Zalando has reportedly doubled the sales generated by its brand partnership programs in the last year, enabling brands to take advantage of Europe's leading online fashion retailing platform to sell extra products.
The German company sells about 2,000 brands in 15 European countries, buying products and delivering them from its warehouses. However, the partner program allows brands to sell extra stock through the Zalando platform, using their own inventories. These products sit alongside others dispatched by Zalando, and only the sharpest consumers will notice the difference, through a little icon under the product.
Zalando started the program six years ago with pilot brands including Adidas, but the retailer started ramping up the concept two years ago and it has since expanded to about 180 companies selling 700 brands. The program includes sports brands such as Adidas and Nike, along with more specialized sports brands like Bogner. It also features retailers like Pull & Bear, a banner of the Inditex group, that wouldn't otherwise engage in wholesale operations but started appearing on Zalando in October.
As reported by Reuters, products sold through the partner program make up nearly 10 percent of the gross merchandise value generated by the Zalando platform. The company said that the longer-term target is to raise that proportion to about 20 to 30 percent.
Zalando provides its partners with consumer data, and it supports them with their marketing strategies, online content, logistics and inventory management. Nike is apparently impressed, as it again mentioned Zalando several times in its latest conference call as an example of a productive relationship with an online retailer. The partner program helps Zalando to reinforce its relationship with brands, and to serve customers who may turn to other stores if Zalando no longer has the required products.
All of this could help Zalando to fend off competition from Amazon. Some brands have been reluctant to intensify their business with Amazon due to concern about branding and fierce price competition among resellers. Birkenstock recently decided to withdraw from Amazon in Europe, as reported in Shoe Intelligence, due to concerns over counterfeits. However, Euromonitor data reported by Reuters indicate that Amazon more than doubled its share in the western European market for online fashion in five years to reach 6.5 percent in 2016, just behind Zalando at 7.4 percent. The report adds that Amazon has signed up more than 350 brands in Europe in the past year.
Zalando is also reinforcing its operations through increased investments in logistics and technology. The group announced a few weeks ago that it was opening a fulfillment hub near Verona. Covering about 130,000 square meters, the distribution hub in Nogarole Rocca is meant to accelerate deliveries in Italy and to serve neighboring markets. The online retailer already has three such hubs in Germany and another one in Poland, with a second under construction in the same country, near Lodz. Smaller warehouses fulfill local demand in northern Italy, France and Sweden. Other investments include the opening of Zalando's third international tech hub in Lisbon at the start of next year.
As previously reported, the focus on growth and investment has put pressure on the German group's profit margin. While reporting a sales jump of 28.7 percent to €1,074.7 million in the third quarter of this year, the company saw its adjusted operating profit (Ebit) shrink to €0.4 million, down from €19.5 million in the year-ago period, and the group predicts that its operating profit margin for the fourth quarter will be slightly below last year's level.
