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INTRO
Founded back in 2011 and headquartered in both Singapore and London, Global Fashion Group (GFG) has grown to become the number one fashion and lifestyle destination in growth markets.
Today, Global Fashion Group has over 16 million active customers
GFG currently has 17 offices and 9 fulfilment centres across four continents around the globe and its primary markets are:
Latin America- Brazil, Argentina, Colombia, and Chile
Russia, Ukraine, Kazakhstan, Belarus
Southeast Asia- Indonesia, Philippines, Singapore, Malaysia, Brunei, Taiwan, Hong Kong
Australia and New Zealand
FASHION HOLDING
Global Fashion Group started as an ensemble of fashion brands established by Rocket Internet, a Berlin-based incubator. By 2014, the company merged its different brands into what is was then a € 2.7B ($ 3.5B) fashion powerhouse. These included Dafiti (Latin America), Jabong (India), Lamoda (Russia and CIS), Namshi (Middle East) and Zalora (South East Asia and Australia).
Rocket Internet is best known for copying proven concepts abroad and introducing these into new markets as it did with Delivery Hero and Zalando
“The Berlin-based firm became quickly known as a “clone factory” after Samwer famously conceded during his Ph.D. that Silicon Valley had got innovation wrong by coming up with new ideas, and the “innovation” would simply be to make existing models more efficient. […] Almost like clockwork Rocket produced clones of Amazon, Uber, Uber Eats and Airbnb".” by Mike Butcher for TechCrunch
With Global Fashion Group, the goal was to merge fashion brands with a focus on emerging markets and exploit synergies to make these more competitive
“GFG will be focused on capturing the massive growth opportunity of fashion e-commerce in emerging markets. Each of the business units will be able to build on the original Rocket platform and continue to leverage knowledge and expertise gained across 23 countries” Oliver Samwer, CEO of Rocket Internet by Ingrid Lunden for TechCrunch
LOCAL SHOPPING EXPERIENCE
Being in the highly competitive online shopping industry, GFG aims to secure its position in the market by delivering localized products and a modern shopping experience. This is supported by three pillars:
Last-mile delivery within 3hrs, next day, or same-day delivery for items bought through its platforms. This is supported by its 3 fully automated and 6 non-automated fulfilment centres
Proprietary technology built on top of its customer data (browsing behavior, purchasing habits, return rate monitoring)
Locally-tailored operations as GFG aims to design, manufacture, market and sell products tailored to local preferences instead of relying on a “one-fits-all” strategy
“The way we work with the brands is deeply local when it comes to selection. With Nike, for example, the selection we buy is very different in a country like Indonesia, where we might buy a lot more long pants or even headscarves, which are very popular these days, compared to what we might buy in Brazil.”
“GFG takes a sharp departure from its competitors who basically believe the world is flat, and everyone will buy the same luxury brands globally because you have these massive brands that are appealing to consumers everywhere.” GFG co-CEO for The CEO Magazine
This outlook by GFG and its management has allowed it to set itself apart from its competitors and offer a unique value proposition to its customers.
DELIVERING GLOBAL FASHION BRANDS
GFG identifies itself as the only company that offers flexible models and solutions for the digital distribution of fashion and lifestyle brands in growth markets. It works with niche and mainstream brands, giving them unparalleled access to a market of more than 1B consumers.
GFG works closely with its brand partners to offer the most relevant and curated products in an inspiring customer environment
It targets mainly younger customers (of whom two-thirds are female) in urban and affluent areas which are style conscious
These customers tend to be highly engaged and buy around 4 brands each year from GFG
“We really want to reach those people (customers) and get them to express themselves through fashion by putting the most exciting local brands and the most exciting global brands in their wardrobe.” GFG co-CEO for The CEO Magazine
THE MARKET
Fashion is currently ranked as the largest B2C e-commerce market segment, with a global size valued at around $ 525.1B as of 2019.
It is estimated that by the end of 2025, this industry will have grown by 11.4% per year, to reach a total market size of $ 1003.5B
2020 saw an overall drop in the industry's performance globally, mainly due to Covid-19, which led to restrictive containment measures, remote working, and industries' closure. The compound annual growth rate (CAGR) stood at -8.59%
However, the global market is expected to recover and reach $ 672.71B by 2023, with a CAGR of 11.48%.
