Forced by lower sales, Zalando seeks expansion in lifestyle

Zalando is losing sales and customers, so the e-commerce giant is forced to look for a new strategy. The fashion platform now wants to expand into lifestyle products, such as children’s gear and sporting goods.

Sales drop in 2023

The German company is struggling with a declining number of customers (to just under 50 million, down from 51 million in 2022) and fewer orders. Its operating profit (EBIT) did climb from 185 to 350 million euros, accounting for a slightly higher profit margin of 3.5 %. Half of the profit comes from apparel sales.

Zalando’s combined gross sales (i.e. the total value of all sales) fell 1.1% to 14.6 billion euros, while the actual sales figure (its commissions and own sales) dropped 1.9 % to 10.1 billion euros. Clothing sales accounted for over 8.5 billion euros of that turnover, with the rest coming from other activities such as fulfilment for other parties and advertising.

Growth elsewhere

Those figures force Zalando to look elsewhere for growth. “The average European household spends more than half of its discretionary income on lifestyle products. That means Zalando can grow with them as they spend across different areas”, the company said in a press release. This has inspired the company to become more than a fashion marketplace, with separate propositions for categories such as sports and children.

Zalando also plans to make full use of external fulfilment: ZEOS Business, launched last year, allows partner brands to use Zalando’s logistics infrastructure, software and services outside the platform for their e-commerce, even to sell at rivals such as About You, Asos or Otto. ZEOS is already profitable, and its current sales figure of 0.9 billion euros means these B2B activities can soon grow into a veritable multi-billion-dollar business.

A new strategy also means new long-term forecasts: by 2028, Zalando is now counting on gross and net sales growing 5 to 10 % annually, with an EBIT margin of 6 to 8 %. With both B2C and B2B, Zalando’s long-term goal is to cover the equivalent of 15 % of the European fashion market, which is worth 450 billion euros.