Zalando

Zalando SE
Societas Europaea
Traded as FWB: ZAL
Industry Online retailing
Founded 2008 (2008)
Founder Rocket Internet, Robert Gentz, David Schneider
Headquarters Berlin, Germany
Area served
 Europe
Key people
 Robert Gentz
(Chairman, President & CEO), David Schneider, Rubin Ritter
Revenue Increase € 2.958 billion (2015)
Increase € 89.6 million (2015)
Number of employees
 9,987 (December 2015)
Subsidiaries Zalando Lounge, MyBrands Zalando Verwaltungs GmbH, MyBrands Zalando eLogistics, MyBrands Zalando eServices, MyBrands Zalando eStudios, MyBrands Zalando eProductions, zLabels GmbH, EMEZA, KIOMI
Website corporate.zalando.com
Advertisement on a house in Cologne, 2015: "Topshop@Zalando" with Cara Delevingne

Zalando SE is a European electronic commerce company seated in Berlin. The company maintains a cross-platform online store that sells shoes, clothing and other fashion items. The company was founded in Germany in 2008, and since has began operating in fourteen European countries and worldwide with spin-offs and subsidiary companies.

History

Zalando was created in 2008 by Rocket Internet, Robert Gentz and David Schneider, initially under the name Ifansho.[1] Inspired by US online retailer Zappos.com,[2] Zalando initially specialised in the sale of footwear but has since included other areas of fashion and sports.

In 2009 Zalando began operations outside of Germany when it started offering deliveries to Austria. In 2010 the company launched in the Netherlands and France, and in 2011 it opened online retail sites in the UK, Italy and Switzerland. In 2012 it launched in Sweden, Denmark, Finland, Norway, Belgium, Spain and Poland.

In 2014 Zalando was listed on the Frankfurt Stock Exchange.[3] Since 22 June 2015, Zalando has been included in the MDAX. In 2015, Zalando started collaborating with Topshop and began selling merchandise in their physical stores. Advertisements featuring the model Cara Delevingne were broadcast in Germany, Switzerland and France.[4]

In June 2015, the Berlin-based fashion trade fair "Bread & Butter" was acquired by Zalando, with the intention to open the globally important event to a broader audience as a "fashion festival".[5]

Business model

The core of Zalando's operations is conducted in Germany with centralized management located in their Berlin headquarters. Amidst waves of business outsourcing, especially since the financial crisis, Zalando's choice to operate and manage its logistics centers in-house has led critics to conclude that the company was digging itself an early grave.[6] The company made firm its belief that it could only optimize its business operations by taking care of the management itself. Internet technology is at the heart of their operations, employing over 1000 IT-workers alone in countries with locational advantages in IT in Ireland (Dublin) and Finland (Helsinki).[7] They have actively developed and optimized its logistic centers to cut down on costs and to increase speed of preparing the customer's order.

Eliminating boundaries to online shopping

They gain their competitive advantage through their generous shipping and return policies, which come at no additional costs while promising a speedy delivery of the ordered items. Additionally, they offer 'payment after delivery', which involves a certain risk for the company. The option to pay after receiving the items, as well as the 90 days return policy are highly attractive options for internet shoppers and exert an even stronger influence on first-time online buyers who hold back on purchasing online often because of the perceived risk that is involved.

These two policies pose a major inventory management risk which is especially strong in the fashion industry with the risk of not being able to sell the items if they have gone out of fashion in this rapid changing industry. However, thanks to its efficient and effective management of their logistic centers, they seem to be able to contain this threat. Whereas many critics and watchdogs expressed concerns that the company would never be profitable, it has since 2014 proven them wrong.

Geographical presence

European countries in which Zalando operates

The company operates in the following European countries: Germany, Austria, Switzerland, France, Belgium, the Netherlands, Italy, Spain, Poland, Sweden, Denmark, Finland, Norway and the United Kingdom.

United Kingdom

In 2011 Zalando launched Zalando.co.uk, thereby offering its retail services to UK customers. Deliveries were operated by YODEL. In the same year Zalando launched a TV ad in English, replicating the humorous format used in its German-language commercials. In it, a long-suffering husband bemoans his wife’s addiction to buying shoes and warns other men about the dangers of introducing women to Zalando.

