Zalando has to come up with something new

Zalando has to come up with something new

After the hangover of the pandemic, the European ecommerce market has returned to its natural dimension. Zalando, the German big name in online fashion, closed 2022 with stable revenues at 10.3 billion euros (-0.1% compared to 2021 when they had grown by 30%) but had to record a crash in profitability: the operating margin it is 0.8%, at 81 million euros, against 4.1% in 2021 with Ebit at 424.7 million. The group's net profit was affected, which collapsed to 16.8 million against 234.5 in 2021. "The past years have suffered the effect of the pandemic, now the trend of the ecommerce market, especially that linked to fashion, is back in line with the forecasts for 2019”, explained Robert Gentz, co-CEO of Zalando, at the press conference. “A faster turnaround than expected,” he added in the letter to shareholders.

Positive note of 2022 was the continued growth in the number of active customers, +6% to exceed 51 million in 25 markets, followed by the number of orders improving by 3.5% and rising to 261, 1 million. The Plus loyalty program has also more than doubled its subscribers, who are now over 2 million in Europe, and physical stores have also grown: 25 stores in 2022, two more than in 2021. growing our client base in the current economic environment demonstrates that our core strategy is working,” Gentz ​​explained.

The focus remains firmly planted on profitability. Zalando's employees will be the first to pay the price, as already announced in recent weeks and confirmed today, the company plans a redundancy plan: "To ensure profitability growth in 2023 and beyond, Zalando will continue to work to improve the margin operating. In February 2023, the company embarked on a program to reduce complexity and adopt simplicity, pragmatism and frugality. This results in the elimination of several hundred general roles in many teams ”.

Targeting 10% of the European fashion market

Zalando will celebrate its 15th birthday in September. By the end of 2023, management expects a revenue trend in a range between -1% and +4%, with an Adjusted Ebit rising to between 280 and 350 million euros (the Adjusted Ebit in 2022 is 184 million ). The year will not be easy, with international tensions that continue to worry Europe and inflation, forecast at 5.6% by Eurostat for the end of 2023.

“The However, our vision of the enormous growth opportunities in the market has not changed: we still see great potential for Zalando in the European fashion market which is worth 450 billion euros - explained Gentz ​​-. In the medium term, we have a clear vision: return to double-digit growth in Gross merchandise value (GMV), with Adjusted Ebit growth between 3 and 6% in the coming years, to reach the high end of the range in 2025 By executing our strategy we are very confident that we can serve 10% of the European fashion market in the long term” , up from the current 3%.

Logistics as-a-service for fashion brands

A future that will also project itself into a business to business dimension. A novelty for the former German startup, historically focused on the direct relationship with its customers. The will of the management is to grow in the long term by making the logistics infrastructure available to other companies to accelerate the entry of new partners into the group's ecosystem.

A taste was already had in October 2022 with the pilot project for fashion and lifestyle brands called Multi-channel fulfillment which opens Zalando's ecommerce solutions to brands that sell with other platforms and through their own online shops. A solution, it is explained in the documents presented to the market, of “logistics -as-a-service to offer our partners access to our unique capabilities in the logistics services network for the fashion and lifestyle sector, to scale their business addressing consumers in a sustainable, flexible and economic way". The pilot project, Zalando says, "has aroused a lot of interest and partners like Pepe Jeans are already on board".