Zalora value proposition

Questions to Answer in your Write-up:

(1) How was Zalora Philippines started?

(2) What was their marketing plan?

(3) What other option for margins growth would you try?

answers based on the articleFor the exclusive use of a. Alsulaiman, 2020. 9 -5 1 7 -0 0 9 REV: DECEMBER 8, 2017 DONALD NGWE THALES TEIXEIRA Zalora Philippines: From Growth to Profitability In May 2015, Paulo Campos (HBS 2010), cofounder and CEO of Zalora Philippines, was at a crucial turning point in his young company’s development. In just three years, Zalora had come from entering the Philippine fashion retail industry as an unknown quantity to becoming a household name across the Southeast Asian archipelago. Campos and his team had achieved much in this time: launching one of the first online retailers in the country, building a logistics network from scratch, acquiring customers at an astonishing pace, and signing up major brands to offer on Zalora.com.ph. But now his investors were ready for him to shift gears and focus on turning a profit within the next two years. Campos and his team were considering four specific options for increasing net margins. The first was to increase the share of products on the website that were offered through a marketplace model. The second was to increase selling prices on all products by offering fewer discounts. The third was to pass on more of the shipping costs to customers. The fourth was to rein in marketing expenditures. The team had identified the opportunity to increase profitability through each of these means, but was keenly aware of potential risks to continued growth, customer satisfaction, and the Zalora brand. (See Exhibit 1 for abridged income statements from recent years.) Zalora Philippines was part of Zalora Group, a Singapore-headquartered online fashion retailer that operated across Southeast Asia. Zalora Group, in turn, was part of a global entity called Global Fashion Group (GFG), which owned online fashion retailers and brands in emerging markets across the world. GFG’s early investors were Kinnevik, a Swedish investment company, and Rocket Internet. Rocket Internet, founded in 2007, was not a typical startup incubator. Rather than help accelerate original or untested business models and ideas, it founded companies based on proven business models largely from the United States and deployed them in emerging markets. 1 Detractors called them copycats, but founder Oliver Samwer preferred the term “company builders.” 2 In 2015, Rocket Internet focused on four main sectors: e-commerce, marketplaces, financial technology, and travel. Once Rocket Internet had decided on a proven idea to take to a new geography, management brought in young entrepreneurs, often MBA graduates or employees from well-known companies such as McKinsey, Goldman Sachs, or the Boston Consulting Group to run the business. They moved abroad to establish the companies where American rivals had yet to penetrate. The pressure was high on the startup managers—they were given a short window of time (often no more than six months) to prove both the strategy and their ability to implement it. 3 Professors Donald Ngwe and Thales Teixeira prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. Certain details have been disguised.