Fabio Baum: “Zalando is and will be a very fashionable technology company”

Zalando‘s General Manager Nordics & Benelux, Fabio Baum, is looking forward to the holiday season after the already very busy Black Friday week. “We offered a smooth shopping experience despite the high order volume. Consumers in Belgium really waited and counted on the promotions”, the told RetailDetail. On 5 March, he will speak at RetailDetail’s Omnichannel & E-Commerce Congress 2024.

The luxury floor in a department store

There are numerous consumption trends at the moment, often going in very different directions, but one consistent trend is that customers are generally less ‘ready to buy’, Baum observes. Especially in the current macroeconomic climate, consumers are more hesitant. “Customers are thinking longer about their purchases. The time between adding something to the shopping basket and finally checking out is increasing.” However, when they do click on the purchase button, consumers choose higher-priced pieces on average as they feel they get to “reward” themselves.

In this global trend, Zalando sees plenty of reasons to further focus on its designer department. That increased focus has already turned the webshop’s designer category into something that “feels like the luxury floor in a department store”, with a very distinct and exclusive look and feel. Brand partners are given “an almost protected environment” there, alongside other brands relevant to them.

Baum believes Zalando can truly become a shopping destination for younger customers of contemporary designers. “Research tells us that by 2030, 80 % of luxury customers will be in their forties or younger. This is Gen Z, a group we know we reach. Our ambition is to attract many more designer brands. This ambition is fuelled by the fact that we notice the average customer does not wear a full designer brand outfit from top to bottom: they mix it with other items. The same people who buy a 2,000-euro dress, also shop for 60-euro shirts.”

Lessons learned from social media

Premiumisation also helps to fend off competition. “I think it is important to remind everyone that Zalando has a fundamentally different business model from some competitors that are now making a lot of inroads in Europe”, Baum hints at Chinese newcomers Shein and Temu without mentioning them by name. Zalando wants to be the starting point for fashion and lifestyle, which means that when you think about fashion and lifestyle, you should start your journey on the platform. For some customers, this is a journey where they want to buy something specific, but many customers mainly want inspiration. More than 70 % of Gen Z customers start their shopping journey by looking for inspiration.

The first pillar of the growth strategy is therefore to deepen the relationship with customers. Zalando wants to connect with its customers beyond just buying. This is why the company has a Plus membership programme (recently expanded to Belgium) and launches digital content via Stories. “E-commerce is moving away from purely transactional relationships – the way we have come to consume media information, social media and so on in the past year has fundamentally changed – so we are investing heavily in content and attractive new formats. We strongly believe that we can inspire the customer beyond the shopping basket, and we also see that customers in Belgium and the Netherlands really appreciate this.”

The second key pillar is the focus on curation and local relevance. The Zalando Plus programme is an example of this, as members have first access to exclusive product launches, discount offers on Lounge by Zalando and extra fast delivery. The launch in Belgium exceeded expectations: not only in the number of customers who signed up, but also in how they interact with the various Plus benefits. For example, many have already taken advantage of the assortment benefits, including during an exclusive partnership with Lacoste. “The Plus programme allows our partners to reach Zalando’s best and most loyal customers”, Baum said.

One way to create a connection is the option to “follow” brands on the platform. “If we look at the figures, such a follower is much more likely to view the brand’s range and ends up buying more often.” In other words, Zalando is increasingly behaving like a social network, but “social media commerce” is not what Baum wants to call it. The app and the site should remain the central channels.

The virtual fitting room is coming

Within that “relationship building”, technology plays a big role. “Zalando is a very fashionable technology company”, the managing director nods. “I feel we are innovating more than ever before, both for internal things (artificial intelligence for filling in product metadata, for example) and things that help the customer. We know that across Europe in e-commerce, around half of all fashion items are returned and a third of that is related to size and fit. We are the only e-commerce company to have a dedicated team for size and fit.”

Usually, products are already given a ‘size flag’ today, indicating whether something will come out large or small. Zalando determines this from manufacturer data, of course, but also by having customers fill in their size profile. “We also read into what we see in a customer’s return behaviour. Have you ever returned in the past and was that due to sizing? We use this information and we have already reduced the number of returns by 10 % this way.”

The next step is the virtual fitting room. At a conference, Zalando has already shown how it manages to determine body and fitting sizes by having people take two photos of themselves in close-fitting clothes. The next step is giving consumers their own avatar, with which they can try on clothes. “You will not only see if it is the right size, but also how it actually fits,” he says.

Online back at pre-pandemic level

With consumers being so cautious, what are the short-term growth expectations? “Zalando has always been a growth company and we will continue to be one. What we have to acknowledge is that we have seen a normalisation in the last two years after the COVID pandemic. We all assumed then that the online share would continue to grow from this new, higher base, but the reality is that the online share has returned to before the pandemic: we are seeing the same trend line as we would have had without COVID. This is clearly something we have to accept as an industry.”

“The good thing is that the online market will continue to grow in the coming years. We are investing now so that we are ready as soon as momentum and demand return. In the meantime, we have a clear focus on profitable growth. We are still assuming an adjusted EBIT of 300 to 350 million euros this year. Double-digit growth in our gross trading volume is our ambition in the medium term.”

“We are also now scaling up our B2B business, Zeos, where brands and retailers can use our logistics infrastructure. The feedback has been extremely positive and we know that the capabilities we have built are unique in Europe. That applies to the fulfilment infrastructure we have, but also to our technological capabilities. Given the progress we have made in a very short time, this is clearly a key growth driver for the longer term.”

Fabio Baum will speak at the RetailDetail Omnichannel & E-Commerce Congress on 5 March, as will Eva Faict, Amazon Country Manager Belgium.