e-commerce space is a long win play, and we hope new businesses

Why are some Indian digital entrepreneurs fretting over the Samwer brothers, three German internet billionaires, spending big bucks on domestic e-commerce? Rocket Internet GmBH - founded by siblings Marc, Oliver and Alexander Samwer - is often attacked for cloning successful US start-ups in emerging markets only to sell them at steep valuations. 

The publicity-shy brothers entered India six months ago with lifestyle e-commerce platform Jabong, a clone of US shoe and apparel e-tailer Zappos; online home decor shop Heaven and Home and furniture shopping mart FabFurnish. And there's more to come with Rocket Internet bankrolling local entrepreneurs and launching their own e-commerce 


 








engines such as Wimdu, a holiday accommodation enterprise, again a clone of Airbnb in the US. Jabong is spending significant money on winning customers even as older competitors like Myntra have grappled with high customer acquisition costs, which are as high as 45% of their sales. After splashing almost $1 billion on Indian digital start - ups last year, venture capitalists and private equity firms have tightened investments leaving some 

 
e-commerce engines struggling for growth capital. Rocket Internet is betting on the emerging digital consumers in Southeast Asia and India, rolling up online engines by taking advantage of the common e-tailing infrastructure, proven business models and the ability to set aggressive milestones.

"Indian e-commerce space is a long win play, and we hope new businesses are contextualizing to the local market dynamics," said Prashanth Prakash, managing partner at Accel Partners, a valley-based venture capitalist and a prolific backer of local e-commerce start-ups. India's rapidly growing internet market is still nascent with roughly 120 million users, and less than 10% of them are online shoppers. "They have aggressive marketing tactics which may put strain on resources," explained Sanjay Guleria, an entrepreneur behind Indian online fashion brand SherSingh, while adding that Samwers may bring in more online shoppers after all. So who are Samwer brothers? Marc, Oliver and Alex started with eBay's German clone Alando, selling it to the former for $54 million in 1999. Since then, they have adapted some of the hottest US internet start-ups to Germany, Europe and beyond, making a fast buck. Their incubator Rocket Internet has a special liking for large non - English speaking markets. The Samwers, considered to be domineering bosses, have built their empire on ruthless execution and exits. Some of their more prominent deals include selling Groupon clone CityDeal to the originator for about euro 100 million last year; exiting Facebook like Studivz for a similar amount and selling mobile ringtone start-up Jamba to VeriSign for $274 million. 

They ploughed back some of this cash to buy stakes in innovators such as Groupon, Facebook website, LinkedIn business portal and Zynga, which they copied with gusto. They are one of the biggest shareholders in Groupon, but offloaded investment in Facebook three years ago. An emailed questionnaire to Rocket Internet GmBH remained unanswered. In India, where the business models of e-commerce poster boys have eerie similarity to Amazon, the fear is not about Samwers cloning local engines. The debate is whether German siblings' aggressive approach to business and reportedly insensitive management style (blogosphere recently buzzed with Oliver asking some employees for a commitment letter signed in blood) would distort the realities in an already hyped e-commerce industry. Indian tech entrepreneurs like K.Ganesh said the entry of Samwer brothers "will give impetus and fillip to e-commerce and the start-up ecosystem. The question about their overtly aggressive approach to business is an individual like or dislike. But there's someone batting for the entrepreneurial economy when our IT services companies, sitting on billions of dollars, are doing little".

Source: The Economic Times