With 31 million active customers and accumulating revenue of $3.2 billion from January to June 2019, Zalando has been staking its claim in the online fashion market over the last 12 years with a mix of mostly mid-market brands like Calvin Klein, Adidas, Levi’s, Ugg, and Guess.
The move is in line with customer expectations, said Zalando Co-Chief Executive David Schneider. In 2019, the company saw over 20 million searches for luxury brands on its site, demonstrating that the Zalando customer is craving high-end items. Over the last 18 months, Zalando has been updating its premium offering with diffusion lines like See by Chloe and Victoria Victoria Beckham, which Schneider said customers have been enthusiastic about.
“We’ve seen enormous success with our premium segment and now is the right time to expand further into luxury,” Schneider told BoF. “From the customer demand side, we see enormous potential.”
Zalando is widely hailed as one of Europe’s most successful internet stories. It's the largest online fashion retailer in Europe, coming in front of Amazon and Asos. It sells in 17 markets across Central and Northern Europe, with its strongest markets in Germany, Austria, Switzerland.
But it’s entering an already crowded luxury e-commerce space, competing with multi-brand retailers including Net-a-Porter, MatchesFashion, Amazon-owned Shopbop and Farfetch, as well as single-brand e-commerce sites and discovery platforms like Instagram.
"Farfetch is no Uber of luxury goods distribution: most of the luxury goods brands worth their salt already have limousines of their own,” Luca Solca, an analyst with Bernstein, wrote in a November 2019 note.
Zalando offers free shipping and a 100-day return policy. But these are perks shoppers have come to expect thanks to Amazon, which is rumoured to be moving further into fashion with a luxury platform of its own.
Zalando’s point of differentiation, Schneider said, is its mix of high and low fashion. It has affordable brands commonly found at a Millennial favourite like Asos, but will also now have luxury — a rarer combination.
Shoppers aren’t being broken into categories anymore; they don’t say they are a luxury buyer or shop commercial.
“Shoppers aren’t being broken into categories anymore; they don’t say they are a luxury buyer or shop commercial,” Schneider said. “They go from commercial brands to high-end to premium, and so we are taking a different approach by serving the customer more broadly. If we offer them a range, we will serve them very well.”
Zalando, which is public and trades on the Frankfurt stock exchange, intends to triple product sales from its premium and luxury products over the next four years. This expansion also tracks with the shopping trends of Millennials and Gen Z, Schneider added.
“We see how the younger generation behaves: they buy used clothes, they mix and match high and low, and that’s why we believe in building a fashion [site] that’s relevant for any customer to satisfy their fashion needs,” he said. “This is a combination no one else can build.”
The retailer has also been courting high-end shoppers with Zalando Plus, its membership programme that’s a response to Amazon Prime and includes unlimited free one-to two-day express home delivery and a personalised customer service experience.
Lena-Sophie Roeper, the company’s buying director of premium and luxury, said some luxury brands will be designing exclusive product for Zalando. These will be released alongside a larger marketing campaign in September during Paris Fashion Week that will target its 17 markets.
Zalando, Roeper noted, has been able to forge intimate relationships with some companies because it stocks their diffusion line. This has amounted to access to the creative teams and style directors at companies like Chloe, Victoria Beckham and Proenza Schouler, who are assisting Zalando on campaigns that are infused with the brands’ aesthetic.
Zalando’s goal, Roeper added, is to eventually sell “ultra-luxury” brands like Gucci, but said its approach into high fashion will be gradual.
The company has begun preparing for its luxury assortment by building out a separate page for its high-end designers. Roeper said they are also experimenting with more elevated packaging options for luxury purchases, which will have “sustainability in mind.”
We see how the younger generation behaves: they buy used clothes, they mix and match high and low.
Even with exclusive product and nicer packaging, Zalando will have its work cut out to stay ahead — not just facing off with other luxury commerce sites, but from the burgeoning resale market, as well as the direct channels of the very luxury brands it is starting to carry. Plus, the assortment of luxury is slim to begin with, and Zalando will need an appealing offering to be considered in the space.
But Zalando has been making aggressive moves into Eastern and Central Europe, as the demand for luxury fashion in those markets grows, and there is no dominant player there just yet. A new fulfilment centre in the city of Lodz will help Zalando target shoppers in Poland and the Czech Republic.
Roeper said its high-low approach is ultimately what will set the company apart.
“We might not have the true ultra-luxury customer but we have customers that are aspirational, love to mix and match, and want a site where they can get everything in one destination,” she said.
Editor's Note: This article was revised on 27 February, 2020 to update the last name of Lena-Sophie Roeper, which was changed from Lena Krups.