Zalando profits from new return conditions

During the first three months of 2019, German fashion web shop Zalando has exceeded expectations and expects to have made a profit after tightening its return policy.

Operating profit

In a short trading update on its website, Zalando indicates that it expects to make a small operating profit for the first quarter of 2019. Until now, analysts have been assuming a loss of around 10 million euros. Zalando does not mention an exact amount in the update; the final figures will not be published until next month.

CFO David Schröder said to be pleased with the performance for the first quarter, “demonstrating that we are focused on strong execution. These results are in line with the company’s full-year outlook” of an operating profit between 175 and 225 million euro. Zalando achieved a total turnover of 5.4 billion euro in 2018, but only achieved a modest net profit of 51 million euro. The company has been growing at a dizzy rate for years, but it has difficulty in making a profit.

Return policy

That Zalando has now exceeded expectations, may have something to do with several measures announced by the company at the beginning of this year. Until then, Zalando did not charge any shipping or return costs, with the result that many customers ‘took advantage’ of the service. Special occasion dresses, such as evening dresses and gala gowns, now have a large label attached, stating ‘do not remove this tag’. In this way, Zalando hopes to prevent customers returning articles they have worn.

Moreover, Zalando has started to impose shipping costs for smaller orders in Italy (and, as of today, also in Ireland, Spain and the United Kingdom). When the order amount is lower than 25 euros, an additional cost of 3.5 euros is charged (respectively 20 pounds and 3 pounds in the UK).