Zalando

Zalando SE

File:Zalando-Logo.svg
Type	Societas Europaea
Traded as	FWB: ZAL
Industry	Online retailing
Founded	2008 (2008)
Founder	Rocket Internet, Robert Gentz, David Schneider
Headquarters	Berlin, Germany
Area served	Europe
Key people	Robert Gentz (Chairman, President & CEO), David Schneider, Rubin Ritter
Revenue	~ € 3 billion (2015)
Number of employees	~ 10.000 (January 2016)
Subsidiaries	Zalando Lounge, MyBrands Zalando Verwaltungs GmbH, MyBrands Zalando eLogistics, MyBrands Zalando eServices, MyBrands Zalando eStudios, MyBrands Zalando eProductions, zLabels GmbH, EMEZA, KIOMI

Advertisement on a house in Cologne, 2015: "Topshop@Zalando" with Cara Delevingne

Zalando SE is a European electronic commerce company seated in Berlin. The company maintains a cross-platform online store that sells shoes, clothing and other fashion items. The company was founded in Germany in 2008, and since has began operating in fourteen European countries and worldwide with spin-offs and subsidiary companies.

It is an online retailer reliant on ‘clicks’, however the firm not entirely independent from ‘bricks’ either. It competes directly against established clothing retailers whose primary source of income comes from physical stores. This immediately sets out the main difference between Zalando and ‘physically present’ retailers, and although the ‘bricks’ retailers have started to take a move on the internet as well it is to remain clear that they operate distinctively different from an internet-only retailer like Zalando. Mixing ‘bricks’ with ‘clicks’ for traditional clothing retailers should serve as a strategy to gain additional revenues and secondly because an online presence is almost considered mandatory. For Zalando, the online presence is the only and single-most important source of income which makes clear that it demands a different strategy than a traditional clothing retailer.

History

Zalando was created in 2008 by Rocket Internet, Robert Gentz and David Schneider, initially under the name Ifansho. Inspired by US online retailer Zappos.com, Zalando initially specialised in the sale of footwear but has since included other areas of fashion and sports.

In 2009 Zalando began operations outside of Germany when it started offering deliveries to Austria. In 2010 the company launched in the Netherlands and France, and in 2011 it opened online retail sites in the UK, Italy and Switzerland. In 2012 it launched in Sweden, Denmark, Finland, Norway, Belgium, Spain and Poland.

In 2014 Zalando was listed in Frankfurt Stock Exchange. From 22 June 2015, Zalando is included in the MDAX. In 2015, Zalando started collaborating with Topshop and began selling merchandise in their physical stores. Advertisements featuring model Cara Delevingne were broadcast in Germany, Switzerland and France.

In June 2015, the Berlin-based fashion trade fair "Bread & Butter" was acquired by Zalando, which intends to open the globally important event for a broader audience as a "fashion festival".

Business model

The core of its operations all take place in Germany with a centralized management in their headquarters in Berlin. Amidst waves of business outsourcing especially since the financial crisis, Zalando's choice to operate and manage its logistic centers in-house has poised critics to conclude that it was digging an early grave. The company made firm its belief that it could only optimize its business operations by taking care of the management itself. Internet technology is at the heart of their operations, employing over 1000 IT-workers alone in countries with locational advantages in IT in Ireland (Dublin) and Finland (Helsinki). They have actively developed and optimized its logistic centers to cut down on costs and to increase speed of preparing the customer's order.

Eliminating boundaries to online shopping

They gain their competitive advantage through their generous shipping and return policies, which come at no additional costs while promising a speedy delivery of the ordered items. Additionally, they offer 'payment after delivery', which involves a certain risk for the company. The option to pay after receiving the items, as well as the 90 days return policy are highly attractive options for internet shoppers and exert an even stronger influence on first-time online buyers who hold back on purchasing online often because of the perceived risk that is involved.

These two policies pose a major inventory management risk which is especially strong in the fashion industry with the risk of not being able to sell the items if they have gone out of fashion in this rapid changing industry. However, thanks to its efficient and effective management of their logistic centers, they seem to be able to contain this threat. Whereas many critics and watchdogs expressed concerns that the company would never be profitable, it has since 2014 proven them wrong.

