Last week, we heard a rumour that Rocket Internet’s Zalora is shutting down its operations in Taiwan. While we are unable to confirm this from Zalora, there are obvious signs that it is indeed shutting down its Taiwan operations.
Zalora entered Taiwan last April. Fast forward one year later today, it is rumoured that Zalora is shutting down its operations. According to Taiwan-based media outlet TVBS, a Zalora local partner revealed that orders from Zalora have ceased earlier last week.
“Zalora personally cancelled their orders from us, and this is an obvious sign that they are shutting down their operations.” – Zalora Taiwan’s partner
Another clear sign of its impending closure is that if you visit the Zalora Taiwan website, customer support is only available until 9am on the 1st of April. If this is an April Fools’ joke, it might be too big a joke as more than 100 Zalora Taiwan employees are rumoured to be laid off with the closing of Zalora. We double checked the other regional sister sites and customer service is still available.
TVBS cited a few reasons why Zalora failed to capture the market in Taiwan, among them its high marketing cost. Zalora Taiwan has been getting celebrity endorsements and advertisements in hopes to draw the attention of the younger Taiwanese generation. Celebrity advertising and its marketing costs are reported to be more than US$400,000 per month. On top of that, another reason cited includes the failure to localize its products to fit the Taiwanese market.
September last year, I wrote an article, Is Rocket Internet losing its grip in Southeast Asia. Rocket Internet has been notorious for its “ok, this done. Not working. Let’s kill it now” strategy.
“The closing of four months old Home24.sg reveals one thing, Rocket Internet will not hesitate to pull the plug when it comes to evaluating a likely failure. As time passes, it became apparent that the strategy for Rocket Internet is somewhat similar to betting. For Rocket Internet, they clone proven business models and replicate them in other countries. For each clone, Rocket Internet puts in a huge amount of money into hiring as well as marketing. They only need a handful of their businesses to work. For clones that have low margins or those that are not doing very well, it will be shut down, alongside with all the employees.”
While Zalora Singapore seems to be going strong with its recent milestones announcement, Zalora Taiwan is losing its grip and to avoid bleeding more money into that market, all signs seem to suggest that it will soon exit the Taiwanese market. With Zalora out, Yahoo! Taiwan and PCHome continues its dominance in the Taiwanese e commerce space, two of the biggest player as they entered the market in its early days. Another player that has been catching up is Japan-based Rakuten, which recently inked a deal with Taiwan social food recipe sharing site iCook.
With Zalora Taiwan shutting down soon, I can’t help but wonder, how are other regional markets (Malaysia, Indonesia, Thailand, Vietnam, Philippines, Hong Kong) doing?
Or, is this an April Fools’ joke?