Global Fashion Group

Product Model






Global Fashion Group (GFG) offers brands the chance to enter the fashion e-commerce sector in emerging markets. GFG, at its core, operates a matchmaking business model, whereby the GFG platform connects buyers to a range of shopping brands, both international and regional. “GFG has successfully built out leading market positions in key emerging markets,” said Oliver Samwer, CEO of Rocket Internet, in a statement. [i] GFG owns the resources to control the transactions between customers and their shopping experience; all core logistics are handled by GFG – warehouses, last mile delivery, payment, customer care and marketing – and, in this sense, is referred to as a “faux matchmaker.”

GFG also sells its own private labels directly to its customers, thus operating a product business model.

History

Global Fashion Group is a fashion e-commerce company: with operations across 5 regions and 27 countries with a 2.5 billion population, it addresses a fashion market worth EUR 350bn.[ii]

GFG offers apparel, accessories, shoes, and beauty products for men and women. The company was founded in 2011 and is based in Luxembourg.[iii]

The company is comprised of five leading fashion e-commerce businesses: Dafiti (Latin America), Jabong (India), Lamoda (Russia), Namshi (Middle East) and Zalora (South East Asia and Australia). [iv]

GFG and its six regional businesses have attracted significant investments from a large number of international investors, in excess of EUR 1.4bn. [v] As of July 2016, GFG has successfully raised EUR 330 million from existing investors. Its lead shareholders include Swedish investment powerhouse Kinnevik, has pumped a total of €161 million into the business.[vi] Rocket Internet, a German company that invests in Internet companies, has also invested over EUR 68 million in GFG in 2016.

Customers – Who They Are

GFG caters to two customer groups: brands looking to expand their online presence in emerging markets via GFG’s marketplace, and consumers in emerging markets looking to shop online.

Engagement – Value Creation Proposition

GFG delivers value to its first customer group, online shoppers, by offering access to over 3,000 international and local brands, all consolidated in one marketplace. GFG has also created its own labels, such as "Lara Karen" and "Sangria" by Jabong in India, and "ZALORA" and "Ezra" by Zalora in South East Asia.[vii]

The second customer group, brands, have the opportunity to showcase their products on the GFG platform, which has successfully built its position as market leader in online Fashion in many key emerging markets.[viii] “We’re excellently positioned in countries and regions where you see a massive shift from offline to online,” Global Fashion Group CEO Romain Voog argues.[ix] Where GFG’s target market encompasses more than two billion people, its potential in terms of web visibility, traffic and revenue is extremely appealing to its brand-customer group. [x]

Furthermore, With U.S. giants like Amazon and eBay yet to make any headway in less mature markets, GFG’s position in emerging markets becomes even more attractive to brand-customers. [xi] Global Fashion Group offers brands the opportunity to enter the fashion e-commerce sector in emerging economies, and widen their ecommerce sales. Brands are also able to collaborate with GFG’s fashion experts in understanding customer taste with the newest local and international trends.[xii]

Per 30 June 2014, GFG had 4.6m active customers, had received 8.4m orders and generated EUR 436m of Gross Merchandise Volume. [xiii] As of 2016, this figure has grown substantially from 4.6m to 10 million customers.[xiv]

Delivery – The Value Chain

GFG’s website provides an online platform which allows consumers to select a range of products from different worldwide brands.

GFG has an integrated and controlled supply-chain that enables its customers to receive their products quickly. GFG provides the logistics on behalf of brands, as they have their own warehouses and customer care centers to ensure the best experience for consumers. The company owns delivery fleets, offers last mile delivery in over 300 cities and enables customers to pay cash on delivery in most markets.[xv]

Monetization – Value Capture

GFG captures value from both sets of customers. Customers pay for purchased goods using debit/credit cards or, alternatively, GFG provides the option of paying cash upon delivery.

Information on any sales commissions are not disclosed on public sources.

