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.

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