clarifies that its parent, Rocket Internet-backed Global Fashion Group, didn’t sell any of its own stake. What it sold Ayala were new shares.

“There was no buyout that happened,” he stresses. “All the money would go into the business.”

Ayala’s investment was more of a vote of confidence, he adds. The group could have pushed for control or at least an equal stake, but it decided to defer to the current management. “They’re happy with the current strategy and direction. But of course, they will be very active at the board level to steer the direction of the company.”

Zalora sees several synergies with its new investor, especially in giving more people access to the site through Ayala’s telco subsidiary, Globe Telecom. Plus it’ll explore more innovation in the payments space through banking subsidiary BPI, and bring more retailers online via mall spin-off Ayala Land. Ayala will also help in Zalora promotions.

The fresh funds will be spent acquiring more inventory from fashion brands, creating more exclusive brands, increasing online as well as offline marketing, and expanding logistics.

Sustainable profits

For keeps