In 2015, Zalando acquired a 20% stake in Cheltenham-based software company Anatwine, headed by a former ecommerce director of SuperGroup, for a seven-figure sum. Anatwine's software - which helps online fashion retailers and brands integrate their processes, systems and stock files - will enable current and future clothing and accessory brand clients to use Anatwine’s technology to sell their merchandise through Zalando. Zalando is expected to speedily widen Anatwine's range of brands.[8]

Further expansion

Ireland

There is no official report on why the company has not expanded towards Ireland. It is the only country in North-West Europe where Zalando isn't active. Although the company actively manages an off-shore IT-hub located on the silicon docks with around 200 employees working for the internet retailer.[9] Ireland as an island state implies that Zalando has only 2 options to service this market. It can only ship its parcels by shipping them overseas, or it must build/outsource a logistics center on the island itself. It is questionable whether either option could be profitable given the size of the Ireland market. Furthermore, Zalando would not be able to guarantee its shipping policy and fast delivery service. Shipping through the UK would theoretically be more economical, but to date, there exists no bridges or tunnels linking the two countries together.

Zalando IT Center (Dock 1), Phoenix-See, Dortmund

Business figures

Zalando was accumulating losses ever since it was founded until they started making profit in 2014. The most important cost factors for Zalando are fulfilment costs and marketing costs, both taking up 50% of total revenues alone without the costs of sales included, with marketing costs as high as 25% in 2010.[10] They managed to become profitable for the first time in 2014 which was due to cost management and profitable sales in their additional markets. Almost 50% of their sales revenues are generated in Germany, Austria and Switzerland which they define as one geographic unit under "DACH". Their yearbook furthermore shows that the firm was already profitable in this geographic unit as early as 2012.[11]

It reflects Zalando's growth strategy by which they deliberately sacrificed short-term profits for long-term growth. The online fashion retailer has hitherto surprised critics and supporters alike that their business model can be successful. The great risk lies in the generous shipping and return policies which are both free of charge for customers, while maintaining a variety of payment options of which 'payment after delivery' constitutes the most risky but also most attractive option for consumers.[12] While their profitability is still very modest, they have successfully entered important markets in Europe, with Ireland, Czech Republic and Portugal the most likely countries to follow.

Year Revenue (bn. Euro) Profit/Loss in bn. Euro Revenue growth EBIT margin
2010[13][14] 0.150 −0.020 −13.5 %
2011 0.510 −0.060 240% −11.8 %
2012 1.150 −0.090 125% −7.8 %
2013[11][15] 1.800 −0.120 56% −6.3 %
2014[16] 2.200 0.082 26% 3.7 %
2015[17] 2.958 0.107 33.6% 3.6 %

Controversies

The German newspaper Bild reported on statements of the German Federal Economic Ministry indicating that Zalando received around 3,3 million Euro, between 2007 and 2012, in subsidies from regional development programs. Zalando also requested subsidies for the year 2013. The Deutschen Mittelstandsnachrichten reported that the Samwer brothers’ business model is predicated on using foreign capital and cheap labour to quickly build up a company, selling it as fast as possible.

In July 2012, German TV channel ZDF broadcast a report on the packing and distribution centre operated for Zalando by a provider near Berlin.[18] The report showed the appalling working conditions at the company providing logistical services to Zalando. In the logistical center of Großbeeren certain staff, who often commute more than 200 km per day from nearby Poland, are not allowed to sit down during their working day.[19] It was further shown that employees were subject to continuous scrutiny, workspace was extremely confined and for several hundreds of employees there was only one filthy toilet container. The ZDF also criticized the hourly wage of € 7,01, which was nonetheless in conformity with the minimum hourly wages for agency workers in East-Germany. Following the ZDF report it was revealed that Zalando had also received a 22,5 million euro subsidy from the government of Thüringen to build a new headquarters. According to a ZDF reporter who went undercover, around 40 employees are being paid by the taxpayer between seven and nine days every month in the framework of apprenticeship programs, while one third of the employees are agency workers. Following the report Zalando announced that it would scrutinize its service providers more strictly. In April 2014 RTL broadcast the documentary Working under timepressure (Arbeiten unter Dauerdruck), which had been made with the support of undercover journalist Günter Wallraff. The documentary led to renewed criticism on the labour conditions at Zalando. Journalist Caro Lobig worked undercover for three months as an order picker in the logistical center at Erfurt. During an eight-hour shift she had to walk up to 27 kilometers. After five weeks she started to suffer from circulation problems. According to an anonymous employee working at the ambulance service, there is hardly a day when they are not called to the logistics center. According to a labour judge interviewed by RTL, Zalando violates German Labour law because of its rules on breaks, by prohibiting its employees from sitting down and by imposing airport-security-type measures on its employees. Through its tight control over its employees, Zalando would also be in violation of privacy rules. RTL requested Zalando to give comments to the allegations but Zalando refused.[20] Instead, Zalando filed a complaint against Lobig for revealing corporate secrets. Lobig in turn filed a complaint against the company regarding her severance pay.[21]

