Zalando made a big pitch for its marketplace at the Ispo Digitize Summit in Munich last month, pointing out that it can help suppliers and retailers of sports and fashion products in many ways. As previously reported, it wants it to contribute to 40 percent of its gross merchandising value (GMV) by 2024, up from around 10 percent at present. Competing with the likes of Amazon, Zalando claims that it is more focused on these kinds of items and less interested in working with discounters.
The German-based e-tailer, which has also recently developed a new, complementary segment of beauty products, also requires lower commissions, averaging 14 percent of sales, to accommodate brands and retailers on its marketplace. In return for this, Zalando takes care of all the digital functions including the development of digital content as well as marketing, customer care, the processing of payments and the use of big data. A special algorithm developed by Zalando gives higher rankings and visibility to retailers who are more responsive, delivering products faster and receiving fewer order cancellations.
More than 1,100 points of sale in Germany are now connected with Zalando's partnership program, up from 600 last October. The program was launched three years ago through a cooperation with an Adidas store in Berlin, and Zalando has just started to internationalize it with a trial in the Netherlands. The retail partners include German retailers like Engelhorn, which operates in sports and fashion, and independent retailers affiliated with the ANWR Group, the very digital-oriented parent company of voluntary groups like Sport 2000 Germany and ANWR Schuh.
Among other benefits, Zalando's Connected Retail program gives brands and retailers more visibility on the internet. It helps them to improve brand awareness, customer traffic and inventory turns, while controlling the pricing of their products. It can help brands and retailers to program their future assortments and to determine where they should open a new store by analyzing customer demand for the products that they offer on the marketplace. It can also optimize the benefits of local campaigns tailored on the consumer insights derived from the traffic on the marketplace.
According to Zalando, these and other benefits can generate 30 percent higher profits for the retailers, particularly because they can reach out to new customers who tend to shop on its website. For the brands, they are said to outweigh risks like the possible loss of some wholesale customers.
Arguing that their programs represent a win-win situation for the partners and the consumers, Carsten Keller , vice president of direct-to-consumer operations at Zalando, and Matthias Schulte, chief executive of Tradebyte, a software company that belongs to Zalando, noted at the convention that marketplaces and similar platforms such as Netflix, Uber or Spotify respond to a growing demand from consumers for a single point of entry in their internet searches for products and services. “The consumer picks the channel,” said Schulte, mentioning the omni-channel approach of brands like Mammut.
Zalando and Tradebyte are also working with brands on specific projects to adapt their systems and help optimize their logistic operations, making choices in tune with the growing omni-channel configuration of the market.
Their managers and other participants at the Munich convention discussed at length the changing mindset of the consumer and its consequences on the purchasing behavior and related processes. As with ride sharing programs, the service is becoming more important than the product, but it must be intuitive and fun to use, offering the right problem-solving solution, and one that is possibly scalable, said one of them.
Ryan Mullins, director of future trends at Adidas, and other participants said that any digital platform should build up trust among consumers, for example using skilled photographers like Airbnb does. Mullins said he supports the development of new creative and impactful applications, like those of Apple, built like gaming mechanisms that can drive engagement and monetization. He called for open-source co-creation methods for disruptive innovations whose benefits should possibly be measurable.
A common denominator at the conference was the desire to use digital platforms to create communities with a collaborative spirit. Obviously, for marketplaces like that of Zalando, one major benefit is the website's ability to attract new customers while offering a greater choice of items at various price points, particularly products that are in strong demand.
In a strategic move intended to give customers access to highly sought sneaker styles, Farfetch, a marketplace that is positioned in the luxury segment of the market, a year ago bought Stadium Goods, which was also connected with Zalando and other more generic platforms like Amazon, eBay and Tmall. In 14 months, its annual turnover doubled to $80 million.
