Asian fashion portal Zalora is pulling out of Vietnam

Zalora, Rocket Internet’s fashion-focused site that raised over US$250 million in equity funds when it started in 2012, unveiled it is shedding the two lacklustre country businesses to cut down on costs, said TechCrunch.

When it started Lazada and Zalora in 2012, Rocket Internet made big moves to fill the e-commerce void in Southeast Asia, a region with over 550 million people without any services from Amazon or eBay.

Both companies eyed profitability by 2015, but they continued to pull in heavy losses last year thanks to a combination of factors including aggressive early targets and slow market growth.

Zalora, Rocket Internet’s take on Zappos, has deemed its businesses in Thailand and Vietnam surplus to requirements - and it is in the process of selling both, a source close to Rocket Internet told TechCrunch.

A Zalora spokesperson declined to comment.

Zalora covers 11 countries across Asia Pacific including Indonesia, Taiwan and Australia.

A source said the company is now focused on countries where it is “on the verge of profitability” and Thailand and Vietnam don’t figure in that equation. Zalora may opt to sell other business further down the line to further streamline its spending.

Like Lazada, Zalora has been shopped to investors and potential purchasers for some time, said sources of TechCrunch. However, while Rocket Internet was seeking to exit Lazada in its entirety, it is breaking Zalora out into chunks that are for sale in specific markets.

TechCrunch understands that a local conglomerate has agreed to purchase Zalora Thailand for just US$10 million, although the deal is not closed yet. The potential acquirer of the Vietnam business is not known right now.

Southeast Asia has long sat in the shadow of larger markets like China and India, but, with over 500 million consumers and a raising middle class, it has potential to be very significant.

However, with just three percent of commerce happening online, inconsistent logistics and differing cultures across the region, building a successful e-commerce business is hugely challenging and capital intensive.