Zalando’s Fresh Strategy : With a “pan-European ecosystem for customers and partners” and an updated plan to capture a “larger share of   fashion and lifestyle e-commerce market,” fashion e-tail behemoth Zalando made a splashful announcement on Wednesday.

Zalando’s Fresh Strategy Focuses on B2C and B2B Transformation

We have been informed that the ecosystem will help strengthen interactions with customers and partners by focusing on business-to-business and business-to-consumer growth directions.

What does this actually imply? When it comes to business-to-consumer sales, Zalando is “differentiating through quality, expanding into more lifestyle propositions and making fashion discovery more inspiring and entertaining.”

To further cement its position as a “key enabler for brands and retailers on and off the Zalando platform” in the business-to-business sector, it is releasing its logistics infrastructure, software, and service capabilities.

It projects a 5- to 10-percent compound yearly growth rate for GMV and revenue in 2028, as well as a 6- to 8-percent adjusted EBIT margin, all thanks to the new strategy.

Difficult times for e-commerce

FILE PHOTO: The logo of fashion retailer Zalando is pictured in Berlin, Germany, April 10, 2019. REUTERS/Hannibal Hanschke/File Photo

This move is in response to the fact that, ever since the e-commerce boom of the epidemic began to fade, online fashion companies have seen declining sales and dwindling profitability, if not outright losses. This has led to major problems for well-known brands like Farfetch and Matches, as well as for mass-market internet retailers like ASOS and Boohoo. Even Zalando has felt the effects, thus the company’s desire to reevaluate its approach is reasonable.

The firm has stated its goal of “to cover in the long term the equivalent of 15% of the European fashion market,” which is worth €450 billion. This is in reference to the argument that the new strategy will help it obtain a bigger portion of the entire market.

As stated in our revised mid-term forecast, “our ambition is to return to strong growth and continue our margin expansion,” co-CEO Robert Gentz added. In business-to-consumer, we’re going above and above in providing our 50 million European consumers with high-quality experiences and goods that complement their lifestyles, as well as with tailored information, ideas, and entertainment. In business-to-business transactions, we will use our one-of-a-kind logistical infrastructure, software, and services to fuel the operations of merchants and partners both on and off Zalando.

Buyers should be aware that this procedure has commenced. With features like sizing recommendations powered by computer vision and AI, it’s providing a more streamlined and personalized digital experience. Currently, proprietary sizing advice is available for around 60% of Zalando’s sold items.

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“Elevating existing categories into distinct propositions which offer a captivating experience by combining a more comprehensive assortment, advice features, personalized inspiration and seamless convenience” is the rationale behind its quick transition into a lifestyle destination.

Zalando is able to fulfill the growing demands of families by catering to the interests and needs of children in areas such as sports and kids and family. It intends to expand the number of European nations where its current proposals are available.

The typical European family already spends over 50% of their disposable income on lifestyle items, so this change is long overdue.

Additionally, it will be “integrating content into commerce and offering personalised inspiration and entertainment” across all categories.

According to the company, “it already started its journey it acquired Highsnobiety in 2022 and launched Stories on Zalando in 2023 to create entertaining content that will enhance engagement” through the use of data and technology.

Additionally, it is enabling more personalized conversations through platforms like the Zalando Assistant, leading to an increase in personalized services for customers.

Zolando will

Regarding business-to-business, Zalando is able to influence the European fashion and lifestyle industry outside of its consumer business through its newly established ZEOS division. For online stores like About You, ASOS, and Otto, this makes the firm an indispensable facilitator of sales.

It has partnerships with over 40 local carriers and a logistical network that includes 12 fulfillment centers, around 20 return centers, and more. Both its own full-stack e-commerce platform and Tradebyte, an integration platform for fashion and lifestyle marketplaces that it has controlled since 2016, are the driving forces behind the technology.

“Uniquely positioned to help brands and other fashion retailers overcome the inherent complexities of cross-border e-commerce in Europe, where they are faced with numerous languages, currencies, payment methods, delivery and returns options, as well as the need to manage multiple sales channels,” the company claims.

With a current revenue of €0.9 billion, ZEOS is already turning a profit. Software, services, and logistics are all a part of it.

Despite a difficult year for online fashion shopping, the company reported a profit in 2023 after meeting its amended estimate for gross merchandise volume (GMV) and revenue. It also achieved the upper end of its adjusted EBIT range.

The company’s goals for 2024 include getting back on track with growth, increasing profitability, and reinvesting in expansion. Gross merchandise value and sales are anticipated to remain steady to increase by 5% year over year, according to the company. It anticipates a range of €380 million to €450 million for adjusted EBIT.