Tuesday 8 November 2016

Highs & lows of Jabong’s parent company Rocket Internet in India

Rocket Internet is famous (or infamous) for being a ‘start-up clone factory’. The Germany-based company that has been around for less than a decade was set up by Marc, Oliver and Alexander Samwer in 2007. And their goal was clear – to replicate successful companies. They had no qualms about being called a ‘copycat’.
“From day one, Ollie (Oliver, Rocket Internet’s CEO) knew he wanted to copy other companies. He didn’t care about being original. He only cared about execution. Alando, the eBay clone, even used the same logo as eBay… in German,” disclosed a former CEO of one of the Rocket Internet ventures.
He added,
“We tried cloning Airbnb, but it didn’t work because it’s so brand- and community-focused… Eventually we realized the best companies to clone were e-commerce businesses.”
Thus Rocket Internet’s journey started in the ecommerce industry, across Africa, Middle-east and Asia Pacific, including in India with Jabong, FoodPanda, FabFurnish and few others.

The success of Jabong

Jabong’s core team consisted of some old faces (co-founders Praveen Sinha and Arun Chandra Mohan) from Asasa, Rocket Internet’s first and failed venture in India. And some new faces like Lakshmi Potluri who was later replaced by Manu Kumar Jain.
Each of the core members was responsible for different core functions like Praveen Sinha handled operations, and Arun Chandra Mohan looked after procurement and merchandising.
By 2011, Jabong’s front-end company Xerion Retail and wholesale unit to procure goods Jade eServices was set up.

Hitting jackpot with logistics firm Javas

Company insiders revealed that Mohan was the most trusted aide of Rocket Internet’s founders for the India business and he had a dominant position in the company. But Praveen Sinha rose to fame (within the company heavyweights) when his idea of opening a logistics unit Javas turned out to be a huge success.
Speaking about the time when Sinha met the German trio to discuss Javas’ potential, a team member revealed,
“Rocket understood only one language—Copy! It wanted to know which global model Javas was a replica of. It was nervous about creating something new.”
The gamble paid off as Javas changed Jabong’s fortune. The fashion etailer’s sales multiplied and customer service ratings touched a new high. Javas’ success brought Sinha the much needed appreciation & attention and soon he took over the reins of the finance and accounting units as well.

Unethical business practices finally catching-up

By now everyone who follows the Indian ecommerce industry is aware of the scandal that broke out in July this year regarding Jabong’s corporate governance violations. Jabong’s co-founders Praveen Sinha and Arun Chandra Mohan along with few others were named in PwC’s forensic analysis report for unethical business practices and misappropriation of funds.
The web weaved by the Indian executives hired by Rocket Internet was too complex and hence, Global Fashion Group that initiated the audit decided to not dig deeper in Xerion’s books.
“At some point, they had to weigh the consequences. Getting deeper into the investigation of Xerion would have increased the risk of non-compliance with Indian FDI laws and that was a bigger problem than the crores that were (allegedly) siphoned off,” shared a manager from Aristotle consultancy that handled Jabong’s finance and accounting functions.
Ultimately Flipkart-owned Myntra acquired Jabong at a discounted rate, since GFG was keen on getting rid of the troubled etailer. Surprisingly, even Flipkart’s recent audit report didn’t come out clean.

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