Rocket Internet's Zalora

Mark Paolo Navata

MSIB 2018

Ecommerce has changed the way Filipinos perform shopping. The Philippines has been known to be a place where malls and fast-consumer goods dominate the local business scene. In fact, richest men in the Philippines, in one way or another, own largest malls and fast-moving consumer goods. Topping the list of these businessmen is SM supermalls founder Henry Sy Sr. who remains the richest among tycoons. Another one is the prominent and wealthy family of Zobel de Ayala, owner of Ayala corporation, a highly diversified conglomerate. Ayala family have the largest stake in Ayala Malls.The proliferation of e-commerce marked the start of the turn of the tide, with e-commerce getting sizable clients from established incumbents. One of the most successful e-commerce disruptors is Zalora in the field of fashion.

As stated in its website, Rocket Internet's Zalora considered itself as Asia's leading fashion destination with the largest and fastest growing fashion focused e-commerce site in Southeast Asia. It was only founded in 2012, but has already built a strong foothold in in Singapore, Indonesia, Malaysia & Brunei, the Philippines, Hong Kong and Taiwan.

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Image taken from: https://insideretail.ph/ayala-corp-gets-regulatory-green-light-for-zalora-deal/

The disruptive innovative brought about by Zalora originated in both low-end and new-market footholds. For the low-end foothold, Zalora has enabled shopping for and paid attention to less-demanding customers who do not buy in bulks,do not want additional expenses on transportation and wary of the opportunity cost spent on going to the malls to buy fashion items. With online shopping, these customers can get items with minimal or free shipping agreements. In this case, incumbents' offering far exceeds the performance of Zalora.

For the new-market foothold, Zalora has generated a new market that did not exist before. There have been customers that have been priced out of the market; the costs that marked up the prices even more for prominent items were rent, inventory and other overhead costs associated with selling in the malls. E-commerce has allowed to remove middlemen and sell directly to customers operating in an almost just-in-time (thanks to data analytics) manner. The benefits derived from buying fashion items online such as huge discounts, free shipping service and lower markup costs allowed to persuade non-consumers turn into consumers.