More than five years after its launch, Zalora Philippines, the country's largest fashion e-commerce store, claimed it's on its way to achieving profitability as revenues have begun to exceed variable costs.
Financial statements submitted to the Securities and Exchange Commission (SEC) showed it posted losses since it started operations in 2012 until 2014, the latest available, when it lost Php532.9 million.
In a press briefing on March 1 to mark its fifth anniversary, co-founder and CEO Paulo Campos III said that Zalora Philippines' gross revenues surged 300 percent since 2014. He declined to provide exact figures. Entrepreneur Philippines estimates that the company's revenues last year likely reached around Php1.9 billion. The company previously reported that revenues stood at Php465.9 million in 2014.
“What we are reporting is that 2016 was the first year that we realized we are fully profitable after delivery costs, product margins and marketing costs, essentially all the way down to variable margins,” Campos told Entrepreneur Philippines.
Zalora PH co-founder and CEO Paulo Campos III said he remains extremely bullish about the growth of ecommerce in the country
Although Campos was quick to add that they’re not exactly in the black yet, earning revenues in excess of variable costs is nonetheless an important financial milestone.
“That’s a big thing,” he said. “The challenge will be to continue to scale at our current unit economics so that we can essentially become fully profitable down to net income.”
Citing data by Google Temasek, Campos said Zalora remained extremely bullish about the prospects of e-commerce in the Philippines.
Late last month, the Ayala Group announced it acquired a 49-percent equity stake in BF Jade E-Services Philippines, the local company that owns and operates Zalora Philippines. Global Fashion Group, which owns a network of online fashion platforms in emerging markets across the globe, retains majority ownership at 51 percent.
The Zobel family-owned conglomerate made the acquisition through Ayala Corp., which bought a 43.3-percent stake, and Ayala Land, which acquired 1.91 percent. The rest of the group's acquisition was carried out by BPI Capital Corp., a unit of Bank of the Philippine Islands, and Kickstart Ventures Inc., the venture capital arm of Globe Telecom. Campos declined to divulge the value of the investment.
“The acquisition is a primary investment, meaning it’s an infusion of fresh capital into the company,” Campos said. “It’s very much a vote of confidence in the current management team, the current strategy and direction.”
Zalora PH says it will continue to offer new fashion brands to customers this year
“Given (Ayala’s) 49 percent they will have a proportionate share of seats on the board and they’ll be able to help steer the direction of the business at the board level,” he added.
Campos said the partnership would result in synergies between Zalora and Ayala’s different business units. “Ayala Land, for example, is the country’s second largest retailer. (The partnership) is a way for their different brands and merchants to get into e-commerce.”
Among the complementary activities the two groups are looking at include more "pop-up" stores in Ayala Malls where customers can try on clothes and other fashion merchandise before buying them online, said Campos.
Zalora Philippines reported 90 million page visits in 2016, up from 50 million the previous year. It added that about 55 percent of customers last year were first-time Zalora purchasers.
The fashion portal currently has a selection of about 1,000 brands and 120,000 products. Campos said they are planning to add more popular brands to their inventory, including the launch of Topshop and Topman, which are under Robinsons Specialty Stores Inc., in April this year.
Paul John Caña is the managing editor of Entrepreneur PH