Company Announcements

                                                                                                                       

Zalando evolves strategy to cover larger share of fashion and lifestyle e-commerce market with pan-European ecosystem for customers and partners

• Ecosystem around Business-to-Consumer (B2C) and Business-to-Business (B2B) growth vectors will further deepen customer and partner relationships

• In B2C, Zalando is differentiating through quality, expanding into more lifestyle propositions and making fashion discovery more inspiring and entertaining

• In B2B, Zalando is opening up its logistics infrastructure, software and service capabilities to become a key enabler for brands and retailers on and off the Zalando platform

• Updated strategy will drive growth through 2028: GMV and revenue both with a compound annual growth rate of 5-10%; adjusted EBIT margin of 6-8% in 2028
   

Berlin, March 13, 2024 // Zalando is evolving its strategy to build the leading pan-European fashion and lifestyle e-commerce ecosystem around two growth vectors: Business-to-Consumer (B2C) and Business-to-Business (B2B). The ecosystem model is a strategic evolution from the current platform one, and will enable Zalando to cover a larger share of the fashion and lifestyle e-commerce market as well as deepen relationships with customers and partners.

In B2C, Zalando is differentiating itself through quality to offer the best possible shopping experience in fashion and lifestyle, enhancing its role in customers’ lifestyle journeys by elevating existing categories such as Sports and Kids & Family to distinct propositions, and offering personalised inspiration and entertainment. In B2B, Zalando is opening up its logistics infrastructure, software and service capabilities to be a key enabler for e-commerce transactions of brands and retailers, regardless whether they take place on or off the Zalando platform. In the mid-term, Zalando sees the B2B growth vector developing into a multi-billion-euro business.

The updated strategy sets out the path for growth in the medium term and will support new financial targets through 2028. Zalando aims for a compound annual growth rate of 5-10% for both Gross Merchandise Volume (GMV) and revenue over the next five years. The outlook for adjusted earnings before interest and tax (adjusted EBIT) as a percentage of revenue is 6-8% in 2028. With both B2C and B2B, Zalando aims to cover in the long term the equivalent of 15 percent of the European fashion market, which is worth 450 billion euros.

“Our ambition is to return to strong growth and continue our margin expansion, as reflected in our new mid-term guidance,” said Robert Gentz, co-CEO of Zalando. “In B2C we will move beyond transactions by giving our 50 million customers across Europe even better quality experiences and products that fit their lifestyle and personalised content, inspiration and entertainment. In B2B, we will power the businesses of partners and merchants on and off Zalando, leveraging our unique logistics infrastructure, software and services.”

B2C: The go-to-destination for quality fashion and lifestyle shopping as well as inspiration

The first growth pillar of the B2C strategy is differentiating through quality to drive customer acquisition and retention. Quality relates to every part of the customer journey: assortment, digital experience, sustainable and inclusive choices, as well as personalised convenience. Already delivering a high quality assortment featuring global brands like adidas, lululemon, Hoka, On, Lancôme and Missoni, Zalando is further improving the excellence of its assortment.

Zalando is also offering a more seamless and tailored digital experience with tools such as size advice, which uses computer vision and Artificial Intelligence (AI). About 60% of all items sold on Zalando already feature proprietary size advice. Furthermore, the company will enable more sustainable choices and embed diversity and inclusion even more by providing product choices that are considerate of different lifestyles and identity characteristics, for example with new ranges of its Adaptive Fashion collections for disabled customers. Investments in high-quality logistics operations are also continuing to improve the customer experience, offering best-in-class convenience with reliable, localised delivery options.

The second growth pillar of Zalando’s B2C strategy is to expand further as a lifestyle destination, following people’s lifestyle choices and building out more areas that address their lifestyle needs. The company is elevating existing categories into distinct propositions which offer a captivating experience by combining a more comprehensive assortment, advice features, personalised inspiration and seamless convenience. Areas that Zalando is building into propositions include Sports, which is an increasingly important part of its customers’ lifestyles and social lives; and Kids & Family, where Zalando can meet more needs of families as the kids grow and develop lifestyle interests. Zalando also plans to roll out more of its existing propositions in more European countries.

