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Nov 12, 2013
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Zalora brings fashion to Asian heart of supply chain

By
Reuters
Published
Nov 12, 2013

BERLIN, Germany - Online retailer Zalora hopes to replicate in Southeast Asia the "fast fashion" model pioneered by Zara, betting on an e-commerce boom in a region better known for manufacturing the latest trends for the West rather than modelling them.

An editorial from Zalor's online magazine

Zalora was launched in early 2012 and now sells around 500 brands in Singapore, Indonesia, Malaysia, Thailand, Vietnam, Hong Kong, Brunei and the Philippines, setting up local warehouses in each market to speed delivery.

"We wanted to be closer to the customer. If you want to promise 24-hour delivery you need to have a warehouse or you get stuck in customs clearance," Zalora founder Harry Markl told Reuters in a telephone interview from Singapore.

Zalora was founded by Berlin-based Rocket Internet, the German venture capital group behind Europe's biggest online fashion retailer Zalando as well as numerous emerging market Amazon clones like Jumia in Africa and Linio in Latin America.

While Zalando is flourishing largely by selling established brands, Zalora expects its new private label, Ezra, to eventually account for half of sales.

In doing so, it plans to emulate the success of ASOS, Britain's online retailer that copies celebrity styles, which saw own brands account for 52.3 percent of sales in the year to August.

"In Southeast Asia, the market is still very open when it comes to positioning brands ... There is an even bigger potential to create a brand similar to H&M or Zara which is purely pushed to the customer online," said Markl, 38, a German who previously worked for consultants McKinsey in Singapore.

Inditex's Zara pioneered the concept of "fast fashion", delivering small batches of the hottest trends from factories close to its main markets in Europe, a model that is hard to replicate when suppliers or warehouses are distant.

By comparison, ASOS now ships to customers around the world from a huge distribution centre in Britain, but is expanding to China, where it plans local warehousing and delivery.

SOURCING HUB

"The typical Asian customer is looking for fast fashion at affordable prices. The big advantage is we are located in the sourcing hub. We don't have to ship to Europe from China and then back to Asia," Markl said, adding that allows lead times for new garments to average just four weeks.

While China and Bangladesh are the world's biggest garment manufacturers, Vietnam, Cambodia, Indonesia, Sri Lanka and India are all seeking to expand their apparel industries.

Markl believes e-commerce can take the same kind of market share in fashion as in Europe or the United States, growing to account for 15 percent of Southeast Asia's 50 billion euro fashion market, from just 1 percent now.

"There is a leap-frog effect. People in remote areas are getting access to Internet via their mobile devices and right away buy online," he said. And 60 percent of Zalora orders were coming from far-flung locations, he said.

Zalora, whose investors include JPMorgan, Summit Partners and German retail group Tengelmann, has built up its own delivery network in several big cities to ensure its parcels arrive on time, a service it could extend to other players.

Zalora has not published any sales figures, but says all its websites have around 18 million unique visits a month.

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