Zalora, the Rocket Internet -backed online fashion store, is continuing its retreat from Asia. The firm sold off its businesses in Vietnam and Thailand last year, and now it is withdrawing from the Philippines and Indonesia.
Yesterday it transpired that Zalora sold 49 percent of its Philippines-based operations to local real estate firm Ayala, as E27 reported, but it is in the process of closing a similar deal in Indonesia.
Zalora is in negotiations with retail group MAP with a view to a controlling investment or acquisition, a source with knowledge of discussions told TechCrunch. MAP operates close to 2,000 retail outlets in Indonesia, including departure stores, fashion outlets and more in partnership with global firms like Zara and Marks and Spencer. MAP is listed on the Indonesian stock exchange and has over 22,000 staff. A deal with Zalora would see its business branch out into online commerce.
A Zalora representative did not respond to multiple requests for comment.
Southeast Asia tends to be overshadowed by China and India, but e-commerce in the region is tipped grow four-times faster than offline commerce to reach $88 billion per year by 2025, according to a report co-authored by Google. Indonesia is Southeast Asia’s largest economy and it has the region’s highest population with over 250 million people. Competition in the country is fierce, with retail conglomerate Lippo pumping a reported $500 million into its online service, while competitors like Tokopedia, Orami and Zilingo are backed by top investors that include SoftBank, Sinar Mas and Sequoia. Zalora has never broken out its financial details for single markets and its financial performance is contained with GFG’s results.
Zalora was founded in 2012 and it has raised over $200 million from investors before losing its independence. Things began to change for the business in 2014 when Rocket Internet created GFG (Global Fashion Group), a holding firm to manage its fashion e-commerce business across the world. Under GFG’s parentage, Zalora struggled to shine and disagreements between the management of both sides resulted in the departure of Zalora’s MD and one co-founder last year. (Amid the turmoil, GFG itself underwent a major haircut as its valuation dropped from $3.4 billion to $1.1 billion.)
Central to that disagreement was a difference in opinion over Zalora in Asia. GFG’s management saw greater potential in its business in more developed regions like the Middle East, while Zalora’s management believed it was on its way to becoming a solid business with the potential for profit. It now appears that GFG is disposing of its business where it can so stay tuned for more deals. Alongside The Iconic, Zalora currently operates in eight countries across Asia Pacific.
The Zalora exits come amid a major setback for Rocket Internet after major investor Kinnevik halved its stake in the German firm. Rocket Internet’s share price dropped 13 percent yesterday on the news.