The average European household spends more than half of its discretionary income on lifestyle products. That means Zalando can grow with them as they spend across different areas. Serving customers across their fashion and lifestyle needs will increase multi-proposition adoption and enable Zalando to capture a higher share of customers’ wallet.

The third B2C growth pillar is based on integrating content into commerce and offering personalised inspiration and entertainment. Zalando is using data and technology to create entertaining content that will enhance engagement, a journey it already started with its acquisition of Highsnobiety in 2022 and the launch of Stories on Zalando in 2023. The company is also powering more personalised conversations with tools such as the Zalando Assistant. Customers will increasingly get tailored offerings to help solve the challenge of overwhelming choice and information overload. For example, the Zalando Assistant uses proprietary data and generative AI to help customers navigate through the assortment via a conversational and contextual search experience. Additional inspirational content and social features will increase user engagement and time spent on the app, resulting in higher advertising revenue from brands and partners.

“Our B2C strategy around quality, lifestyle and inspiration clearly sets us apart from the competition and will continue to win us market share,” said David Schneider, co-CEO of Zalando. “Our customers want even better usability, convenience and digital experience. But beyond that, new digital-first generations of customers want inspiration and entertainment while shopping online. Using our data and technology, we can integrate engaging content into e-commerce and enable personalised conversations with our customers. There is a massive opportunity to engage with customers on a whole new level.”

B2B: The operating system to enable e-commerce across Europe on and off Zalando

In addition to B2C, Zalando will report figures for its B2B segment, starting in 2024. The company’s recently launched ZEOS business enables Zalando to shape the European fashion and lifestyle industry beyond its own consumer business. It makes the company a key enabler for e-commerce transactions beyond Zalando, for example via the About You, ASOS or Otto marketplaces.

Over the past 15 years, Zalando has built a powerful operational logistics and technology backbone tailored to the needs of the fashion and lifestyle industry. The logistic network is made up of 12 fulfilment centres, about 20 return centres, and benefits from relationships with more than 40 local carriers. The technology is powered by the company’s proprietary full-stack e-commerce platform and Tradebyte, the leading fashion and lifestyle marketplace integrator owned by Zalando since 2016. As a result, ZEOS is 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. ZEOS is already a profitable 0.9 billion-euro-revenue business today.

ZEOS is running on Zalando’s operational backbone and is now building an operating system for the fashion and lifestyle industry to enable the entire value chain of multi-channel direct-to-customer, all the way from integration to customer fulfilment. ZEOS rests on three key propositions. First, logistics with a shared infrastructure and network of fulfilment centres, return hubs and carriers - a backbone of any e-commerce business. Second, software, a layer of digital services.

Utilising the existing capabilities of Tradebyte, the software will allow brands to steer their entire e-commerce business and provide data-driven recommendations on how to optimize their business. And third, services, a layer on top where third party software and service providers can integrate their offering, to support brands and retailers with additional e-commerce needs, for example, content or financing solutions. All three layers are meant to be modular, meaning they can be used together in one package, or separately, based on business needs.

Zalando to be an enabler for positive change in the industry

The updated strategy will also help Zalando to be an enabler of positive change for a more sustainable and inclusive future of the fashion and lifestyle industry. Customers will have access to a more sustainable and transparent assortment and thus be enabled to make choices aligned with their values. With its ecosystem approach, Zalando will also enable partners to work towards their sustainability ambitions and help them understand the rapidly evolving regulatory environment. Zalando’s ambition is to achieve net-zero CO2 emissions for its own operations and private label business by 2040, and across the entire business by 2050.

Zalando drives profitability in 2023

In 2023, Zalando met its revised guidance for GMV and revenue, and even achieved the top end of its adjusted EBIT range in a challenging year for online fashion retail.

