Zalando posted lower sales in 2023 but expects to at least stabilize revenues this year and resume growth from 2025. The German online fashion group also outlined its long-term plans to cover 15 percent of the European fashion market.
In 2023, the gross merchandise volume (GMV) decreased by 1.1 percent year-over-year to €14.6 billion, and revenues declined by 1.9 percent to €10.1 billion. Full-year adjusted Ebit rose to €350 million from €185 million a year earlier, resulting in an adjusted Ebit margin of 3.5 percent, up by 1.7 percentage points. Net income rose to €83.0 million from €16.8 million, while capital expenditure dropped to €263.2 million from €351.7 million. “Our financial discipline meant that we were able to deliver on another quarter of improved profitability,” said CFO Sandra Dembeck.
In 2024, the company expects GMV and revenues to grow by 0 to 5 percent and adjusted Ebit is forecast at between €380 million and €450 million. Over the next five years to 2028, Zalando aims for a compound annual growth rate of 5 to 10 percent for both GMV and revenues, while the adjusted Ebit margin is forecast at 6 to 8 percent in 2028. In the long term, Zalando aims to cover the equivalent of 15 percent of the European fashion market, which it estimates is worth €450 billion annually.
“Our ambition is to return to strong growth and continue our margin expansion, as reflected in our new mid-term guidance,” said Robert Gentz, the co-CEO of Zalando. “In B2C, we will move beyond transactions by giving our 50 million customers across Europe even better quality experiences and products that fit their lifestyle and personalized content, inspiration and entertainment. In B2B, we will power the businesses of partners and merchants on and off Zalando, leveraging our unique logistics infrastructure, software and services.”
In the business-to-consumer segment, Zalando aims to be “the go-to destination for quality fashion and lifestyle shopping as well as inspiration.” The first growth pillar for B2C “is differentiating through quality to drive customer acquisition and retention.” The group claims that it is already delivering a high-quality assortment featuring global brands like Adidas, Lululemon, Hoka, On Holding, Lancôme and Missoni, and that it is further improving “the excellence of its assortment.”
The retailer said that it is offering a more seamless and tailored digital experience with tools such as size advice, which uses computer vision and artificial intelligence (AI). About 60 percent of all items sold on Zalando already feature proprietary size advice, it said.
The second growth pillar is to expand further as a lifestyle destination, “following people’s lifestyle choices and building out more areas that address their lifestyle needs,” it added. Areas that Zalando is building into propositions include Sports and Kids & Family, where it believes it can meet more needs of families as the kids grow and develop lifestyle interests. It also plans to roll out more of its existing propositions in more European countries.
The third growth engine for B2C is based on integrating content into commerce and offering personalized inspiration and entertainment. Zalando noted that it is using data and technology to create entertaining content that will enhance engagement, a journey it already started with its acquisition of Highsnobiety in 2022 and the launch of Stories on Zalando in 2023. “Customers will increasingly get tailored offerings to help solve the challenge of overwhelming choice and information overload. For example, the Zalando Assistant uses proprietary data and generative AI to help customers navigate through the assortment via a conversational and contextual search experience. Additional inspirational content and social features will increase user engagement and time spent on the app, resulting in higher advertising revenue from brands and partners,” it explained.
Starting this year, Zalando will report separate figures for its business-to-business (B2B) segment. The recently launched ZEOS business enables “Zalando to shape the European fashion and lifestyle industry beyond its own consumer business. It makes the company a key enabler for e-commerce transactions beyond Zalando, for example via the About You, ASOS or Otto marketplaces,” it stated. The group’s logistic network comprises 12 fulfillment centers and about 20 return centers and benefits from relationships with more than 40 local carriers. ZEOS is already profitable and generates €0.9 billion in revenues, according to Zalando.
“ZEOS is running on Zalando’s operational backbone and is now building an operating system for the fashion and lifestyle industry to enable the entire value chain of multi-channel direct-to-customer, all the way from integration to customer fulfillment. ZEOS rests on three key propositions. First, logistics with a shared infrastructure and network of fulfillment centers, return hubs and carriers – a backbone of any e-commerce business. Second, software, a layer of digital services,” it added.
“Utilizing the existing capabilities of Tradebyte, the software will allow brands to steer their entire e-commerce business and provide data-driven recommendations on how to optimize their business. And third, services, a layer on top where third-party software and service providers can integrate their offering, to support brands and retailers with additional e-commerce needs, for example, content or financing solutions. All three layers are meant to be modular, meaning they can be used together in one package or separately, based on business needs,” Zalando concluded. Tradebyte is a fashion and lifestyle marketplace integrator owned by Zalando since 2016.