As of 2019, North America was the largest region in the fashion e-commerce market, with the Asia Pacific being the fastest-growing region
In China, eCommerce sales account for 39% of all transactions. In the United States, the figure stands at 20%. In regions where GFG operates, the number rests at just 6%. Patrick Schmidt acknowledged this and mentioned the following:
“A major driver for us is to push that number higher, to 10, 15, 20% (in the coming years).” GFG co-CEO for The CEO Magazine
TIER-1 MANAGEMENT
Global Fashion Group is currently led by two co-CEOs, Christoph Barchewitz and Patrick Schmidt. They have both held their positions since 2018 and are responsible for overseeing the company's ongoing strategic and operational development. Christoph has also served as a member of GFG’s board. Patrick has served as the current chairman of THE ICONIC, a sub-brand of GFG, and is the current chairman of the brand.
Christoph Barchewitz is the current co-CEO of GFG, a position he has held since February 2018 after taking over from Romain Voog
Has served in the Board of CFG since 2015 and has helped craft key strategic alliances such as the Ayala/Zalora joint venture in the Philippines, as well as Emaar Malls/Namshi partnership in the Middle East. Christoff has also served as a board member and chairman of the supervisory board at Westwing Home and Living. He has also played the role of an investment director at Investment AB Kinnevik in London, United Kingdom
Holds an MPA in International Finance Policy from Columbia SIPA, a Dipl. Kfm in Business Administration from the University of Mannheim and a European Master of Business Science from Akademia Ejonomiczna w Krakowie
Patrick Schmidt is the current co-CEO at GFG, a position that he has held since February 2018
Previously, he served as the CEO and chairman of THE ICONIC, a sub-branch of GFG. Has held previous positions as director and board member at the National Online Retailers Association in Sydney Australia. He is also the co-founder and former CEO of Groupon Australia, also serving as the International Vice President of Groupon Latin America between 2012 and 2013
Holds a Master of Science in Business Administration, Business Administration, and Management from Purdue University
Erica Berchtold is the current CEO at THE ICONIC, a position that she has held since February 2019
Has also served as the Managing Director at Rebel & A-Mart Sports, Infinite Retail, and Goldcross Cycles, a position that she held from November 2011 to December 2018
She has taken a Senior Executive Program at the London Business School, and a Company Directors Course, GAICD, from the Australian Institute of Company Directors
RED FLAGS
Back in 2019, GFG unveiled its plans to go public and set its share price at € 8. The goal was to raise € 300m, but GFG would barely raise half that in its IPO. This would prompt the company to reduce its share price to $ 4.50 to lure more investors, although the goal was still not achieved.
One thing that stood out in GFG’s IPO was that it was mainly backed by existing investors. Kinnevik, at the time, owned 35.8% of the company, while Germany’s Rocket Internet owned 20.4%
Upon further inquiries on why potential and existing investors did not buy that much into the company, some pointed to Rocket backing the IPO. More specifically, they cited Rocket being more less of an innovator, and more of a company that simply goes after already successful internet companies, an aspect that significantly devalues the company, which was the case with GFG
Regardless, the value of the company has grown noticeably ever since
FINANCIAL REVIEW
In 2020, GFG reported 42m orders, a 21.4% growth from the previous year
It posted a Net Merchandise Value (NMV) of € 1,958.2m, a 25.7% increase from the previous year
GFG’s active customers, in 2020, grew by 24.6% from the previous year, and closed at 16.3m by the end of 2020
By the last quarter of 2020, GFG had a 31% marketplace share, a 10.3% increase from the previous year
Revenue growth for 2020 stood at 15.3%, with earnings standing at € 1,359.7m, up from € 1,346m back in 2019
Gross profit stood at € 586.2m, up from € 539.8m in 2019
EBIT stood at a loss of € 64.8 in 2020 versus a loss of € 125.1m during the previous year
GFG had € 704.6m in current assets versus € 448.9m in current liabilities in 2020
THE TAKE
What we like:
GFG is a global fashion powerhouse applying battle-tested concepts to fast-growing emerging markets
It leverages technology and consumer insights to fasten delivery, determine its product assortment and boost its marketing efforts
The group is fairly valued compared to its larger peers (Zalando and Asos) while growing by around 20% year-on-year
What we don’t like:
The group is still not profitable and may face a post-COVID deceleration as shoppers return to physical shops
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Disclaimer: Return is not an investment advisor, we have no access to non-public information about publicly traded companies, and this is not a place for the giving or receiving of financial advice, advice concerning investment decisions or tax or legal advice. We are not regulated by the Financial Services Authority. Investors should conduct their own analysis before making any investment. The value of shares, assets and investments and the income derived from them can decrease as well as increase. Investors may not get back the amount they invested - there is a real risk of partial or total loss. Past performance is not a guide to future performance.
Disclosures: The author has a position in Global Fashion Group. The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article.
Picture: Courtesy of GFG.