In November 2015 the Centre for Protection against Unfair Competition in Germany filed a suit claiming that Zalando misled consumers on the availability of certain products suggesting that they needed to act fast to buy them. Zalando said that they had already changed their marketing practices, taking the Centre's concerns into account. They claimed that they no longer informed consumers that there were "three items available" when more than three were available.[22]

See also

References

  1. ↑ Jaffé, Diana; Riedel, Saskia (8 December 2010). Werbung f8r Adam und Eva: Zielgruppengerechte Ansprache durch Gender Marketing Communication. Wiley-VCH. p. 215. ISBN 978-3-527-50549-4. Retrieved 13 September 2011.
  2. ↑ Bloomberg Businessweek; 3/5/2012, Issue 4269, p74-80, 6p, 5 Color Photographs
  3. ↑ Zalando to Raise Up to $815 Million in German E-Commerce IPO Retrieved on 31 January 2015
  4. ↑ Saramowicz, Caroline. "Another Day, Another Cara Delevingne Campaign! Model Fronts Topshop's Zalando Campaign". graziadaily.co.uk. Retrieved 31 May 2015.
  5. ↑ Zalando kauft Berliner Modemesse Bread & Butter (German), Berliner Zeitung, 8 June 2015
  6. ↑ O'Hear, Steve. "Samwer Zappos Clone Zalando Takes On A Hefty €40.7 Million In Debt Financing". TechCrunch. Retrieved 2016-04-27.
  7. ↑ "Zalando Geschäftsbericht 2015 Bilanzen und Berichte". annual-report.zalando.com. Retrieved 2016-04-27.
  8. ↑ Retrieved on 22 May 2015
  9. ↑ Briggs, Bill. "German e-retailer Zalando grows web sales 36% in 2015". Retrieved 2016-04-27.
  10. ↑ Year report Zalando 2012
  11. 1 2 Zalado's year report of 2013
  12. ↑ "Zalando GMBH". Retrieved 2016-04-22.
  13. ↑ "Für Umsatzrekord zahlt Zalando einen hohen Preis". Die Welt (online) (in German). 2013-02-15. Retrieved 2013-10-21.
  14. ↑ Max Wilken (2012-02-20). "Zalando macht Miese trotz Umsatzexplosion". Fabeau.de (in German). Retrieved 2013-10-21.
  15. ↑ Jonas Rest (16 February 2014). "Online Modehandel Zalando: Zalando macht sich fit für die Börse". fr-online.de (in German). Retrieved 2015-02-14.
  16. ↑ "Zalando erzielt Jahresgewinn nach starkem vierten Quartal" (in German). 11 February 2015. Retrieved 2015-02-17.
  17. ↑ "ZALANDO CONTINUES ON HIGH GROWTH PATH" (in German). 1 March 2016. Retrieved 2016-03-02.
  18. ↑ Nach heftiger Kritik: Zalando-Partner reagiert, FashionUnited 02 August 2012.
  19. ↑ "ZDF-Zoom: Im Zalando-Lager ist den Arbeitern Sitzen verboten - Golem.de".
  20. ↑ Zalando Stellungnahme
  21. ↑ Lukas Bay, Martin Dowideit (2014-04-15). "Zalando geht juristisch gegen RTL-Journalistin vor". handelsblatt.com (in German). Retrieved 2015-02-14.
  22. ↑ Thomasson, Emma (5 November 2015). "German private-sector watchdog accuses Zalando of false advertising". Reuters. Retrieved 5 November 2015.
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