Zalando sells less but earns more

German fashion webshop Zalando saw its sales drop in the last quarter, but profits rose sharply. Technology, targeted marketing and partnerships with strong fashion brands should ensure further growth.

Higher average amount

While Zalando’s Gross Merchandise Volume dropped 1.8 % to 3.7 billion euros in what the fashion retailer calls a “challenging environment” and the number of orders fell from 67.8 million to 63.2 million, sales by partners on the platform did grow 7 % and the online shopping club Lounge by Zalando, which offers temporary discounts, also saw strong growth.

Operating profit (EBIT) got a huge boost from a higher average amount per order (causing lower logistics costs) and rose by a hefty 87 % to 144.8 million euros. More targeted marketing also contributed to profitability, as did the fact that more trading partners are using logistics services at Zalando Fulfillment Solutions, which recorded 3 % growth.

Artificial intelligence

Storytelling and technology should further boost Zalando’s growth, says co-CEO Robert Gentz. On the marketing side, the e-commerce player expects a lot from partnerships with new (luxury) brands such as Lululemon, Lancôme, Mugler and Shiseido. Sport is also a growth segment, including HOKA, a brand for innovative and high-quality running equipment.

Technology solutions contribute to the shopping experience and more efficient operations. The recently launched tool that gives customers personalised sizing advice based on artificial intelligence not only improves the shopping experience for customers – finding the right size is one of the biggest challenges in online fashion sales – but will also result in Zalando having to process fewer returns.

For the full financial year, Zalando now expects trading volume growth of between 1 and 7 % and EBIT between 300 and 350 million euros.