The online retailer Zalando is one of the leading addresses for fashion and lifestyle in Europe. The Berlin-based company serves 25 European markets with around 49 million customers. With its platform strategy at the center – marketplace model and the integration of stationary retailers (connected retail) – Zalando is aiming for further international growth. By 2025, the partner program plans to expand to half of its gross merchandise volume (GMV).
FashionUnited spoke to Megan Keller Maley, General Manager for Benelux, UK and Ireland about doing business in uncertain times, the top-selling product categories and the future of Zalando’s partner programme.
Concerns about inflation and the war in Ukraine weighed on consumer sentiment. How is business for Zalando?
It was generally a challenging time for us as an e-commerce company. The macroeconomic challenges that we and the other companies continue to face are more severe than we previously anticipated. Inflation, the war in Ukraine and higher household costs are of course affecting consumer spending. In addition, consumer confidence is declining and customers are reluctant to make purchasing decisions or even migrate to lower price categories.
At the same time, we have seen a normalization of shopping behavior as customers can go back to the stores. Our customers have less disposable income, but they also have more opportunities to spend it. That can be in physical stores, travel, or hospitality — not just e-commerce, as was the case at the height of the pandemic. All these changes in customer behavior were challenging in the first half of the year.
And how is your outlook?
We recently released our second quarter results. These have demonstrated our agility as a team and our ability to react quickly to adapt to the current environment while making the experience even more inspiring and engaging for our customers. We continued to grow our customer base and now have more than 49 million active customers. We are fully focused on our strategy and making targeted investments across our entire business to ensure our long-term growth. For the second half of 2022, we expect improved profitability and a return to growth.
Are there consumers in certain countries who are less concerned than others?
There is no country that is not affected by what is happening in macroeconomics. This is a general situation facing the world – not just Europe.
How is Zalando dealing with these uncertain times?
Thanks to our platform strategy, our Zalando brand partners can react quickly to uncertainties by deciding which of their products they want to dynamically present to our customers. The great thing is that the partners can flexibly decide which range best suits the respective situation. They don’t have to decide twelve months in advance which items or prices they want to offer on the platform, but can do this dynamically.
Customer tastes can change pretty quickly, or the weather can change suddenly. The ability to flexibly manage the assortment is crucial. If it is very cold in March, our partners can still sell winter items to meet customers’ needs.
Brexit has also upset the fashion industry. What challenges does Zalando face in cross-border trade?
As a company, we are experienced in operating successfully in non-EU countries such as Great Britain, Switzerland or Norway. Together with all partners involved, we have worked to implement all the necessary steps to establish a smooth process for all Zalando customers in Great Britain. In recent years we have constantly worked on adapting our processes to the new rules and of course we continue to monitor the market closely in order to offer our customers the best possible range and comfort.
How is Zalando mastering these new rules and challenges?
We have focused even more on our role as a strong partner for British brands. Our priority is to make it easier for brands to get started on our platform and scale their businesses, both in their local market and in the other 24 markets we serve.
Brands can use our insights and analytical tools to drive performance on Zalando, fulfillment and shipping solutions to gain access to a variety of markets in Europe, and marketing services to differentiate with consumers, reach their target audience and their brand build up.
What types of products are doing particularly well in your markets in Belgium, the Netherlands, Luxembourg, the UK and Ireland?
In terms of individual product categories, streetwear is definitely a big area of growth and development for us as a company in all countries. We’ve also seen a great development in occasion wear as we’re getting more social again, whether it’s at weddings or on nights out. Occasion fashion was a strong driver for both women’s and men’s fashion.
Our designer category is also experiencing a kind of renaissance. This trend is particularly interesting in the UK where it has become a key area of focus for us and where we are seeing great results. Thanks to our partnership with the British Fashion Council, we are able to showcase both British designer brands and international designer brands. It’s something we’re excited to develop further.
Are there differences between the countries?
Streetwear is a real shooting star in all the countries I manage. The Netherlands is always a market where we see a high affinity for streetwear and sports – the same goes for Ireland. Designers are a major focus in Belgium and the UK.
Of course, every country is different and so is our position in these markets. Belgium and the Netherlands are very mature markets for us, in which we have been present for over ten years. We have a very large customer base in these markets and are concentrating on further deepening our customer relationships. To achieve this, we rely, for example, on our loyalty program Zalando Plus or on categories such as streetwear.
Great Britain and Ireland are newer markets for us. Here we focused on increasing overall brand awareness, telling the Zalando story and introducing new customers to the brand. It’s a slightly different approach simply because the markets have such different levels of maturity.
More than 4400 brands are part of the Zalando partner program. In which country is the Connected Retail program most successful?
While our partner program is active in all Zalando markets, Connected Retail is currently available in 13 of the 25 Zalando markets. Like our partner program, Connected Retail is a live service that is constantly evolving. Since we first launched Connected Retail in Germany in 2018, it is still the largest market in terms of the number of connected stores. However, we also see that the service is well received in the other twelve markets, with Poland and Spain also being very strong markets. We have now integrated over 7,000 physical stores across Europe and counting.
Connected Retail has not yet been launched in the UK. Are you planning to establish the concept there as well?
It’s not on the schedule for this year. It’s a great opportunity for all markets, but at the moment there are no plans to launch the program in the UK.
What is the relationship between the platform and wholesale business model?
From the customer’s point of view and because we can only offer a complete range of products through a combination of our own purchasing and partner program, we will continue to pursue this approach. The wholesale model is still an important part of the business, especially for brands that are relevant to multiple markets.
We are seeing more and more that brands are becoming more active and making decisions themselves. Some brands are represented through Wholesale, the Partner Program and Connected Retail, while others choose to connect only through Connected Retail. It’s all about which models work best for them. The transition is happening on its own. 32 percent of our GMV in the first quarter came from the partner business, both through the partner program and through Connected Retail. In the markets I manage it’s even more – especially in the Benelux countries. We see this continue to grow each quarter. So this is clearly something that is interesting and working for our partners.
What are your plans for the future of the platform business model?
Our goal is to always have the best range for our customers. Not only in terms of quantity, but also in terms of quality. We know which brands our customers love, appreciate and want to see on our platform. Our main goal is to ensure that we represent these brands in our fashion store.
This translated and edited post previously appeared on FashionUnited.uk.