Zalando must share consumers with stores again

Now that people can start shopping in person again, Zalando‘s empire is (somewhat) gone. Growth slowed down, and, this autumn, the online fashion platform had to lure consumers back with discounts.

Competitive fashion market

Zalando cannot keep up its spectacular Covid growth now that people can start shopping in person again. In the last third quarter, the German online retailer achieved a sales growth of 23 per cent; in the second quarter, there was still growth of 40 per cent. Turnover reached 2.3 billion euros, just above analysts’ expectations.

The company points to a very competitive fashion market with many price campaigns to get people shopping again in the aftermath of the pandemic. Zalando also had to spend more on discounts and marketing. The e-commerce platform started in six new markets in Eastern Europe simultaneously.

In the red

In the third quarter, the platform had 46.3 million active users, considerably more than the 35.6 million users in the same period of 2020. The number of orders rose by almost 27 per cent, the number of online visitors grew from 1.27 billion to 1.7 billion people.

At the same time, however, losses increased: an operating profit of 9.8 million euros became a net loss of 8.4 million euros. A year earlier there was still a net profit of 58.5 million euros. “Despite rising inflation and uncertainties in the supply chain, we remain confident that we can achieve our raised prospects for the full year”, reassures David Schroeder, chief financial officer.

Plus membership

Zalando is also tapping into the new retail favourite, the ‘rundle’: from now on, Dutch customers can get a Plus membership, which entitles them to express delivery and pick-up return services for the price of nearly 10 euros annually. They also get exclusive access to limited edition items and designer pieces. 

From Albert Heijn to Fnac Darty, almost every major consumer company is launching a similar type of subscription model nowadays. Professor Scott Galloway calls them ‘rundles’ or ‘recurring revenue bundles‘. They offer retailers the advantage of a fixed income, increased loyalty, and additional data on consumers. In turn, consumers can save money or enjoy other benefits.

You can read more about ‘rundle’ and why it is the new holy grail of retail in the new book The Future of Shopping: Re-set Re-made Re-tail that will be published by LannooCampus in the spring of 2022.