- An ecosystem centered around Business-to-Consumer (B2C) and Business-to-Business (B2B) growth vectors further deepens customer and partner relationships
- In B2C, Zalando differentiates itself through quality, expands its lifestyle offerings to include more, and makes fashion discovery more exciting and fun.
- In B2B, Zalando is working to unlock its logistics infrastructure, software and service capabilities to become a key enabler for brands and retailers both on and off the Zalando platform.
- The latest strategy will drive growth through 2028. The compound annual growth rate for both GMV and revenue is 5-10%. Adjusted EBIT margin in 2028 is 6-8%
Berlin, March 13, 2024 // Zalando is evolving its strategy to build a leading fashion and lifestyle e-commerce ecosystem across Europe, centered around two growth vectors: Business-to-Consumer (B2C) and Business-to-Business (B2B). I am. This ecosystem model is a strategic evolution from the current platform model, allowing Zalando to cover a larger share of the fashion and lifestyle e-commerce market and deepen its relationships with customers and partners. Masu.
In B2C, Zalando differentiates on quality to offer the best possible shopping experience in fashion and lifestyle, elevating existing categories such as sports and kids & family into distinct propositions and creating personalized We strengthen our role in our customers' lifestyle journeys by providing inspiration and entertainment. . In B2B, Zalando is opening up its logistics infrastructure, software and service capabilities to become a key enabler for e-commerce transactions for brands and retailers, whether they take place on or off the Zalando platform. doing. In the medium term, Zalando sees the B2B growth vector becoming a multi-billion euro business.
The updated strategy provides a path to medium-term growth and will support new financial targets through 2028. Zalando is targeting a compound annual growth rate of 5-10% in both gross merchandise volume (GMV) and revenue over the next five years. . The outlook for adjusted earnings before interest and taxes (adjusted EBIT) as a percentage of revenue is 6-8% in 2028. In both B2C and B2B, Zalando aims to cover the equivalent of 15% of the European fashion market in the long term. , worth 450 billion euros.
“Our goal is to return to strong growth and continue to expand our margins, as reflected in our new medium-term guidance,” said Robert Gentz, co-CEO of Zalando. Stated. “At B2C, we go beyond transactions by providing our 50 million customers across Europe with even higher quality experiences and products that fit their lifestyles, personalized content, inspiration and entertainment. B2B We look forward to leveraging our unique logistics infrastructure, software and services to enhance the business of our partners and sellers within and outside Zalando.”
B2C: Your destination for quality fashion and lifestyle shopping and inspiration.
The first growth pillar of a B2C strategy is to differentiate through quality and drive customer acquisition and retention. Quality touches every part of the customer journey, including assortment, digital experiences, sustainable and inclusive choices, and personalized convenience. Already offering a high-quality assortment featuring global brands such as Adidas, Lululemon, Hoka, On, Lancôme and Missoni, Zalando is further improving the excellence of its assortment.
Zalando also uses tools such as size advice using computer vision and artificial intelligence (AI) to provide a more seamless and customized digital experience. Around 60% of all products sold on Zalando already have their own sizing advice. Additionally, the company is enabling more sustainable choices and further embedding diversity and inclusion by offering product choices that take different lifestyles and identity characteristics into account, such as a new adaptive fashion collection for customers with disabilities. I'll go. Our investments in high-quality logistics operations also continually improve the customer experience, providing best-in-class convenience with reliable, localized delivery options.
The second growth pillar of Zalando's B2C strategy is to further expand as a lifestyle destination by following people's lifestyle choices and building more areas that cater to their lifestyle needs. The company is elevating existing categories into distinct propositions that deliver engaging experiences by combining a more comprehensive assortment, advisory features, personalized inspiration, and seamless convenience. . Areas that Zalando incorporates into its offer include sports, which are becoming an increasingly important part of customers' lifestyles and social lives. With Kids & Family, Zalando can meet more needs of families as children grow up and become more interested in their lifestyle. Zalando also plans to roll out its existing offer in more European countries.
The average European household spends more than half of its discretionary income on lifestyle products. This means Zalando can grow with them as they spend time in different areas. Serving customers according to their fashion and lifestyle needs will increase the adoption of multiple offers and help Zalando capture a higher share of customers' wallets.
The third growth pillar for B2C is based on integrating content into commerce to deliver personalized inspiration and entertainment. Zalando uses data and technology to create interesting content that drives engagement. This work has already begun with the acquisition of Highsnobiety in 2022 and the launch of his Stories on Zalando in 2023. The company also has Zalando Assistant. Customers will increasingly obtain customized products to solve the challenges of overwhelming choice and information overload. For example, Zalando Assistant uses proprietary data and generated AI to help customers navigate the assortment through a conversational and contextual search experience. Adding inspirational content and social features increases user engagement, increases time spent in the app, and increases ad revenue from brands and partners.
