Zalando accelerates support for brands during COVID-19 crisis

Zalando

Zalando, the global online fashion platform, has outlined a series of initiatives to help support its brand partners through the COVID-19 crisis from increasing liquidity to clearing over-stocks.

The company said it can help brands, both existing partners and potential new partners, to connect with its 32m active customers to make sales and “reanimate their business” through the Zalando platform.

“After a tough March, we see customer demand coming back and we want partners to access this. We want to support all kinds of fashion brands, designers and retailers suffering from the effects of the coronavirus crisis and strengthen the diversity of the industry. That’s why Zalando now offers immediate solutions to increase liquidity, clear overstock and launch or expand Direct-to-Consumer business.

“For small to midsize partners we will push onsite visibility worth five million euros via Zalando Marketing Services until the end of 2020, because we believe our Partner Program is the best way for smaller brands to put their creations in front of millions of customers,” said Zalando co-CEO David Schneider.

Zalando is offering free connection to its platform within 12 days. Via the Partner Program, brands can connect to the systems without up-front expenses. For better cash flow, Zalando will increase the frequency of revenue pay-outs earned through the Partner Program to every 14 days until the end of June. To release overstock pressure, the off-price channel Zalando Lounge is offering consignment deals and will take care of order fulfilment.

During the Easter Weekend alone, Zalando partners sold more than one million items through the partner program, it says. Brands are able to integrate their stock directly into the Zalando Fashion Store, retain control over the assortment, prices and brand representation. They can also take advantage of various services, such as Zalando Fulfillment Solutions and Zalando Marketing Services, both aimed at helping brands “overcome challenges in their digital value chain by leveraging Zalando’s technology, marketing or convenience strengths with a highly distributed and flexible logistics network of 11 sites across five different countries”.

At the end of March Zalando launched an expanded Connected Retail service allowing bricks and mortar retailers to connect directly to online customers via the Zalando platform. Zalando waived commission fees for the program until 31 May and installed a weekly pay-out cycle to help with liquidity. Over the past two weeks, it has received more than 160 requests from retailers to join the program.

Physical stores shipped around 35,000 items over the Easter weekend alone. The best performing partner, with a total of three connected stores, received 2,300 orders in one day, says Zalando. Shoppers in Germany can choose to support stores in the Connected Retail platform via the filter option “directly from a store.”

After strong growth in January and February this year, Zalando said it initially noticed a significant decrease in customer demand as a consequence of social distancing measures that were taken across Europe. In the three weeks following 9 March, Zalando observed negative growth of its Gross Merchandise Volume (GMV) of -8% year-over-year. In the two weeks following 30 March, GMV started to grow again compared to last year.

According to preliminary figures for the first quarter, Zalando has grown its GMV by between 13.1% and 14.3% to €1.98 to €2bn (Q1 2019: €1.75bn), and group revenues by between 10.1% and 11.6% to €1.52bn to €1.54bn (Q1 2019: €1.38bn). The company expects an adjusted EBIT in a range of -€90m to -€110m (Q1 2019: €6.4m) as a result of lower sales growth in the first quarter and an exceptional inventory write-down of €40m as a result of the revised sales expectations for the current season.

The Zalando Group has access to a current cash position of around €1.03bn (as of March 31, 2020), which “allows it to invest through-cycle even in this challenging time.”