Lazada losses and revenues double

Lazada’s six general merchandise sites operate in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. Lazada’s net revenue was US $154.3 million last year, more than double 2013 results of $75.5 million.  Yet the company’s net operating losses (EBITDA, or earnings before interest, taxes, depreciation and amortization) were $152.5 million, also more than double the 2013 figure of $67 million.

(Most figures in Rocket’s annual report were in euros; Lazada’s results were reported in US dollars.).

For online retailers, however, a key metric is growth in Gross Merchandise Volume (GMV)–the sales value of products sold. In the case of an unprofitable company like Lazada, another metric is the share of losses relative to GMV and whether that share, the negative margin, is narrowing year on year. By that measure, Lazada is moving in the right direction.

GMV for Lazada grew more than 300% in 2014, from $95 million to $384 million. In terms of adjusted Ebitda (that is, adjusted for share-based compensation), Lazada lost $58.5 million in 2013 and $146.7 million last year. The 2013 loss was 62% of GMV; in 2014, the loss was only 38% of GMV.

Lazada’s websites started out three years ago as inventory-based direct retailers–thus,”the Amazon of Southeast Asia” moniker. In the past year,  though, the switch to a primarily “marketplace” business model was the most significant driver of revenue growth, accounting for about 70% of Lazada’s monthly sales as of November last year.

Under a marketplace model–as followed by eBay, Thailand’s Rakuten Tarad , Malaysia’s Lelong and  Indonesia’s Blibli–third-party merchants and brands sell products from their own niches on a huge site. According to Rocket’s annual report, its marketplace sales increased 20-fold from January to December 2014. Lazada charges a commission on such sales.

Lamido shutdown and profitability targets

This year Lazada’s business model will come to even more closely resemble that of Southeast Asia’s large homegrown C2C (consumer-to-consumer) and B2C (business-to-consumer) marketplaces, many of which started off as classifieds sites more than a dozen years ago. That’s because in March Rocket shut down its four Lamido marketplaces.  Launched at the end of 2013 and in early 2014 in Indonesia, Malaysia, Philippines and Vietnam, Lamido sites catered to C2C sales and small- and medium-size merchants. Such small-time vendors can now sell goods on Lazada.

Rocket has set no deadline for profitability for Lazada or any other company but the annual report notes, “We generally aim for our companies to reach break-even at EBIT level six to nine years after launch.” Lazada sites launched in 2012. The first Zalora site appeared in the Philippines, in late 2011.

Rocket says that the number of Lazada’s transactions quadrupled year on year, to 6.9 million in 2014. The total number of site customers also more than tripled, to 3.9 million.

In November, Temesek, a Singapore sovereign wealth fund, led a €200 million investment round in Lazada, resulting in a US$1 billion valuation.  Rocket’s stake in Lazada, 26.7% at the time of  the October IPO, is now 23.8%.  Swedish investment fund Kinnevik owns 14%.

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Lazada and apparel site Zalora are among a dozen companies that Rocket has designated as its most mature “Proven Winners.” Their revenues grew by an average of 82% in 2014.  As of March 31, 2015, Rocket valued the Proven Winner group at €6.5 billion ($7.15 billion) and estimated its own stakes as totaling €2.1 billion ($2.31 billion).

Zalora sites sell clothing, shoes and other apparel in  Australia, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. The Australian site is known as The Iconic and also serves New Zealand. In the past year, Zalora has emulated Lazada in allowing third-party merchants to set up shops on its sites, taking a commission on sales.

Kinnevik - Global Fashion Group’s largest shareholder

Zalora’s net 2014 revenue was €117 million euros ($140.4 million), a 70% increase from 2013 levels. Zalora’s net losses (EBITDA) grew slightly in euros,  from  €61.7 million in 2013 to €68.1 million in 2014. But, due to the weakening of the euro against the US dollar, losses actually declined slightly in dollar terms: from $84.9 million in 2013 to $82.8 million in 2014. Lazada’s and Zalora’s combined 2014 net losses therefore totaled $235.3 million.

Zalora’s GMV grew 80% in the past year: from €84 million in 2013 to €151.6 million in 2014. The operating loss–as adjusted EBITDA–as a proportion of GMV shrunk even more than Lazada’s: from 90% of GMV in 2013 to 58% in 2014.

The number of Zalora’s transactions increased more than 90%, from 2 million in 2013 to  3.9 million in 2014. The total number of  customers doubled, growing from 1.3 million to 2.7 million for the same periods.

In December, Rocket and its co-investors combined their five apparel businesses under a single entity called the Global Fashion Group (GFG). In addition to Zalora/The Iconic, the new company includes Jabong (India),  Dafiti (Latin America), Lamoda (Russia), and Namshi (Middle East); altogether, they operate sites in 27 countries. Rocket holds a 23% stake in the group; the largest shareholder is Kinnevik, which owns 26%.

Rocket valued GFG at  €2.7 billion as of the end of December 2014. Kinnevik’s valuation was 12% lower, according to its annual report.

Meanwhile, the big picture 

As for the Rocket Internet Group as a whole, there are many other analyses. In brief, it reported total sales in 2014 of  €104  million ($115.7 million), a 43% increase from 2013. But unlike in 2013, it wasn’t a profitable year.  Rocket reported a net loss of €20.2 million ($22.4 million).  All those numbers appear small because under German rules, Rocket is only required to report revenue of companies in which it holds majority stakes; it holds minority stakes in most of its startup companies.

In 2013, the profits of the now independently listed Zalando, a western European apparel retailer, were responsible for group profit of  €174.2 million. Rocket blamed the losses on  costs associated with its IPO in October 2014. Portfolio value grew 77% in the three months following the IPO. Much of the increase in value was due to growth in its Brazilian e-commerce ventures as well as in its restaurant and grocery delivery services now operating in 71 countries.

Besides Lazada, Zalora and Jabong, restaurant delivery service Foodpanda is among the dozen “Proven Winners.” Foodpanda is popular in the cities of  Brunei, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Hong Kong, Indian and 34 other countries. On an acquisition binge in 2014, Foodpanda reported 2014 (EBITDA) losses of  €34 million. It was half owned by Rocket at the end of the year. Since then, Foodpanda has raised $210 million in new funds, for a total of $310 million since 2012.

http://www.forbes.com/sites/susancunningha...-profitability/