Zalando has taken a series of measures to make its delivery services more efficient, to increase revenues and profitability, and to reduce the environmental impact of its operations. One such measure is to terminate home pick-up for premium German customers who wish to return items.
This service, which was part of a wider offer called Zalando Plus, has not always met quality standards or worked efficiently, the company said. Started in 2017, the Plus service provided for same-day deliveries, extra discounts and individualized customer service in exchange for a fee of €15 per year. The price of Plus membership will not change in the absence of the return service.
This loyalty program represented 10 percent of the company’s total gross merchandising volume (GMV), according to its third quarter results. Overall, the GMV rose by 24.6 percent to €1.9 billion during the quarter (see the separate article in this issue) and is expected to increase to €20 billion by 2023.
To help meet this financial target, Zalando has commissioned Knapp to equip its logistics center in the town of Bleiswik, near Rotterdam, with a shuttle system and sorting technology that should start to operate by 2021. Zalando has invested around €200 million to build the center, which will service customers in Western Europe, including the Netherlands, Belgium, Luxembourg, France, Spain and the U.K.
The company operates nine logistics centers, but the one near Rotterdam has the highest degree of automation and can store about 16 million items. According to Zalando, on peak days, several hundred thousand pieces leave the facility, thanks to a combination of shuttles and sorters.
Dürkopp Fördertechnik, a subsidiary of the Knapp Group, provides the sorting technology that enables such systems as the OSR Shuttle Evo, returns storage and manual warehouse processes to run efficiently at the same time. The group specializes in intelligent solutions for distribution and production. Together with its subsidiary, it provides solutions to Hugo Boss, Olymp, Christian Dior, Esprit and Marc Cain.
From Jan. 1, 2020, Zalando will also seek to improve its profit margins by increasing the fee it charges to firms for the use of its online platform. Companies seeking to operate on the marketplace will soon be paying a commission of up to 25 percent of their gross sales, which is comparable to those charged by other operators. Its present sales commission averages 14 percent.
Zalando aims to achieve a profit margin of 20 to 25 percent for its marketplace business, while simultaneously reducing product-related risks. It has already set a goal of generating 40 percent of its GMV from its marketplace, up from around 10 percent at present.
We are not sure whether it will get up to this level, in spite of partnerships with important brands like Adidas and many other brands and retailers. Birkenstock pulled out of Amazon’s marketplace in the U.S. two years ago, and Nike announced a similar move earlier this week, after a two-year experiment. Nike’s announcement came a few days after the news that John Donahoe, a former executive of eBay, will become the new president and chief executive of the company next Jan. 13 (more in Sporting Goods Intelligence Europe).
Furthermore, Zalando has launched a strategy called “do.More” to become carbon-neutral in its operations, deliveries and returns. By 2023, the company plans to introduce new eco-friendly packaging to minimize waste, while eliminating single-use plastics. It claims that its boxes are already made of 100 percent recycled materials, its shipping bags of 80 percent recycled plastics and its beauty bags of 100 percent recycled paper. Last month, Zalando introduced a four-week pilot to test re-usable packaging too.
Another part of the sustainability strategy is to work only with partners that meet Zalando’s ethical standards, which will be constantly raised over the next few years. In terms of products, the company’s private label brand, Zign, will be fully dedicated to sustainability from the summer of next year. Customers will find a broader range of eco-friendly items from over 240 brands. Zalando has committed to generating 20 percent of its Gross Merchandise Volume with more sustainable products by 2023. It has tripled the assortment of sustainable items from 2017 to 2019. In its online fashion stores, “green” products can be identified with a flag that will appear on any device.
To help save energy, Zalando is currently testing same-day delivery with electric cars. The online retailer recently started a pilot project in Hamburg with 24 electric cars, which are operated on 100 percent green electricity. Zalando works with various logistics partners. Hamburg’s urban area has 600 charging stations for electric cars. The pilot project in the city will run for three months, initially serving customers of Zalando Plus, the company’s premium delivery service.
At Zalando’s facilities, 90 percent of the energy comes from renewable sources. The company is cooperating with Fashion for Good for the use of a technology designed to improve transparency in its supply chains. Its Zimpact Program has identified more than 90 solutions to make the supply chain more transparent. The firm said that customers have re-used over one million items in 2019 through its resale platform, Zalando Wardrobe.
