Rocket Internet to shut down Turkey operations

Nina Fowler 2012-08-17 65

Istanbul

Rocket Internet is understood to be shutting down its operations in Turkey to focus on other parts of its portfolio, which seems likely to result in widespread job losses.

Rocket Internet, owned by Marc, Alexander and Oliver Samwer and headquartered in Berlin, supports a portfolio of over 100 companies in 40 countries including flagship online retailer Zalando, which brought JP Morgan on board as a minor investor this week.

Sources released information earlier this week about possible Rocket Internet job cuts in Turkey. Now, according to unnamed sources in contact with VentureVillage, Gründerszene and Turkish tech news site Webrazzi, Rocket Internet’s entire country operations are to wind down or be suspended.

Since entering Turkey last year, Rocket’s operations in the region have expanded to over 400 employees. The incubator’s ventures in Turkey include: Zidaya, following the Zalando model; Evimister, an online budget general store specialising in electronics; online sporting goods shop Sporena; jewellery and crafts platform Eleseri; and Turkish branches of international companies WimduWestWing, Namshi and Mizado.

It’s unclear how many staff in Turkey will be let go or moved to other operations and whether there will be any sales or acquisitions as part of the closure.

High competition and cultural fit – or just portfolio pruning?

The reasons for the closure of operations in Turkey is also unclear. One industry insider, who asked to remain unnamed, suggested profit margins in Turkey were low compared to other markets with no easy way to increase them.

Yet, on the face of it, Turkey looks like a promising market for e-commerce companies. This article late last year in VentureBeat lays it out well. In 2011, for example:

First, eBay acquired 93 percent of Turkey’s largest auction site, GittiGidiyor — in a deal rumored to value the company at $215 million. Then South African media conglomerate Naspers acquired 70 percent of Markafoni, one of Turkey’s largest private shopping companies, in a deal valuing Markafoni at about $200 million… Markafoni is also owner of Zizigo, the largest online shoe retailer in Turkey (yes, an a self-acknowledged copycat of the U.S. shoe retailer, Zappos).

It’s possible relatively high competition is part of the reason for Rocket Internet’s decision not to pursue this market, as well as issues adapting existing business models to Turkey’s distinct culture and internet consumer market.

Rocket Internet seems to be making moves to consolidate its portfolio, closing online shopping club Bamarang in June favour of similar model Westwing. Also this week, Rocket Internet signed a €340 million partnership deal with telecoms group Millicom in Latin America and Africa, which includes an option for Millicom to take full control of the company before 2016.

It’s no consolation for those in Turkey who may find themselves without jobs – and questions should be asked about the social cost of setting up large-scale operations in a country only to pull out after a few years – but, for Rocket Internet, this portfolio cut obviously makes commercial sense. One big question left open is where the incubator’s resources will be redirected, whether it’s new markets, existing markets or new areas altogether.

For related reading, check out:

Rocket Internet to sell Latin America and Africa stake to Millicom in €340 million deal

Rocket Internet working on Stripe clone, taking aim at online payments sector

Access Industries’ billionaire Len Blavatnik sinks $200m into Rocket Internet

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