Geographical presence

European countries in which Zalando operates

The company operates in the following European countries: Germany, Austria, Switzerland, France, Belgium, the Netherlands, Italy, Spain, Poland, Sweden, Denmark, Finland, Norway and the United Kingdom.

United Kingdom

In 2011 Zalando launched Zalando.co.uk, thereby offering its retail services to UK customers. Deliveries were operated by YODEL. In the same year Zalando launched a TV ad in English, replicating the humorous format used in its German-language commercials. In it, a long-suffering husband bemoans his wife’s addiction to buying shoes and warns other men about the dangers of introducing women to Zalando.

In 2015, Zalando acquired a 20% stake in Cheltenham-based software company Anatwine, headed by a former ecommerce director of SuperGroup, for a seven-figure sum. Anatwine's software - which helps online fashion retailers and brands integrate their processes, systems and stock files - will enable current and future clothing and accessory brand clients to use Anatwine’s technology to sell their merchandise through Zalando. Zalando is expected to speedily widen Anatwine's range of brands.

Further expansion

Ireland

There is no official report on why the company has not expanded towards Ireland. It is the only country in North-West Europe where Zalando isn't active in. Although the company actively manages an off-shore IT-hub located on the silicon docks with around 200 eployees working for the internet retailer. Ireland as an island state implies that Zalando has only 2 options to service this market. It can only ship its parcels by shipping them overseas, or it must build/outsource a logistics center on the island itself. Both options can be questioned for their profitability as the Irish market is not so big either. Furthermore, Zalando would not be able to guarantee its shipping policy and fast delivery service. Shipping through the UK would theoretically be more economical, but up to date, there exists no bridges or tunnels linking the two countries together.

Zalando IT Center (Dock 1), Phoenix-See, Dortmund

Business figures

Zalando was accumulating losses ever since it was founded until they started making profit in 2014. The most important cost factors for Zalando are fulfilment costs and marketing costs, both taking up 50% of total revenues alone without the costs of sales included, with marketing costs as high as 25% in 2010. They managed to become profitable for the first time in 2014 which was due to cost management and profitable sales in their additional markets. Almost 50% of their sales revenues are generated in Germany, Austria and Switzerland which they define as one geographic unit under "DACH". Their yearbook furthermore shows that the firm was already profitable in this geographic unit as early as 2012.

It reflects Zalando's growth strategy by which they deliberately sacrificed short-term profits for long-term growth. The online fashion retailer has hitherto surprised critics and supporters alike that their business model can be successful. The great risk lies in the generous shipping and return policies which are both free of charge for customers, while maintaining a variety of payment options of which 'payment after delivery' constitutes the most risky but also most attractive option for consumers. While their profitability is still very modest, they have successfully entered important markets in Europe, with Ireland, Czechia and Portugal the most likely countries to follow.

Year	Revenue (bn. Euro)	Profit/Loss in bn. Euro	Revenue growth	EBIT margin
2010	0,150	−0,020		−13,5 %
2011	0,510	−0,060	240%	−11,8 %
2012	1,150	−0,090	125%	−7,8 %
2013	1,800	−0,120	56%	−6,3 %
2014	2,200	0,082	26%	3,7 %
2015	2,958	0,107	33.6%	3,6 %

Controversies

In July 2012, German TV channel ZDF broadcast a report on the packing and distribution centre operated for Zalando by a provider near Berlin. The report stated that certain staff, who often commute more than 200 km per day from nearby Poland, are not allowed to sit down during their working day.

In November 2015 the Centre for Protection against Unfair Competition in Germany filed a suit claiming that Zalando misled consumers on the availability of certain products suggesting that they needed to act fast to buy them. Zalando said that they had already changed their marketing practices, taking the Centre's concerns into account. They claimed that they no longer informed consumers that there were "three items available" when more than three were available.

See also

• E-commerce
• Online shopping

External links

• Official website