In 2023, GMV decreased 1.1% to 14.6 billion euros and revenue declined 1.9% to 10.1 billion euros. Full-year adjusted EBIT rose to 350 million euros from 185 million euros, resulting in an adjusted EBIT margin of 3.5%, up 1.7 percentage points from 2022.

Partners continue to grow their business on Zalando and more are choosing to use the fulfilment service offering. The share of partner business in the Fashion Store’s GMV increased by almost 2.8 percentage points to 39.2% and the share of items shipped by Zalando Fulfillment Solutions increased by 4 percentage points to 62% in the fourth quarter compared to the previous year. In the fourth quarter, Zalando focused on increasing profitability and improving the gross margin. Adjusted EBIT rose 25% to 183 million euros in the quarter compared with a year ago, in-line with market expectations.

“Our financial discipline meant that we were able to deliver on another quarter of improved profitability,” said Dr. Sandra Dembeck, CFO at Zalando. “These improvements, along with our healthy balance sheet, enable us to invest in the strategic priorities of our ecosystem vision, such as the quality of the customer experience, new fashion and lifestyle propositions, technology to increase customer engagement and expanding our B2B offering. We have the financial strength to successfully build the ecosystem for fashion and lifestyle e-commerce.”

In 2024, Zalando plans to return to growth, further increase profitability and invest in future growth. The company expects GMV and revenue to grow 0 to 5% in 2024 compared with 2023. Zalando will continue to focus on profitable growth with margin progression. It expects adjusted EBIT to be between 380 million euros and 450 million euros in 2024.

The Annual Report 2023, as well as the earnings presentation and strategy update presentation are available on the Zalando Investor Relations website. Zalando will report the results for the first quarter 2024 on May 7, 2024.

(End)
 

Zalando at a glance

Key figures
IN EUR M	FY/23	FY/22
Group GMV	14,631.6	14,788.7
Percent growth	-1.1 %	3.2 %
Group revenue	10,143.1	10,344.8
Percent growth	-1.9 %	-0.1 %
Fashion Store revenue	8,241.9	8,634.2*
Thereof DACH	3,638.2	3,809.9*
Thereof Rest of Europe	4,603.7	4,824.3*
Offprice revenue	1,776.1	1,602.8
Other revenue	399.6	373.4
Reconciliation revenue	-274.5	-265.6*
Adjusted group EBIT	349.9	184.6
Adjusted group EBIT margin	3.5 %	1.8 %
Fashion Store adjusted EBIT	282.3	91.6
Thereof DACH	282.3	178.7
Thereof Rest of Europe	-0.1	-87.1
Offprice adjusted EBIT	43.6	56.6
Other adjusted EBIT	29.4	39.8
Reconciliation adjusted EBIT	-5.3	-3.3
Net working capital	-441.8	-211.6
Capital expenditure	-263.2	-351.7
Net income	83.0	16.8

 

	FY/23	FY/22
Key performance indicators
Active customers (million) (last 12 months)	49.6	51.2
Number of orders (million)	244.8	261.1
Average orders per active customer (last 12 months)	4.9	5.1
Average basket size (EUR) (last 12 months)	59.8	56.6

Definitions are available in the Annual Report 2023

* Prior year figures adjusted, please check Annual Report 2023 (chapter Results by segment) for more information.

 

About Zalando

Founded in Berlin in 2008, Zalando is building the leading pan-European ecosystem for fashion and lifestyle e-commerce around two growth vectors: Business-to-Consumer (B2C) and Business-to-Business (B2B). In B2C, we offer an inspiring and quality multi-brand shopping experience for fashion and lifestyle products to about 50 million active customers in 25 markets. In B2B, we are using our logistics infrastructure, software and service capabilities to help brands and retailers run and scale their entire e-commerce business, on or off Zalando. As an ecosystem, Zalando aims to enable positive change for the fashion and lifestyle industry.

 

Contact

Media inquiries
Sheenagh Matthews
Business & Financial Communications
presse@zalando.de

 

Investor/Analyst inquiries
Patrick Kofler
Investor Relations
investor.relations@zalando.de