Zalando has unveiled plans to double in size by 2020, raising its annual sales from €3.6 billion to €7.6 billion, as part of an ambitious new strategy that will include providing new services to brands like Adidas and Nike. Founded in Berlin in 2008, the German company has quickly expanded to become Europe's largest pure online fashion retailer, with a strong position also in the sports lifestyle segment, but as the pace of growth has slowed, the e-tailer is seeking to diversify.
The company had until recently focused on offering more than 1,500 brands to consumers in 15 countries from huge suburban warehouses. With the new Fulfillment Solution, for which Nike will be one of the first clients, Zalando is changing from being just a wholesaler to becoming a provider of services to the brands. As previously reported, Zalando is already doing so by offering customers in the Berlin area direct access to Adidas' German warehouse.
On offer are the technological and logistics expertise of the company, as well as its loyal customer base. Zalando claims more than 200 million monthly visits to its e-commerce site. In the first quarter of 2017, 68 percent of its online traffic came from mobiles, amounting to 20.4 million active customers.
The Zalando Fulfillment Solutions, a potentially more lucrative business than just selling fashion items, will run as a third-party offer separate from the primary online marketplace. According to Zalando, the wholesale model accounts for about 90 percent of revenues and yields an Ebit margin of 10 percent. The margins of the new services are expected to be higher.Brands pay a commission to Zalando for storing products and fulfilling orders made through the Zalando website. To support the service, a new supply chain model has been rolled out that uses algorithms to predict demand so the retailer can quickly replenish items.
The service, which has been launched in Austria, France, Germany, the Netherlands and Spain, is to help retailers and brands to expand into new territories quickly. Besides Nike, Bestseller, the Danish fashion group which owns Jack & Jones and Vero Moda, is one of the first major customers for the service. Ander Povlsen, the owner of Bestseller, has held a 10 percent stake in Zalando since 2013. Weekday, a brand of H&M, has also signed up, as has Elvi, a plus-size fashion retailer from the U.K.
Zalando currently operates eight logistics hubs in Europe, four of them in Germany and two each in northern Italy and in France. The company plans to open a new 130,000-square-meter logistics center in Szczecin in Poland in the autumn. Another 30,000-square-meter center in Brunna near Stockholm should be operational by the end of the year. With these openings, Zalando will have the capacity to handle €8 billion in sales per year.
Meanwhile, Nike's share price gained about two percent after a Reuters report indicating that it is considering becoming a wholesale dealer on Amazon, selling its products to consumers directly on its internet marketplace rather than through other online retailers. Adidas and Under Armour already sell directly to consumers through Amazon in the U.S..
The move could reportedly raise Nike's global sales by one percent, while giving it the possibility to better control pricing and its image on the web. It could reduce the revenues of Foot Locker and other sports retailers, and this had a negative impact of their share price.
The highly publicized report was followed by the news that Fouzan Mansuri, director and category leader for sports and fitness at Amazon, has become a member of the board of the Sports & Fitness Industry Association (SFIA) of the U.S.
