Battling Amazon, European challenger looking to China
Japanese FDI flows in roads, bridges it built
ROBERT Gentz stepped off a plane in Beijing with the goal of conquering online fashion in China. By the time he boarded his return flight to Berlin, he had a new plan: to copy it.
Gentz, a 34-year-old German who is a co-founder of Zalando – a European clone of Zappos, the online American shoes and fashion retailer owned by Amazon – held meetings in fall 2013 with Chinese and fashion labels, online stores and other parts of the e-commerce industry. He wanted to expand Zalando into the world’s largest digital market.
But after the meetings, Gentz decided China’s approach to online fashion was far ahead of anything available elsewhere. He marvelled at how Chinese consumers freely chatted with brands and stylists on WeChat, a local internet messenger, while online retailers, independent delivery companies and fashion houses routinely joined forces. “We wanted to take that experience back to Europe,” he said.
This holiday season, Zalando, which is Europe’s biggest digital fashion player, is using a made-in-China approach to take on Amazon. Few companies have been able to keep Amazon at bay after it enters a new market. The notable exception is in China, where rivals like Alibaba, the world’s secondlargest online seller by market value, have been able to hold ground.
In addition to selling directly to consumers, Zalando wants to remake itself into a digital shopping mall, letting fashion houses and retailers make sales as well, often with limited input from Zalando.
These efforts, roughly a year in the making, may foster a rare European tech player able to give Silicon Valley heavy-hitters a run for their money across the region, which is still one of the world’s largest and most profitable markets.
“If you want to be the dominant player in a geographical area, you need to go beyond being just a traditional e-commerce player,” said Erik Mitteregger, a board member at Kinnevik, a Swedish investment firm that was an early Zalando investor and still owns a 32 percent stake. “It’s a necessary move.”
Zalando’s inspiration from China, though, comes with challenges.
Despite domestic dominance, Chinese players like Alibaba have yet to replicate their business model overseas. Online shopping habits in Europe are also somewhat different from those in China.
While European competitors have earned loyal followings, Zalando remains the largest, both by market valuation and total online sales, accord- ing to Euromonitor, a data provider. It is expected to double its yearly pretax earnings this year, to $220 million, and revenue is likely to jump more than 20 percent, to $4 billion, according to an average of equity analysts’ estimates.
“Zalando is well placed to be a leading fashion platform in Europe,” said Andrea Ferraz, a Morgan Stanley analyst in London.
Still, the company remains a relative minnow – its $9.5 billion valuation is one-40th that of Amazon. And Europe’s fast-growing online fashion market, estimated to be worth $75 billion, has not gone unnoticed by e-commerce giants.
Alibaba has hired local country managers and brought its payment service to Europe, mostly to serve Chinese visitors. Amazon has opened a fashion studio in London and joined the British Fashion Council to bolster its local credibility.
To compete with Amazon and others, Zalando has spent heavily on a network of logistics hubs that dot the European landscape.
For Nicolas Borg, a Zalando strategy executive who previously worked at eBay, the next stage will most likely be chatbots, or humanlike interactions powered by artificial intelligence, to offer fashion advice to consumers on the likes of Facebook Messenger.
“In the future, what will matter is not where the purchase happens, but how you can influence it,” Borg said. JAPANESE investors have sunk over $800 million into the Cambodian economy over the past two decades, with much of this investment coming on the back of concessional aid directed to develop and strengthen the country’s trade and industry capacities, according to data provided on Friday by the Japanese Embassy.
The data show Japan’s official development assistance (ODA) net disbursements totalled over $2.4 billion between 1993 and 2014, including $190 million in loans, $1.4 billion in grants and $798 million in technical cooperation.
A separate report cites figures from the Council for the Development of Cambodia (CDC) that show Japan’s total FDI in Cambodia was $801 million between 1994 and 2015.
In Channy, chairman of the Cambodia-Japan Business and Investment (CJBI) group, said yesterday that Cambodia has experienced a wave of Japanese investment since 2012, with heavy investment in the garment and electronics manufacturing sectors.
The FDI has followed Japanese loans and grants that were funnelled into developing infrastructure, such as roads and bridges that paved the way for better supply chain logistics.
“Japan has helped us to develop infrastructure that they recognise as beneficial for connecting Cambodia to international markets because they see us as a central country for regional trade,” he said.
Cambodia enjoys a strategic geographic location in the heart of ASEAN, which holds 600 million consumers, while benefitting from preferential trade access to the European and US markets, Channy explained.
“We also provide good facilities for FDI by offering 100 percent foreign ownership as well as tax exemptions on exports, which are the key ingredients for attracting investment,” he said.