FabFurnish in German Rocket’s portfolio merger plan, to take on Ikeahttps://indianexpress.com/article/business/companies/fabfurnish-in-german-rockets-portfolio-merger-plan-to-take-on-ikea/

FabFurnish in German Rocket’s portfolio merger plan, to take on Ikea

Rocket Internet may consolidate its furniture & home and living portfolios, which includes FabFurnish.

Rocket Internet has at least four portfolios in the furniture and home and living space, including FabFurnish. (Image Courtesy: Fab Furnish website)
Rocket Internet has at least four portfolios in the furniture and home and living space, including FabFurnish. (Image Courtesy: Fab Furnish website)

Rocket Internet, the German technology incubator, which recently merged its five fashion portfolios across the globe, including Delhi-based Jabong, to create a $2.7-billion entity, is likely to drive a similar consolidation with its furniture and home and living portfolios, which includes FabFurnish in India. The move is purported to take on the global furniture major IKEA, sources told FE.

The incubator, with a professed aim to become the world’s largest internet platform outside the US and China, was launched by Samwer brothers Alexander, Marc and Oliver in 2007. It stoked the public imagination through its investments in Facebook, eBay, Groupon and LinkedIn, before going public on the Frankfurt Stock Exchange earlier this month, raising close to $1.7 billion at a valuation of $8.2 billion.

Rocket Internet has at least four portfolios in the furniture and home and living space: West Wing, Home 24, Zanui and FabFurnish. Among them, West Wing and Home 24 feature in Rocket’s list of proven winners with sales of over $63.5 million and valuation of over $126 million, while Zanui and FabFurnish are among the emerging companies.

“There will be a focus on gaining synergies in sourcing. Being a successful company in fashion or home segments is about having the right products, for which you have to go to the right places to source. You can do it together if you consolidate your volumes. Synergies are massive on the back end,” said one person aware of the matter.

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Sources said Rocket Internet is biding time for the ventures to gain scale. The company owns 33.7% stake in Westwing and 49.5% in Home24, both Germany-headquartered ventures together addressing markets in Germany, Italy, Brazil, Russia, France, Spain, Poland, Netherlands, Austria, Switzerland, Kazakhstan and Belgium. While both Westwing and Home24 crossed $125 million in annual sales in 2013, FabFurnish is eyeing to generate sales of $35 million this fiscal.

“Rocket wanted to build an IKEA. That is one of the dreams of the Samwer brothers. So, they will definitely look to build something as big as IKEA in the online space. It’s very much on the cards,” said another person. In 2013, IKEA reported revenues of $36.4 billion through 315 stores in 27 countries. It has 51 stores in North America, 222 in Europe, 14 in Russia, 23 in Asia and five stores in Australia.

FabFurnish founder Vikram Chopra declined to comment on the consolidation. He, however, said the furniture market in India is a minefield of opportunities. “Right now, furniture and home décor is a $20-billion market in India, expected to become $40 billion. The market is highly unorganised at the moment, which is the biggest challenge. We are going all out. We are already among Rocket’s emerging companies and we will work towards becoming a proven winner,” Chopra said, adding that FabFurnish will expand its warehouse in Bangalore and open another in Kolkata to address the east and N-Emarkets.

In September, Jabong was merged with Dafiti of Latin America, Lamoda of Russia, Namshi of the West Asia and Zalora of Southeast Asia and Australia to create Global Fashion Group, where Kinnevik, Rocket Internet and Access Industries will be the largest shareholders with 25.1%, 23.5% and 7.4% stakes, respectively. Interestingly, all these entities figure among Rocket’s proven winners, with sales of over $63.5 million and valuation of over $126 million.

Sayan Chakraborty | The Financial Express