European’s Ecommerce Best or Bubble?

Zalando, the Zappos like fashion retailer of Germany, has priced it’s IPO according to Forbes at a valuation of almost $7bn. It’s selling stuff, quickly:

Last year the company, which was the fastest-ever on the European continent to hit $1 billion in annual revenue, posted net sales of about $2.3 billion. In August, Zalando announced revenues of $1.4 billion in the first half of 2014 with net income of $16.6 million, an improvement from the more than $90 million net loss during the same period in 2013. On its current track, the retailer, which operates in 15 different European countries, may have the first profitable year in its history.

Some investors will look at this company and a number of other technology companies and come to the conclusion that globally, there is some sort of tech bubble.

But what’s not to like? A company growing sales at a fast clip can surely justify such a valuation. The net loss will concern some but unlike some of the floundering department stores – like one-time German market leader Karstadt – Zalando appears to have a clear vision of the future. This is important; long term thinking is in short supply at a time when retail needs it most.

Another interesting thing Zalando and partners Rocket Internet are doing is going international – this is more typical of a technology company than the traditional retailer. Indeed, whilst it’s a risky bet, it could be argued that many of the developing markets are ecommerce first, physical store second. This is no more apparent than China, where Alibaba has been dominating the retail market there with a similar approach.

So yes, bubble maybe, but a European company aspiring to big things must surely be considered a success and aspiration for others.


From the New York Times:

The Alibaba Group, the Chinese Internet juggernaut, raised nearly $21.8 billion in its initial stock sale on Thursday, as investors flocked to buy a piece of the company that is poised to continue dominating China’s burgeoning e-commerce industry.

The company priced its shares at $68 each, at the top end of an already raised range. At that level, the online market operator will have a market value of about $168 billion — much more than eBay,Twitter and LinkedIn combined.

A coming of age for the Chinese Internet. Along with Tencent, Baidu and a host of other successful companies, we will have a globally competitive marketplace for goods and services – all thanks to the Information Age we now live in. Founder Announces

An interesting post this morning from Marc Lore, a co-founder of, gives us more details on his plans for Lore founded parent company Quidsi – housing a string of other ecommerce websites – all of which were notable for innovative user experiences and back-end systems including use of Kiva Systems robots. Lore notes on his blog:

In retail, e-commerce brands have fundamentally altered the way people shop – putting more power in consumers’ hands through democratizing tools like price comparisons, ratings and reviews. But there is still more work to be done if we are to truly to live up to our stated ideals of greater transparency and customer empowerment. We have to ask ourselves: What are the hidden costs in e-commerce? Are there aspects of e-commerce that don’t make sense? And most importantly, how do we expose these inefficiencies and empower customers to eliminate them?

Some interesting questions and no doubt Jet will probably not be your typical desktop type ecommerce site given the calibre of the folks they have plus how much ecommerce has moved on since was founded.

The question, and the elephant in the room is off course Amazon, who after-all purchased Quidsi after intense competition against the company. Jet will be up against it, especially as we learnt this week that Amazon is outspending everyone when it comes to search advertising. Maybe Jet can compete in different ways? If you were starting an ecommerce business today, how would you compete?

Step One was Physical, Step Two is Bits

Whilst most associate ecommerce and doing business over the web as largely a physical phenomenon, one must not forget that in actual fact its the bits that really make the money. We all know about music; the industry acutely affected the most by the shift from the physical medium to digital. Nevertheless, the biggest industry of them all in many respects – finance – is only beginning to feel the Internet’s influence. The FT notes:

Banking is moving online. Millions of Britons are embracing contactless cards, mobile banking and other consumer-friendly technology, transferring almost £1bn a day over the web. According to the BBA, the industry body, the growth in internet banking is a “seismic change” in the way we manage our finances, help people keep track of their money and save them the time and hassle of queuing in their local branch.

This is what Paypal and countless other online payment services have shown us in the preceding decade or two. That is, moving and managing money is actually far more efficient and cost effective when it’s solely a digital concern. This creates lots of opportunity for those banks to help us to do so and at the same time, lots of headaches.

Source: The FT

Zalando; the Watermark for European Pure-play Ecommerce

Zalando, a 2008 Germany based fashion-clothing retailer, is filing to go public. Interesting as the story is, especially given how dominant American Ecommerce players Amazon and Ebay have been on the continent, its’ worth examining the bottom line. And it ain’t all that good:

In 2013, the company posted revenue of 1.76 billion euros, or about $2.3 billion, and an after-tax loss of €116.6 million.

So, like many in the business of pure-play, the lack of profit is hardly surprising. Time will tell whether or not the company an use IPO money to scale the business to break-even, or will they become another target for Amazon who similarly purchased fast growing Zappos in 2009. (Ironically, one year after Zalando came to be).

Source: NYT