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The Original Copycats
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For instance, in 1999 they sold Alando to eBay for $50 million. In 2003, they hawked online astrology site viversum to Questico for an undisclosed sum and in 2009, made $126 million by selling CityDeal to Groupon. In the same year, their virtual currency site GratisPay went to SponsorPay for an undisclosed sum. The Samwer brothers together own about 10 per cent in Groupon, thanks to the CityDeal sale.
On 26 March, Oliver Samwer was spotted in Gurgaon's Udyog Vihar, as he spent his entire day in jabong.com and Rocket Internet's office. Addressing a group of 120-odd employees from Rocket and jabong.com, Oliver aggressively talked of India being high on Rocket's priority list as he took stock of the estimated $45 million invested in India in a span of five months in three ventures — jabong.com, fabfurnish.com and heavenandhome.com. The advertising push behind jabong.com, in particular, has stunned industry observers and rivals as Rocket tries to make up for lost time by ramping up volumes and revenues to take on Indian e-tailing's market leader flipkart.com. This is Rocket's second stint in India. In January 2011, it tried launching afafa.com, but the business was shut in just about 75 days due to regulatory issues.
"Jabong.com and fabfurnish.com are very important to us and everything else comes later," Oliver told his employees. His message was loud and clear: create India's No. 1 fashion- lifestyle and home furnishing e-commerce portal — a clone of zalando or US's zappos.com and onekingslane.com.
The mission does not end at lifestyle and fashion alone. The trio wants to create an eBay replica too. Sources confirmed that the company will launch an online marketplace in a couple of months. Home furnishings is another domain in which the Samwer brothers see growth potential across the globe.
Rocket has already hired several venture partners in India, who help the company spot business opportunities and even help locate talent. "The coming year will see a lot more businesses by Rocket Internet in India, work on which is already in progress," said one of the venture partners on condition of anonymity. Rocket has a strength of 400 employees in India and over 20,000 employees worldwide. "This time around in India the purpose may not be just selling out," says another venture partner at Rocket Internet India who is working closely with the European team. "The larger plan could be an IPO, too," he added.
Rocket's first venture in India, jabong.com, is a fashion and lifestyle portal with 15,000 SKUs (stock-keeping units). It gets 82,939 unique visitors a day, according to hypestat.com. It already has a 40,000 sq. ft warehouse in Pataudi and has set up its own logistics team called "jvas". Experts estimate jabong.com to have received a funding of more than $10 million from the European Founders Fund (EFF). A separate entity Xerion Retail (believed to be an offshoot of Rocket Internet) is behind its back-end logistics and owns Rocket's brands in India.
When jabong.com was established, the Samwer brothers approached Tushar Ahluwalia, Sunnyraj Agarwal and Nishrit Shrivastva, who were exploring the idea of entering e-tailing. Given Rocket Internet's love for the home furnishings market, the idea of heavenandhome.com came alive in December 2011 with a fourth founding member Tara Kaushal, who joined the company as a co-founder and style head. It is inspired by onekingslane.com.
Just like Samwer brothers, their ventures are media-shy too. Talk to any of them, and they are hesitant to even mention the "R" word. "It's a European fund we cannot talk about." Shhh! It is the best known "secret" in the industry currently as everyone tries to second guess the funding that has gone into the business. Rocket and its companies in India did not respond to BW's email till the time of going to press.
The third business that Rocket Internet is pushing is fabfurnish.com, patterned on home24.com. Those running the show are co-founders Vaibhav Aggarwal, Vikram Chopra and Mehul Agrawal. Market estimates put the company's funding at $7-10 million in the first round. It has its warehouse on Sohna Road.
In certain markets, Rocket copies the business models so precisely that it's hard to separate from the original. That leaves the industry wondering whether to hate the trio or admire them. Zalora, clone of Zappos, and Lazada, a clone of Amazon, are just a few examples. The only country where Rocket Internet has failed to get a toehold is Russia, but it hasn't lost hope there too. It is still trying hard in that market to turn around its fortunes (see chart).
Like any other venture capital firm, EFF, too will not just offer you money for your golden ideas and set you free. Instead, it keeps a tight control over the day-to-day operations. But EFF has a different and a much-hated style of working than any regular venture capital fund has. Its incubator, Rocket Internet, launches companies, places select people on the board, provides a carved out (read copied) business model and does everything else from marketing to design or even search engine optimisation to further the cause of the business it funds. Those chosen to run the businesses are mostly young consultants and researchers. Their CVs sport brands such as McKinsey, Bain & Co., Tuck Business School, Harvard and IIM, among others.
The fast-paced Indian e-tailing industry has many players competing with Rocket Internet's businesses. Jabong faces strong competition from yebhi.com, myntra.com, fashionandyou.com and exclusively.in. Heavenandhome.com, whose categories clash with its cousin jabong.com, has established competitors like plushplaza.com, 99labels.com and futurebazaar.com. For now, Jabong's aggressive branding has pulled its unique user base to 82,939 a day in just five months as compared to yebhi.com's 110,322 unique visitors a day and myntra's 123,224. However, sustaining such a level would be tough given the high customer acquisition cost and lack of customer loyalty. The battle for customer acquisition is fierce as the pie of online shoppers is still very small and the number of players vying for the same pie is mushrooming rapidly.
"Home and lifestyle market is fragmented and there are no dedicated players currently. But given India's export record of home and lifestyle items, we see a lot of growth," says Nishrit Shrivastava, co-founder of heavenandhome.com.
All in all, Rocket is pressing the accelerator on its Indian businesses. Whether global majors will find its clones worth buying will be interesting to watch.
(This story was published in Businessworld Issue Dated 09-04-2012)