In a dismal year for Rocket Internet, one startup proves to be a hidden gem

Photo credit: Jeshoots.

Rocket Internet’s having a pretty dismal year. There was the loss of nearly US$700 million in the first six months, it’s seen the collective value of its fashion startups shrink by US$2.4 billion, and analysts have pilloried it for opaque financial structures and large employee turnover.

Its shares currently trade down 46.5 percent from their 2014 debut. Oliver Samwer, Rocket’s CEO, brushes aside analysts’ concerns, pointing to the company’s vast reservoir of cash and significant brand equity as factors that will help it steer through these turbulent times.

Part of what makes the German copycat incubator so irresistible to investors is its unmatched appetite for risk. It quite literally ventures into markets deemed too risky by Western entrepreneurs, giving it a first-mover advantage and building a tech ecosystem where none exists.

It’s easy to forget that Rocket was the first institutional investor in ecommerce in Southeast Asia, leaping in with an Amazon clone called Lazada. Its bets in Africa are also paying off – the value of its holding group is over a billion dollars with Goldman Sachs recently ploughing in hundreds of millions of bucks into operations there.

Times might be tough for Rocket, but write the firm off at your own peril.

Hidden gems

Rocket Internet’s strategy of copying an existing idea and taking it to new markets does not always work. Its sale of fashion store Jabong in India to Flipkart for just US$70 million exemplifies that. Zalora is also bleeding cash – the Southeast Asian clothing retailer recently closed shop in Thailand and Vietnam in an effort to cut losses.

But one region showing immense potential is the Middle East. Namshi, the Zalora equivalent for Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain is – wait for it – a Rocket Internet startup that’s actually profitable.

A huge mall pictured from Dubai’s Burj Khalifa. Photo credit: Johannes Martin.

Namshi’s financials indicate the company is well on track to dominate online fashion retail in the six markets it operates in. Net merchandise value, or the amount shoppers spend on the site, grew by 50.5 percent in the first six months of the year. Gross profit growth was also strong, increasing by 53.1 percent compared to the corresponding period last year.

Overall, the startup posted a profit of US$1.8 million, reversing the US$1.2 million loss last year.

Hosam Arab, co-founder of Namshi, tells Tech in Asia there’s been a concerted effort by the team to build a fashion brand.

“What we work on from the get go is ensuring the assortment is as interesting to the customer as possible and the experience we provide to them is unmatched,” he asserts.

Early start

Brand-conscious consumers