Zalando today announced major moves into luxury fashion and second-hand clothing along with further investments in European logistics as it presented strong growth figures for 2019.
The German-based company, which describes itself as “Europe’s leading online platform for fashion and lifestyle”, was unable to forecast what impact the fast spread of the Covid-19 virus might have on its business. But executives underlined that most of its stocks for forthcoming spring and summer sales are already in its warehouses.
In 2019, Zalando’s 31 million active customers, a 17% rise on the previous year, made 145 million orders for goods worth €8.2 billion (+23.6%) in Gross Merchandise Volume (GMV). This generated a 20.3% increase to revenues of €6.5 billion for the company, which improved adjusted operating profits to €224.9 million from the previous year’s €173.4 million.
Growth was especially pronounced in the fourth quarter with GMV up 24.3% to €2.5 billion and revenue up 19.5% to €2 billion at an adjusted EBIT of €110.4 million, pushed by record-breaking results during Cyber Week, Zalando said.
This year, the company expects to increase its GMV between 20% and 25%, revenues to grow between 15% and 20% in 2020, and an adjusted EBIT between €225 and 275 million (excluding a potential negative impact caused by the coronavirus outbreak).
“We look back at a very successful year. We achieved strong financial results in every single quarter,” said CFO David Schröder. “While delivering those results, we have made strong progress on our strategic agenda.”
In line with its platform strategy, Zalando significantly grew the share of the Partner Program, which at the end of the year accounted for 15% of its Fashion Store GMV. Growth was enabled through scaling services that make it easier for brands to be successful on the platform such as Zalando Fulfillment Solutions (ZFS) and Zalando Marketing Services (ZMS).
Around 40% of Partner Program items were shipped through ZFS in the fourth quarter, it pointed out. The company expects its fulfilment service to sort and deliver about 50% of partner goods this year.
Luxury fashions and second-hand items in 2020
Outlining its plans for this year, Zalando announced that it will expand its premium segment to include luxury brands and seek a higher share of the €38 billion market for premium fashion. Its sales of premium fashions from 260 brands already grew by 35% last year.
The online retailer has recently added Moschino Couture and Alberta Ferretti, and will further expand the category “by creating an inspiring and relevant experience for both customers and brand partners”. It aims to double its premium and luxury assortment before year-end 2023.
“Especially younger customers like to mix and match high-street fashion brands with sports and designer pieces. Premium has been our fastest-growing category in the past months, and we see a huge potential to build on that,” explained co-CEO David Schneider.
Additionally, the company will get into the second-hand clothes segment with the launch of “Pre-Owned” as a new category in the third quarter of 2020 following a successful pilot scheme. Customers in Germany will be able to buy curated pre-owned fashion, as well as sell their pre-owned fashion items to the retailer.
Zalando said this category launch supports its ambition to build deep customer relationships by creating even more customer touch points and brings it closer to the goal to become a sustainable fashion platform.
New Spain logistics centre to improve coverage of southern Europe
Meanwhile, Zalando also announced another major investment to further expand its European logistics network. The company plans to open a local warehouse in Spain to significantly improve its convenience offering and unlock future customer growth in the region. However, it did not disclose the location, the size of the facility or the opening date.
According to a Reuters report, co-CEO Rubin Ritter told reporters that Zalando will invest about €330 million on logistics this year, including the new warehouse in Spain.
Last month, Zalando started operations at a 130,000 sqm fulfilment centre in Nogarole Rocca, near Verona in northern Italy, which is also serving customers in southern France, Spain, Austria and Switzerland. It also opened its third logistics centre in Poland earlier this month.
Overall, Zalando now has 15 fulfilment centres in six European countries. It is currently investing €200 million in a new 140,000 sqm facility at Bleiswijk, near Rotterdam, that will open in summer 2021, catering to customers in Western Europe (mostly Netherlands, Belgium, Luxembourg, France, Spain and UK).
The company is also expanding delivery services through initiatives such as the Zalando Plus loyalty scheme which offers free express deliveries, premium same-day deliveries in the evenings in selected markets, and ‘deliver to neighbour’ tests.
