These big tech firms had a really rough year

Photo credit: Pixabay.

The terrible “winter” analysts expected to send a chill through startup world this year didn’t weaken tech companies in Asia as much as it could have.

India probably suffered most. After a boiling hot 2015, prominent Indian startups like Zomato, Ola, Snapdeal, and Flipkart each saw significant valuation cuts.

At the same time, the biggest companies in Southeast Asia, like Grab and Go-Jek, continued to see larger and larger funding rounds. In China, Alibaba once again beat its Singles Day sales record.

Some big names struggled to meet expectations this year. While these companies didn’t shut down outright, they saw a drop in popularity, were forced to scale back, or had to let go of staff.

Rocket Internet

German startup builder Rocket Internet tops the list. The firm launches internet companies in developing markets, often mimicking models that have worked elsewhere. It also acts as an investor in other startups.

Rocket’s share price dwindled to new lows this year. Global Fashion Group – a cluster of ecommerce operations, including Zalora in Southeast Asia and Namshi in the Middle East – saw its valuation cut by two-thirds.

Rocket Internet may be celebrating selling its Southeast Asian ecommerce enterprise Lazada to Alibaba and food delivery site Foodpanda to competitor Delivery Hero, but those businesses weren’t very healthy to begin with. Lazada was cash-strapped and desperate to find new investors. Foodpanda had to shut down some of its branches before selling the rest.

Sad panda. Photo credit: Pixabay.

In India, Rocket managed to dump furniture store FabFurnish and fashion retailer Jabong.

The Berlin-headquartered firm got rid of a lot of excess baggage. It’s still got money in the bank, and some portfolio companies, like Namshi, are reportedly doing well. Yet, we’re likely to see a strategy shift in Rocket’s company-building and investment thesis in the years to come.

Xiaomi

Not long ago, Xiaomi was hailed the ‘Apple of China’.

The phone maker had become China’s most valuable private company in 2014 and soared past Samsung to become the number one smartphone in its home market.

Xiaomi failed to cater to users ready to upgrade to a more premium phone.

But the reputation Xiaomi won in just a few short years began fading in 2016, dropping from the top spot in terms of smartphone shipments in China to fourth. Globally, other Chinese brands like Oppo and Vivo pushed it out of the top 5.

So what went wrong? Tech in Asia reader and strategy consultant Edward Tse lays out some reasons. Among them: Xiaomi failed to cater to users ready to upgrade to a more premium phone. Its attempt to bypass traditional retail and handle its brand-building and sales almost exclusively online didn’t work out. It became too diversified when it started getting into other hardware, like air purifiers and bicycles.

Is Xiaomi in deep shit?

Rakuten

Japan’s internet behemoth Rakuten has a number of online retail outlets, media portals, and owns messaging app Viber, among other things.

This year, it dramatically shut down all its ecommerce marketplaces in Southeast Asia. 150 people lost their jobs. Plus it retreat from other global markets.

Rakuten became wary about picking its battles. In the case of Southeast Asia: not long after Rakuten pulled out of the region, Alibaba moved in by acquiring Lazada. The Japanese firm probably caught wind of the impending deal and decided it would be too costly to keep investing in this environment.

It did, however, recently participate in the US$350 million funding round for Uber competitor Careem in the United Arab Emirates.

Grofers

Albinder Dhindsa, cofounder and CEO of Grofers. Photo Credit: The Week.

As mentioned earlier, many big startup names in India took a beating this year.

Among them: groceries delivery startup Grofers, backed by the likes of SoftBank, Tiger Global, and Sequoia.

It was losing tens of thousands of dollars every single day. It had to let go of 10 percent of its staff and retreat from a number of Indian cities.

Grofers also had to make significant operational changes, like moving away from its app-only model. Basically, every assumption Grofers held about running an asset-light groceries delivery service in India – one that works with brick-and-mortar stores and focuses on delivering goods to customers at home – turned out to be flawed.

Grofers owned up to its mistakes and is trying to turn things around in the new year.

Nida Rooms

Nida Rooms isn’t an internet company with global recognition, but as a firm that operates across Southeast Asia, it’s one of the bigger ones in the region.

It’s a budget hotel startup – one that helps small no-name hotels standardize their service quality and branding. Nida then helps market rooms to improve occupancy. It’s similar to Oyo Rooms in India.

Nida has raised at least US$5.6 million in funding but it looks like something is seriously going wrong.

Employees began complaining about unpaid salaries, and vendors reported outstanding bills.

Tech in Asia’s investigation revealed that at least some of the hotels in Nida’s network don’t see much value in the partnership.

HappyFresh

HappyFresh, like Grofers in India, is a grocery delivery startup operating in Southeast Asian countries like Indonesia and Thailand. Working with supermarkets, it has professional shoppers who buy and pack groceries as per the customer’s order via the app.

The startup was launched by a group of professionals with solid experience: former entrepreneurs, investors, and management consultants. That, however, didn’t translate into a quick win for the company.

It raised new funds this year on top of US$12 million in hand. But at the same time, it had to exit two markets, Taiwan and the Philippines.

Around this time, a major leadership reshuffle took place: Group COO Benjamin Koellmann left his position, though he is still an investor. Group CEO Markus Bihler took on a role as vice chairman of the board.

New CEO Guillem Segarra, who used to work in operations with Benjamin, says Markus came into a more strategic role where he deals mainly with investor relations.

Guillem told Tech in Asia the changes weren’t sudden, but “a transition we’ve been looking for.” While the previous months had been dedicated to growth, the company’s new mantra is to “concentrate effort and resources.”

MatahariMall

MatahariMall, the ecommerce company associated with Indonesian conglomerate Lippo Group, burst onto the scene in 2015.

It said it would invest up to US$500 million to become the “Alibaba of Indonesia,” only to see Alibaba itself planting a foot on its home turf.

After a massive marketing campaign raised the site’s profile in its early days of operations, traffic took a nosedive, before recovering again in October – the weeks leading up to Harbolnas, Indonesia’s yearly online shopping bonanza with heavy discounts.

Traffic isn’t a good measure of an ecommerce company’s success, but a drop of this proportion is significant. It could mean marketing budgets temporarily dried up, and that there’s a lack of repeat visits and loyal customers. By comparison, Lazada’s traffic is more stable and on a steady rise.

At the same time, some significant changes occurred on MatahariMall’s site.

For one, Matahari Department Store (MDS) – Lippo’s offline retail chain – features much more prominently on the site, right around the time MDS was reported to plan increasing its stake in MatarhiMall’s parent company.

A second announcement said Japanese financial services company Tokyo Century is partnering with Lippo to launch an online lending platform in Indonesia as early as next year. According to that report, the platform will make small loans available to MatahariMall vendors.

So far, the larger picture in this series of changes is unclear, and MatahariMall CEO Hadi Wenas isn’t ready to speak about any eventual strategy shifts and the company.

We’ll have to wait for MatahariMall’s next moves.

This list does not include tech companies that closed down or completely pivoted their business models. Here’s a list of startup closures in 2016.

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from Tech in Asia https://www.techinasia.com/tech-companies-rough-year-2016
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