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Confirmed: Rocket Internet’s Zalora to exit from Thailand and Vietnam

Fresh after securing a mammoth US$339 million round of funding for its Global Fashion Group (GFG), Rocket Internet this afternoon confirmed to Tech in Asia that it has signed off on Zalora’s sale in the struggling markets of Thailand and Vietnam.

Rumors of this exit popped up earlier this week with TechCrunch reporting that the businesses would be sold for a paltry US$10 million each to Bangkok-headquartered retailer Central Group. A Rocket Internet spokesperson today confirmed that the company is going ahead with the sale, but declined to disclose any financial information or the identities of prospective buyers.

The fashion ecommerce store will concentrate on high-potential, high-growth markets like Indonesia and Singapore.

Zalora has incurred hundreds of millions of dollars in losses in the past few years.

Though disposable cash may no longer be an issue, it is likely that the new funding round came after renegotiated metrics, with investors wanting to see a clear path to profitability for Zalora.

What this means is that the fashion ecommerce store will concentrate on high-potential, high-growth markets like Indonesia and Singapore and weed out the ones that aren’t performing.

Rocket’s annual financial report, released earlier this month, indicated that while Zalora’s net revenue increased by 77.5 percent to US$235 million in 2015, its net losses declined even further to US$106 million. While it doesn’t provide data for individual markets, this is clearly an untenable situation for the German firm.

Rocket’s fashion startup in India, Jabong, is another struggling venture which may also be up for sale. Rocket reportedly slapped an optimistic US$500 million price tag on the company in October, but investors weren’t willing to part with more than US$250-300 million.

The venture, which competes with the likes of Myntra and other niche ecommerce sites, lost US$6.9 million in Q4 2014 and posted another loss of US$297,000 in Q4 2015. The online retailer did say margins improved in the fourth quarter, but that is traditionally a strong period for retailers as it coincides with both Christmas and the Indian festival of Diwali.

Jabong posted a loss of US$7 million in 2015 as compared to a loss of US$24 million in 2014.
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