“Our B2C strategy around quality, lifestyle and inspiration clearly differentiates us from our competitors and will continue to gain market share,” said David Schneider, co-CEO of Zalando. . “Our customers want greater ease of use, convenience and digital experiences. But beyond that, new digital-first generation customers are looking for inspiration and entertainment while shopping online. With our data and technology, you can integrate engaging content into your e-commerce and enable personalized conversations with your customers. There is a huge opportunity to engage with your customers on a whole new level. ”
B2B: The operating system that enables e-commerce across Europe, both inside and outside Zalando.
In addition to B2C, Zalando will also report figures for the B2B segment from 2024. His recently launched ZEOS business allows Zalando to shape the European fashion and lifestyle industry beyond its own consumer business. This makes the company a key enabler of e-commerce beyond Zalando, for example via About You, ASOS and Otto Marketplace.
Over the past 15 years, Zalando has built a strong operational logistics and technology backbone tailored to the needs of the fashion and lifestyle industry. His logistics network consists of 12 fulfillment centers and approximately 20 return centers, benefiting from relationships with over 40 local carriers. This technology is powered by the company's proprietary full-stack e-commerce platform and Tradebyte, a leading fashion and lifestyle marketplace integrator owned by Zalando since 2016. As a result, ZEOS is uniquely positioned to help brands and other fashion retailers overcome their inherent complexities. Europe faces the need to manage multiple sales channels, along with numerous languages, currencies, payment methods, shipping and return options. ZEOS currently has a revenue of 900 million euros.
ZEOS runs on Zalando's operational backbone and is currently building an operating system for the fashion and lifestyle industry that enables the entire multichannel value chain direct to customer, from integration to customer fulfillment. doing. ZEOS is based on his three key proposals. First, logistics with shared infrastructure and a network of fulfillment centers, return hubs, and carriers – the backbone of any e-commerce business. The second layer is software, which is a layer of digital services.
Leveraging Tradebyte's existing capabilities, the software enables brands to take control of their entire e-commerce business and provides data-driven recommendations on how to optimize their business. And third is service. This is a layer on top where third-party software and service providers can integrate their products to support brands and retailers with additional e-commerce needs such as content and financial solutions. All three layers are modular and can be used together in one package or individually depending on your business needs.
Zalando will be a force for positive change in the industry
The updated strategy will also help Zalando deliver positive change towards a more sustainable and inclusive future for the fashion and lifestyle industry. Customers have access to a more sustainable and transparent assortment, allowing them to make choices that align with their values. With its ecosystem approach, Zalando enables its partners to work towards their sustainability goals and also helps them understand the rapidly evolving regulatory environment. Zalando's goal is to achieve net-zero CO2 emissions across its business by 2040, in its own and private label businesses, and by 2050.
Zalando drives profitability in 2023
In 2023, Zalando achieved revised guidance for GMV and revenue and achieved the high end of its adjusted EBIT range in a challenging year for the online fashion retail industry. In 2023, gross merchandise value decreased by 1.1% to EUR 14.6 billion, and sales decreased by 1.9% to EUR 10.1 billion. Full-year adjusted EBIT increased from EUR 185 million to EUR 350 million, resulting in an adjusted EBIT margin of 3.5%, an increase of 1.7 points from 2022.
As partners continue to grow their business with Zalando, more and more partners are choosing to use our fulfillment services. In the fourth quarter, the share of partner business in the fashion store's GMV increased by approximately 2.8 points to 39.2%, and the share of goods shipped by Zalando Fulfillment Solutions increased by 4 points year-on-year to 62%. Ta. In the fourth quarter, Zalando focused on increasing profitability and improving gross margin. Adjusted EBIT for the quarter was 183 million euros, up 25% year-on-year, in line with market expectations.
Dr. Sandra Denbeck, CFO of Zalando, said: “These improvements and our strong balance sheet allow us to invest in the strategic priorities of our ecosystem vision, including quality of customer experience, new fashion and lifestyle offerings, technology to increase customer engagement, and expansion of B2B services. We have the financial strength to successfully build a fashion and lifestyle e-commerce ecosystem. ”
Zalando plans to return to its growth trajectory in 2024, further increasing its profitability and investing in future growth. The company expects his GMV and revenue to increase by 0-5% in 2024 compared to his 2023. Zalando remains focused on profitable growth with improved margins. Adjusted EBIT in 2024 is expected to be between EUR 380 million and EUR 450 million.
The 2023 Annual Report, Earnings Presentation for Analysts and Investors and Strategy Update Presentation are available on the Zalando Investor Relations website. Zalando is scheduled to report his 2024 first quarter results on May 7, 2024.
