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The 10 e-commerce stories for the week ending 22 March 2013

The Samwers launches a new fund, Price Comparison gets hot in South East Asia, Walmart gives us a glimpse into the future and more.

Is Rocket Internet going to be around in 5 years time? That is the question I have had on my mind for the last few weeks. Internet businesses is a funny thing, the movement in the markets can mean that irrelevance happens quickly. Groupon is a great example of this.

Thus the news that Manuel Koser is moving away from being MD of Zando is indicative of an entrepreneur who is moving on to a new venture and not one being sidestepped by investors. Rocket Internet has a recipe that works and their staff are some of the most efficient individuals I have met.

Emerging market ecommerce is a high stakes game full of risk, trust and lots of work. Will Rocket Internet IPO? As time goes on, I am leaning more towards one of their vehicles (Big Foot 1 or Big Foot 2) being made the investment opportunity.

Bigfoot I, in which Kinnevik owns 33%, was the first fund they launched and comprises
Dafiti (online shoes and fashion in Brazil), Lamoda (online shoes and fashion in Russia)
and Namshi (online shoes and fashion in the Middle East). These three companies are
built on the same platform and systems as Zalando, and Lamoda and Dafiti in particular
are performing very well. Dafiti currently has the best infrastructure and very high volumes while Lamoda has the best momentum. Bigfoot I is well funded but might need some
additional injection to fully progress with the expansion plans.

Bigfoot II, in which Kinnevik owns 34%, was the second fund they launched and
comprises The Iconic (online shoes and fashion in Australia), Zalora (online shoes and
fashion in South-East Asia) and Zando (online shoes and fashion in South Africa). This
fund is a little younger and might need some additional funding to progress with the
companies’ expansion plans.

The other story that dominated my thoughts was the sudden split between Rakuten and their joint venture partner in Indonesia. Rakuten has now done this on 2 occasions and everytime it has left a deal after 12 months. I think it is clear that Rakuten are slowly learning that joint ventures sometimes is not the best way to enter a market. Hiroshi Mikitani clearly wants a bigger slice of global ecommerce but they have to manage their market entrance strategy better.

The 10 e-commerce stories for the week ending 15 March 2013

Ma announces his successor at Alibaba, eBay says paid search has no effects, Google make plenty of changes and more.

Middle of March is normally the start of news that relates to end of quarter information. SEC filings, quarterly results and lots of press coverage is the norm. The point is we are almost done with quarter one and Alibaba did the unthinkable. Jack Ma, the founder of the biggest ecommerce business in the world has announced his successor. Jonathan Lu is to take over from Ma and his appointment I think is a very strategic one. One, he is one of a handful of Alibaba senior management who has vast knowledge of the entire operation. Also, I think his background in finance has helped him. It is clear that an Alibaba IPO is coming and he will be the person meeting with banks etc. One other thing to note, is that Alibaba has decided to appoint a local executive and not an international CEO to lead them into the future. Alibaba in my mind is going to be a threat for all ecommerce businesses in the coming years.

The article or story that dominated my thoughts was the eBay story over Paid Search ads. eBay claim that they have results to backup their conclusion that paid search is ineffective. “Overall, paid search turns out to be a very expensive way of attracting new business: The study’s authors estimate that, at least in the short-run, paid ads generate only about 25 cents in extra revenues for each dollar of ad expenditures. (For branded keyword searches, the additional revenues are close to zero” It is a fascinating read but I think a few things needs to be said. One, eBay has proved this for their own keywords and have tested their own hypothesis. I generally think that paid advertising is to be used in a controlled manner as it can lead to unsustainable growth (hello Groupon) but this raises some eyebrows in the direction of Google Adwords. Also keep in mind, that eBay has a reputation of bidding on low quality keywords which must be taken into consideration. Google answered this situation in 2012 and I must say I think we might see more of these stories in the coming 12 months. Adwords is the revenue driver for Google and they will defend it aggressively.