GFG increased sales about 50 percent to 930 million euros in 2015 and narrowed its loss margin by more than 10 percentage points in the first quarter, based on adjusted earnings before interest, taxes, depreciation and amortization, Voog said. [xvi]

References

[i] Ingrid Lunden . (2016). Rocket Internet’s GFG gets $340M+ at $1.1B valuation. Available: https://techcrunch.com/2016/04/27/rocket-internets-gfg-pockets-340m-at-1-1b-valuation-down-from-3-5b-a-year-ago/. Last accessed 24th August 2016.

[ii] Kinnevik. (2016). Global Fashion Group. Available: http://www.kinnevik.se/en/Investments/e-commerce-marketplaces/Global-Fashion-Group/. Last accessed 24th August 201

[iii]Bloomberg. (2016). Overview of Global Fashion Group. Available: http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=286512343. Last accessed 18th August 2016.

[iv]Ingrid Lunden. (2014). Rocket Internet Consolidates 5 Emerging Market Fashion Brands Into One. Available: https://techcrunch.com/2014/09/04/rocket-internet-consolidates-5-emerging-market-fashion-brands-into-one-3-5b-gfg/. Last accessed 18th August 2016.

[v]Global Fashion Group . (2016). Global Fashion Group, Investors. Available: http://global-fashion-group.com/imprint.html. Last accessed 18th August 2016.

[vi] Robin Wauters. (2016). Rocket Internet’s Global Fashion Group closes €330 million funding round. Available: http://tech.eu/brief/rocket-internets-global-fashion-group-closes-e330-million-funding-round/. Last accessed 24th August 2016.

[vii]Kinnevik. (2014). Kinnevik and Rocket Internet to create global fashion e-commerce group . Available: http://www.kinnevik.se/en/Media/Press-releases/Kinnevik-and-Rocket-Internet-to-create-global-fashion-e-commerce-group/. Last accessed 18th August 2016.

[viii] Ingrid Lunden . (2016). Rocket Internet’s GFG gets $340M+ at $1.1B valuation. Available: https://techcrunch.com/2016/04/27/rocket-internets-gfg-pockets-340m-at-1-1b-valuation-down-from-3-5b-a-year-ago/. Last accessed 24th August 2016.

[ix] Stefan Nicola . (2016). Rocket Declines as Fashion Unit Raises Cash at Lower Value. Available: http://www.bloomberg.com/news/articles/2016-04-27/rocket-internet-drops-as-fashion-unit-raises-cash-at-lower-value. Last accessed 24th August 2016.

[x]Rocket Internet. (2016). Global Fashion Group. Available: https://www.rocket-internet.com/companies/global-fashion-group. Last accessed 18th August 2016.

[xi]Ingrid Lunden. (2016). Rocket Internet’s GFG gets $340M. Available: https://techcrunch.com/2016/04/27/rocket-internets-gfg-pockets-340m-at-1-1b-valuation-down-from-3-5b-a-year-ago/. Last accessed 18th August 2016.

[xii]Global Fashion Group. (2016). Global Fashion Group, Brands. Available: http://global-fashion-group.com/brands.html Last accessed 18th August 2016.

[xiii] Kinnevik. (2014). Kinnevik and Rocket Internet to create global fashion e-commerce group . Available: http://www.kinnevik.se/en/Media/Press-releases/Kinnevik-and-Rocket-Internet-to-create-global-fashion-e-commerce-group/#_ftn4. Last accessed 24th August 2016.

[xiv]Global Fashion Group. (2016). Facts and Figures . Available: http://global-fashion-group.com/about.html?slide=3. Last accessed 24th August 2016.

[xv]Global Fashion Group . (2016). Global Fashion Group, About. Available: http://global-fashion-group.com/imprint.html. Last accessed 18th August 2016.

[xvi] Stefan Nicola . (2016). Rocket Declines as Fashion Unit Raises Cash at Lower Value. Available: http://www.bloomberg.com/news/articles/2016-04-27/rocket-internet-drops-as-fashion-unit-raises-cash-at-lower-value. Last accessed 24th August 2016.

Disclaimer

Written by Halima Begum and edited by Danielle Reza under the direction of Prof Charles Baden-Fuller, Cass Business School, in September 2016. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2017



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