Less than a month after JP Morgan put investments into two Rocket Internet-backed fashion sites modelled on Zappos — an undisclosed investment in Zalando and $45 million in Brazil’s Dafiti, the bank is taking an equity stake in a third Rocket Internet fashion business. Lamoda.ru in Russia, a site with 5 million unique users and 500,000 “loyal customers,” is apparently raising between $40 million and $80 million from the bank. The news was announced by Lamoda itself, although the terms of the investment are only being reported by third parties.
Lamoda, you might recall, played an infamous part in an embarrassing email last year from Oliver Samwer, one of the founders of Rocket Internet: in a letter to employees, he made detailed references to the mistakes Lamoda had made, as a cautionary tale for those not to be repeated in other markets. Calling the new, aggressive strategy a “blitzkrieg”, it was a revealing and damaging email for a company that likes to play its cards close to its chest.
(Witness the fact that investment and other figures and wider business strategies are rarely, if ever, revealed.)
In this case we are left equally in the dark about the financial terms — and crucially whether Rocket has managed to turn any of those past issues around. Some of the problems detailed in that letter included the wrong approach to marketing and business reporting. Samwer also noted that because of those mistakes, the founders “lost 50% of their equity” and had “no salary for 6 months.”
Earlier this month, JP Morgan also invested $45 million in another Rocket Internet venture in another developing market, Dafiti, another Zappos-style operation, this time in Brazil.
The Samwer brothers have build a large business out of creating international versions of U.S. businesses, and in some cases selling on those businesses to the U.S. counterparts as they look for rapid global expansion. Such was the case with CityDeal, eventually sold to Groupon and now the basis of its European operation.
But to the present: Today, a spokesperson tells me that JP Morgan’s cash-for-equity deal was made via Lamoda’s German holding company. Previous investors in the company, in addition to Rocket Internet, Ab Kinnevik, Holtzbrinck Ventures and Tengelmann — all regular Rocket co-investors.
Lamoda was founded in 2010, and currently offers some 500,000 products from some 700 mainstream international brands like Nike, Guess, Levi’s and Iceberg.
Like Russian homegrown sites KupiVIP and Ozon, Lamoda has also invested a lot in building out its own logistics infrastructure — an essential in a market where the postal service and couriers can be costly and unreliable, and many still pay for internet goods with cash on demand.
Lamoda plans to use the investment to expand outside of Russia — an essential move at a time when others (like KupiVIP) are looking to do the same: “The investment underlines our leading position in one of the world’s fastest growing markets,” said Lamoda co-founder Niels Tonsen in a statement. (Other founders include Dominik Picker, Florian Jansen and Burkhard Binder.)
“It will allow us to further expand our product and brand portfolio as well as our presence in other emerging markets such as Ukraine, Kazakhstan, Azerbaijan and Belarus. We will continue to streamline our fulfillment and delivery processes and to enhance the online shopping experience for our customers,” he added.
“We believe Lamoda is in an excellent position to capture the rapid growth of Russia and its adjacent markets. Our investment will help the company expand its operational capabilities and customer service resources,” J.P. Morgan Asset Management portfolio manager Robert Cousin said in a statement.