My take on Rocket Internet

I’ve wanted to write about Rocket Internet ever since reading an article that appeared in SGEntrepreneurs, written by my friend Bernard Leong, titled Are the Samwer Brothers, a.k.a Rocket Internet really that bad for Southeast Asia? That article appeared towards the end of March 2012, and anyone that knows me closely knows that I’ve been having an epic year traveling for business (more on that later). What prompted me to write this today? Reading Bernard’s next article in the series titled Is there any method in Rocket Internet’s madness? That and I’m taking a much needed break, sitting in a venue older than the nation Malaysia itself, overlooking the place where Malaysia fought for independence from the British, and sipping a cold Hoegaarden from the tap.

If you haven’t read those links, consider it a pre-requisite. Go on, I’ll wait.

In the US-based media, Rocket Internet are looked at as copycats. Should we shun copycats that don’t improve on things? No. Very little uniqueness comes out of things, and its rare that true innovation happens. The iPhone, the iPad, the Macbook Air. Those are true innovations that every other manufacturer out there is trying to copy. Its very much similar in the software world where things get rehashed. Timing & execution play an important role to success, naturally.

Free market economics are also interesting. You can launch products that are clones of Pinterest, but if Pinterest is where it’s at, that’s where people are going to be. I remember in the early days of Twitter, there was many a clone, even one in Malaysia called Pacmee, funded by an investor friend of mine. They put 18-months of good work into it, added the local spin to it, and bam, Twitter won anyway. Welcome to free market economics.

This is similar to AirBnB clones like Wimdu (Rocket Internet). You might add your local spin to things, like my friend recently launched in Japan, homerent.jp, but in 18-24 months you’ll see if a local spin makes a business. I’m rooting for my friend, especially since the Japanese market is very closed, so here’s a cheers to them. Plus they have a great story to boot. (A friend is an investor at iBilik focused on the south-east asian market – I too wish them all the success).

At the end of the day, free market economics picks which service wins. What you do to make yourself a winner is down to creative smarts, growth hacking, and most importantly gaining user traction.

South-east Asia is unlike any other. We call ourselves ASEAN, but we have no single currency, we all speak different languages, we have no Schengen agreement and even though there may be free-trade-agreements in place, we all come with our own obscure laws. We don’t even have a beer you’ll call an Asian beer :-) As Bernard pointed out, we seem very much like Europe.

What is Rocket Internet getting right? Execution – at a great speed. Scale. With failing fast built-in.

The Next Web carried an article on this topic too. I quote:

These people don’t complain about payment gateway issues for their e-commerce sites, they just find ways to make it work. They won’t wait, and that’s a winning attitude.

I know the pain of dealing with Malaysian payment gateways. I guess I should say we should be thankful that we even have payment gateways. Most people don’t even bother dealing with these gateways and end up doing dodgy hacks like saying they’ll accept transfers from cash deposit machines, direct bank transfers, or worse, cash on delivery. This is not e-commerce. This may be commerce facilitated by electronic means, but it is in no way seamless or meets my standards of being called e-commerce.

That aside, I applaud the Samwer brothers doing this. Sure it isn’t very friendly to the smaller entrepreneur. Now you just have to learn to be more cunning. Execute better. Overall, I feel small entrepreneurs will do even better with this market as there’s lots of benefit to Rocket Internet spending the money to educate people about e-commerce (just see my thoughts on zalora & zalora II).

The one’s complaining were the ones already used to building copycats with a lot less money & execution flair. 

That’s not to say this model hasn’t got its issues. As Bernard points out, they’ve had executives come & go, lots of complaining employees, and they’ve even shut down services. I’ve been told by many that they’re also cheap. And customer service is generally terrible (this is anecdotal, like how an iPod hasn’t arrived in 73 days – I have never purchased anything from a Rocket Internet company). I’ve heard that seller relations aren’t all that awesome either.

Everything has hiccups. Its how quickly you learn from them and execute better. It’s not easy to build a Zappos culture overnight, and frankly speaking, South-East Asian customer service is in the doldrums overall. Many businesses can take to learning from how 5-star hotels run their operations in Asia (see service at InterContinental Bangkok, InterContinental Singapore, Grand Hyatt Singapore, Hyatt Regency Kuantan Resort and the like). The culture of Delivering Happiness is generally non-existent.

Bernard suggests this too:

The inconvenient truth is that the Samwer Brothers are excellent in cloning the operations and the IT platforms behind, but they are not good at cloning companies where the real strength is in the services part of the company.

Are operations cloned rather well? The IT platforms from my knowledge are all built within the market. This is why some markets have to deal with Google Spreadsheets and some markets have real built-in systems. 

Will there be a successful exit for one of these clones? Who’s to say. Anything is possible. It seems that JP Morgan has bet on Rocket Internet, but that’s not an underwriter that has much clout in general today. See where Facebook is.

If you’re a South East Asian entrepreneur, don’t look at Rocket Internet companies as competition. They’re cloners. If you’re planning on building something remotely original, or a mashup, good on you. Execute smarter. If you’re planning on doing a clone, make sure you excel in the local touch. There’s no shortage of advice and if money is tight, remember to do things in a lean fashion. Your buddies at Rocket Internet are well funded (yes, the Euro is declining, but its still better than any single south east asian currency out there), but have a different passion & goal in their execution. Passion will show in good customer service.

If you are Rocket Internet, good luck with the cloning. I’m never a fan of unoriginal copies, but you’ve brought clear execution to what was already happening in the space anyways. This is why I respect you. I wish you the best of luck, and congratulations with getting investment dollars. It means you’re here to stay. Continue ensuring that people are comfortable with e-commerce transactions. Lobby to improve it with governments. But please don’t turn people off with terrible customer service. Asian customers can take a lot of crap, just don’t go overboard.

If you’re a US-based company reeling as to what Rocket Internet is doing in South East Asia, remember that you caused this to happen. You chose not to expand here and now you’re paying the price. Plain and simple. I’ve had my fair share of conversations with US-based companies that seem to think Asia is the last place to expand to. That’s a mistaken notion people.

All in, there’s plenty that’s happening in the US that is still not available in South East Asia. Plenty more to clone. Much more to disrupt.