The Great Technology War between Giants

2012 was a year in which a bigger picture formed inside my thinking. Ecommerce is my day job and I think we are in a great period for commerce. Let us be clear about one thing, retail and ecommerce is no longer 2 channels. It is one massive opportunity for businesses and entrepreneurs to assist customers buying items whether it be online or in-store.

Mobile commerce in its current format is not the endgame in my mind. We are only scratching the surface on what mobile devices can do. Augmented reality, location and a variety of other things will play a role in commerce in the coming years.

Regular readers will be aware of my thinking regarding the big five. It is not the animals found in the game park but rather the big five technology businesses. I have written about it in the past when I looked at the Amazon effect but these companies drive the technology used by us on a daily basis.

Alibaba Names Jonathan Lu As New CEO, Replacing Founder Jack Ma

Yesterday, was a significant day in the history of Alibaba. Jack Ma announced to the world that he will be succeeded by Jonathan Lu Xaoxi. Does the new heir apparent seem to be a new unknown? I tend to think so but Lu is Ma’s choice and that speaks volumes.

Lu, is like Ma one of the few Alibaba executives that has experience and knowledge of all 25 Alibaba businesses (a brief summary of the Alibaba holdings is seen below). That is significant as he will need to manage all of these holdings after they were all realigned to be separate businesses.

The 10 e-commerce stories for the week ending 8 March 2013

Cobone acquired by Tiger Global Management, Google selling cars?, Hybris raises money and much more

I missed writing last week’s summary and boy this week has been full of news. Google is rumored to be building a Amazon Prime competitor. I find this interesting, how does it fit into the commerce value chain at Google? (at the moment this seems like a program to be run on top of Google Shopping? ). Secondly, it raises a very interesting question – if I am a merchant why would I take part in this program? Amazon Prime is the world’s greatest loyalty program and it is very successful for Amazon’s customers. The mere fact that Bezos keeps the user numbers secret tells you of the importance. Google has a serious disconnect with “Google Shopping Express” and needs to ensure that it compliments its services or it will go nowhere.

Are we beginning to see the building blocks for a marketplace from Google? Maybe, but Google has bigger problems to worry over – vertical search as seen with apps is cannibalizing its advertising business(the goose that lays the golden eggs for Larry and co), Android has lost ground in comparison to iOS for the last 2 months and Motorola seems to be having less staff every month.

I am going to say it as it has been on my mind for the last few weeks – anybody that wants to directly compete with Amazon needs lots of cash, patience and has to be 4 steps ahead of Bezos. No one has won when going head to head with Amazon.com (only when using the courts have Amazon lost) – they are the kings of margins and closing down industries. Google must be real sure that they want to go head to head with Amazon. I have seen what they do to companies – it aint pretty.

A few weeks ago I wrote about a potential IPO for Hybris software. Well, in the last few days they have announced a new round of funding by some serious investors. Meritech’s additional investing is interesting as they are a late stage fund and I think it signals that this investment is primarily done for growth. Let us be honest for a moment, enterprise commerce solutions is at the moment an open market. Oracle has spent billions on acquisitions, eBay has a interest via GSI Commerce and IBM has also spent millions on acquisitions to ensure that they have a total solution for merchants. Hybris is in my opinion a company to watch and I have a feeling that they will target specific functionality to add to their current offering. The IPO will come as they will need to raise money to challenge Oracle ATG in the enterprise commerce platform industry.

Africa and the Middle East are regions that I look at closely. Ecommerce in both regions are it is infancy but the investors are all here spending millions to ensure that they have a business/es to cater for customers in both regions. The Middle East has seen an influx of investment (LivingSocial etc) and then saw those same investors move out of the markets. It is almost like the ecosystem lost momentum which ensured business closures, investors leaving etc. Cobone is a early market leader who received funding from LivingSocial (whom are also under some pressure) and then lost the investor due to LivingSocial leaving the region. Earlier today, it was announced that Tiger Global has acquired Cobone with original investor Jabbar Internet Group exiting the investment. I note that Tiger Global Management is investing heavily in Africa and MENA – it almost looks like a consolidation of holdings has been happening over the last 6 months.