The Gorilla of eCommerce

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What do you call a group of European tourists that overspends in Southeast Asia?

A Rocket Internet Marketing Team.

Rimshot!

Excuse me. I just needed to get that out of my system.

Rocket Internet gets a lot of hate. It’s easy to understand why. Even before they came into the region, they’ve had a fairly shoddy reputation. They’ve been (rightly) seen as having outrageous employee turn-over; extreme management practices; and an incredibly large war chest funding their web properties across the globe.

At Golden Gate Ventures, I see a ton of potential investments in the eCommerce space. eCommerce in Southeast Asia is a beast: not only do online retailers have to manage relatively low margins, you have to deal with the lack of sufficient payment options, shoddy warehousing and logistics solutions, fragmentation in the space given the heterogeneity of the region and, most importantly, a consumer that up until a few years ago, was not inclined to make any purchases online.

PayPal and credit card penetration being awful is one thing, and entrenched players operating in the same space in expansionary markets is another, but consumers that don’t even go online to shop? That’s a real bitch to deal with.

If consumers don’t go online, it doesn’t matter what your value proposition is, how great your unit economics are, or how amazing your team is. If no one is going to buy your shit, your company is going to die. Unless you spend a tremendous amount of money getting those consumers online.

Cue Rocket Internet.

Rocket Internet spends a tremendous amount of money to acquire customers. They’re operating in Singapore, the Philippines, Malaysia, and Indonesia, across numerous industries and verticals, and in regions that were up until a few years ago completely ignored by established tech companies. Doing one thing well is difficult, doing multiple things infinitely harder. Doing multiple things in Southeast Asia? That will make you RAGE.

What makes Rocket Internet different from other companies is that it’s a regional corporation that can sustainably spend on expensive marketing initiatives. Because they’re spending money on converting offline consumers into online consumers, they need to rely on channels and campaigns that are incredibly expensive: discounts, sales, vouchers, anything that drives margins down but is next to impossible for other eCommerce players to compete against.

They’ve used this strategy with Lazada and Zalora to great effect, but have also applied it to their other properties like Food Panda, EasyTaxi, Lamudi, and Carmudi. The end effect? Converting these customers means millions of people coming online and seeing it as a very viable alternative to offline channels. These are customers that either would not have come online in the first place, or were at the very least some time away from it. And these are customers that other online companies — direct competitors, indirect competitors, or operating in totally unrelated industries — now have access to.

In essence, having Rocket Internet foot an initial $30 customer acquisition cost means a $3 customer acquisition cost down the line for everyone else. That’s hugely important, both to the continued viability of Southeast Asia as a a technology market and economic hub.

The good? Rocket Internet has arguably done more to drag Southeast Asian consumers online more than any other tech company. Period. The bad? If you’re a direct competitor, expect some hardball tactics that could drive down your margins, pull your vendors away, or dry up investment. That isn’t to say it’s impossible going up against Rocket Internet: MyTeksi/GrabTaxi seems to be pulling ahead; commerce portals AVA of the Philippines and Jooix of Singapore have found a niche in curated goods; and portals for real estate and cars are so hyperlocal that a well-connected founder could [and has] given Rocket Internet properties a run for their money.

Sure, they get a lot of hate. But next time you see a 70+ year old auntie book a taxi through EasyTaxi or an ah beng cursing at the prices on his Carmudi app, you know who to thank.

But before I go …

What do you call an out-of-work management consultant?

A Rocket Internet Managing Director.

Am I right? Am I right, people?