Brick-and-Mortar Retailers Are Dinosaurs: Entrepreneur
Life + Money

Brick-and-Mortar Retailers Are Dinosaurs: Entrepreneur


The founder of Rocket Internet, the German venture capital company behind dozens of online start-ups, warned the retail industry on Thursday that e-commerce and smartphones would mean there will be little future for stores in emerging markets.

Oliver Samwer, 40, told the annual summit of the Consumer Goods Forum (CGF), an industry network of some 400 retailers and big brands from 70 countries, that many of them risked being left behind as the growth of e-commerce accelerates. 

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"You only have stores because there was no Internet, but that does not mean there is a right to have a store," Samwer said, adding that traditional retailers focused too much on older shoppers and not enough on smartphone-savvy youngsters.

"What you fear will come much faster," he warned.

Rocket Internet is bidding to create the largest internet empire outside the United States and China, seeking to replicate the success of Amazon and Alibaba [IPO-ALIB.N] in markets the U.S. and Chinese e-commerce groups have yet to dominate, such as Africa, Latin America and Russia. After his speech, Samwer traded blows about whether stores will survive, in a panel discussion with Mark Price, managing director of British grocer Waitrose [JLPLC.UL], who introduced himself to Samwer saying: "Hi - I'm Mark, I'm a dinosaur."

Samwer founded Rocket Internet in 2007 with his brothers Marc and Alexander and it is already active in 102 countries, making revenue of $1 billion in 2013 via online fashion stores including Dafiti in Latin America and Lamoda in Russia, as well as Jumia for general merchandise in Africa.

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Sources have told Reuters the company is considering a stock market listing in Frankfurt later this year which could value it at up to 5 billion euros ($6.8 billion), as buoyant capital markets have encouraged a flurry of e-commerce flotations this year, with most focus on Alibaba.

Samwer said the stock market value of Amazon and Alibaba would soon dwarf the world's biggest retailer Wal-Mart. "What would you buy for your children? I would buy Amazon and Rocket (shares)," he said, adding he believed French retailer Carrefour would have been better off buying a stake in Alibaba than trying to open stores in China.

Only 10 Percent Left Offline?
Noting that 75 percent of the world's population lives in the markets Rocket is targeting, Samwer said e-commerce had even better prospects in emerging markets than in developed economies, as online sites do not have to compete with such established stores. "If you don't have to share with offline, your percentage will be much higher," he said. "It will all move online, you will have 10 percent left that will not move online."

Samwer said Rocket Internet ventures around the world already had 44 million fans onFacebook, more than Nike and Apple combined, noting that the cities with the most active users of Facebook are Bangkok, Jakarta and Istanbul, with none of the top 10 cities in the United States.

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Deutsche Post, the world's largest postal and logistics company which is profiting from booming deliveries for online retailers, predicts e-commerce could account for up to 40 percent of total trade by 2025 in developed countries, from under 10 percent in most markets now, and up to 30 percent in emerging markets, up from a tiny fraction today.

The Samwers have raised hundreds of millions of dollars of funding for Rocket Internet and its ventures, including from Swedish investor AB Kinnevik, billionaire American industrialist Leonard Blavatnik, JP Morgan Asset Management and retailers like Tesco and Germany's Tengelmann and Rewe.

Before founding Rocket, the Samwers had success with German online auction site Alando, which they sold to eBay and mobile phone content provider Jamba which they sold to VeriSign.

Rocket Internet also helped launch Zalando, Europe's biggest online fashion retailer, which is considering its own stock market listing. Rocket is no longer invested in Zalando, but the Samwer brothers' European Founders Fund still owns 18 percent. ($1 = 0.7368 Euros)