Thursday 23 July 2015

Rocket Internet (RKET GY) ... The Imitation Game part III

Thursday 23rd July 2015

Some of the text in Rocket Internet's prospectus is pretty amusing. It sounds impressive but when one dwells on it for longer than a second, one appreciates its absurdity. 

Dafiti

Take for example the background information Rocket provides in its prospectus on Dafiti, the online clothing, shoe and accessory retailer in Brazil, Argentina, Chile, Colombia and Mexico:  

Dafiti brand recognition in Brazil
Source: Rocket Internet prospectus
As highlighted above, according to Rocket, by March 2014 the Dafiti brand was recognized by almost 90% of the Brazilian population. That's not bad going considering the brand was launched three years earlier in 2011 and probably puts it up there with Coca-Cola for brand awareness. 

Of course according to the World Bank, 24% of the Brazilian population is 14 or under, while a further 7% is over the age of 64. So 90% brand recognition for an online clothing and shoe retailer amongst the entire Brazilian population (under 14's and over 65's included) within 3 years is a sterling effort.  

Lamoda   

Another example is, Lamoda, Rocket's online clothing, shoe and accessory retailer, this time focused on Russia, Kazakhstan and the Ukraine. Lamoda has also has gained impressive and rapid brand recognition: 

Lamoda brand recognition in Russia
Source: Rocket Internet prospectus
As highlighted above, according to Rocket, by March 2014 the Lamoda brand was among the most recognized fashion retail brands in the CIS, with an impressive 84% of the Russian population recognizing its brand. Lamoda was launched in 2011.

Jabong

A further example is Jabong, another online fashion company, operating in India:

Jabong's market opportunity
Source: Rocket Internet prospectus
In its prospectus, Rocket indicates that the Indian fashion retail market " ... is expected to amount to US$55 million in 2014."  This looks to be an innocent typo and more likely supposed to say US$55 billion instead. Especially as Rocket continues to suggest that it will grow "... to US$88 billion by 2018." This is a minor typo. What appears somewhat less straightforward is the commentary regarding internet penetration of India's fashion market.

Rocket indicates that "the online fashion penetration rate in India is expected to be a relatively low level of 0.8% of the overall fashion retail market compared to 11.3% in the United States in 2014." If that is the case, then on the basis of the overall fashion retail market amounting to some US$ 55 billion, that would suggest that the online fashion market was worth c. US$ 440 million in 2014. As Rocket highlights further up, Jabong reported "... INR 4,385.7 million in net revenues in fiscal 2013." This is c. $US 76 million at an average 58 USDINR exchange rate during 2013, which suggests that from a relatively quick start of a matter of a few years, Jabong had captured 17% of the online fashion retail market in India.

In its 2014 annual report, Rocket goes on to revise Jabong's 2013 revenue to INR 3,443 million or c. $US 59 million. But Jabong's 2014 revenue was reported to have risen to INR 8,114 million or c. $US 133 million at an average 61 USDINR exchange rate in 2014. On Rocket's information provided that would suggest that within a matter of a few years, Jabong had captured over 30% of India's online fashion market by 2014. Remarkable.        

Namshi

Rocket's online fashion offering to the Middle East, Namshi, has seemingly topped India's Jabong for market share gain. 
Namshi's market opportunity
Source: Rocket Internet prospectus
On Rocket's market information provided above of a $US 30 billion total fashion retail market but 0.4% online penetration by 2014, the online fashion market was worth $US 120 million in 2014. Hence with Rocket reporting net revenue of AED 53 million in 2013, rising to AED 168 million in 2014 or c. US$ 15 million and US$ 46 million respectively, this would imply 38% market share by 2014. Another remarkable result in a matter of two years since inception.

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In many cases the numbers provided are also as amusing.

Dafiti again ...

The table below is from Rocket's prospectus, highlighting Dafiti's key performance indicators, among which, unique visitors to Dafiti's site is included:
Dafiti's key performance indicators
Source: Rocket Internet prospectus
Rocket indicates that the Dafiti website received 208 million unique visitors in 2013, which was up from 167 million unique visitors in 2012. That's a lot of visits for a website that didn't exist a few years prior. In fact ...

Dafiti is targeted at Brazil, Argentina, Chile, Colombia and Mexico. According to the IMF, in 2013 these countries populations were:

Brazil ................. c. 201 million
Argentina ........... c. 42 million
Chile .................. c. 47 million
Colombia ........... c. 18 million
Mexico ............... c. 118 million

A combined population of c. 426 million.

Populations of Dafiti's markets in 2013 (million)
Source: Rocket Internet, IMF for population data
According to the World Bank, in 2013 the number of persons per 100 with access to the internet in each of these countries were:

Brazil ................. 51.6 (per 100)
Argentina ........... 59.6 (per 100)
Chile .................. 66.5 (per 100)
Colombia ........... 51.7 (per 100)
Mexico ............... 43.5 (per 100)

Internet users per 100 in Dafiti's markets in 2013
Source: Rocket Internet, World Bank for internet users
Hence, if Brazil's population in 2013 was c. 201 million and 51.6% of the population had access to the internet then that would suggest c. 104 million Brazilians had access to the internet in 2013.

On a similar basis the others work out as follows:

Brazil ................. c. 104 million
Argentina ........... c. 25 million
Chile .................. c. 31 million
Colombia ........... c. 9 million
Mexico ............... c. 52 million

A combined population of c. 220 million with access to the internet in Dafiti's markets.

Now Rocket reckons Dafiti had 208 million unique visitors to its website in 2013. Which is commonly understood to mean, the number of distinct individuals requesting pages from the website during 2013, regardless of how often they visit. I.e. 208 million individual sets of eye balls looked at Dafiti's website in 2013. So if Dafiti's markets have c. 220 million individuals with access to the internet, then practically 95% of them went onto Dafiti's website at some point during 2013? Of course some eyeballs may have inadvertently oggled the website from other countries but even so, most of the traffic must surely come from Brazil, Argentina, Chile, Colombia and Mexico.

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog.

2 comments:

  1. regarding unique visitors, they probably mean daily unique visitors, which is one of the standard KPI for website traffic. That would make more sense (although it would be super high still)

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  2. with daily unique, i mean that if you visite the website every day, you would be counted 365 times in a year.

    And, don't look to much into website traffic, it's not so hard to buy bulks of hundreds of thousands of website loads that can make numbers grow (it's a known marketing technique, not a fraud)

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