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Zalando SE is a German electronic commerce company based in Berlin. The company maintains a cross-platform online store that sells shoes, fashion and beauty items. The company was founded in Germany in 2008, and since has begun operating in fifteen European countries and worldwide with spin-offs and subsidiary companies. Swedish company Kinnevik is the largest owner with 32%.
|Traded as||FWB: ZAL|
|Founder||Rocket Internet, Robert Gentz, David Schneider|
(Chairman, President & CEO), David Schneider, Rubin Ritter
|Revenue||€ 4.49 billion (2017)|
|€ 215 Million (2017)|
Number of employees
|Subsidiaries||Zalando Lounge, MyBrands Zalando Verwaltungs GmbH, MyBrands Zalando eLogistics, MyBrands Zalando eServices, MyBrands Zalando eStudios, MyBrands Zalando eProductions, zLabels GmbH, EMEZA, KIOMI|
Zalando was created in 2008 by Rocket Internet, Ruysen Fee and David Schneider, initially under the name Ifansho. Inspired by US online retailer Zappos.com, Zalando initially specialised in the sale of footwear but has since included other areas of fashion and sports.
In 2009 Zalando began operations outside of Germany when it started offering deliveries to Austria. In 2010 the company launched in the Netherlands and France, and in 2011 it opened online retail sites in the UK, Italy and Switzerland. In 2012 it launched in Sweden, Denmark, Finland, Norway, Belgium, Spain and Poland.
Since 2013, inspired by tech companies from the East, especially China, Zalando decided to overhaul its successful European online fashion store into a digital platform. Emulating Chinese companies, Zalando set off into remaking itself into a digital shopping mall, allowing fashion houses and retailers to make sales as well, often with limited input from Zalando.
In 2014 Zalando was listed on the Frankfurt Stock Exchange. Since 22 June 2015, Zalando has been included in the MDAX. In 2015, Zalando started collaborating with Topshop and began selling merchandise in their physical stores. Advertisements featuring the model Cara Delevingne were broadcast in Germany, Switzerland and France.
In October 2017, Zalando launched a beauty concept store in Berlin which offers host product launches and events.
In February 2018, Zalando expanded its collaboration with physical retailers in Germany.
In June 2018, Zalando expanded its operations to Ireland and the Czech Republic. The markets are served over the existing logistic sites of Zalando.
The core of Zalando's operations is conducted in Germany with centralized management located in their Berlin headquarters. Amidst waves of business outsourcing, especially since the financial crisis, Zalando's choice to operate and manage its logistics centers in-house has led critics to conclude that the company was digging itself an early grave. The company employs over 1600 IT-workers across offices in Germany (Berlin, Hamburg, Dortmund), in Ireland (Dublin), in Finland (Helsinki) and Portugal (Lisbon).
The company also runs an off-price site for designer clothing dubbed Zalando Lounge with the tag line 'Exclusive brands for amazing prices'.
Eliminating barriers to online shoppingEdit
Zalando's competitive advantage comes through their customer-centered shipping, return and payment policies. They offer 'payment after delivery', which involves a certain risk for the company. The option to pay after receiving the items, as well as the 100 days return policy are highly attractive options for internet shoppers and exert an even stronger influence on first-time online buyers who hold back on purchasing online often because of perceived risk.
These two policies pose a major inventory management risk, which is especially strong in the fashion industry, where it is hard to sell the items if they have gone out of style. As a result, over 50% of items are returned by customers, who take advantage of the return policies.
The company operates in the following European countries: Germany, Austria, Switzerland, France, Belgium, the Netherlands, Italy, Spain, Poland, Sweden, Denmark, Finland, Norway, Ireland, the Czech Republic and the United Kingdom.
In 2011 Zalando launched Zalando.co.uk, thereby offering its retail services to UK customers. Deliveries were operated by YODEL. In the same year Zalando launched a TV ad in English, replicating the humorous format used in its German-language commercials. In it, a long-suffering husband bemoans his wife’s addiction to buying shoes and warns other men about the dangers of introducing women to Zalando.
In 2015, Zalando acquired a 20% stake in Cheltenham-based software company Anatwine, headed by a former ecommerce director of SuperGroup, for a seven-figure sum. Anatwine's software - which helps online fashion retailers and brands integrate their processes, systems and stock files - will enable current and future clothing and accessory brand clients to use Anatwine’s technology to sell their merchandise through Zalando. Zalando is expected to speedily widen Anatwine's range of brands.
Zalando was accumulating losses ever since it was founded until they started making profit in 2014. The most important cost factors for Zalando are fulfilment costs and marketing costs, both taking up 50% of total revenues alone without the costs of sales included, with marketing costs as high as 25% in 2010. They managed to become profitable for the first time in 2014 which was due to cost management and profitable sales in their additional markets. Almost 50% of their sales revenues are generated in Germany, Austria and Switzerland which they define as one geographic unit under "DACH". Their yearbook furthermore shows that the firm was already profitable in this geographic unit as early as 2012.
It reflects Zalando's growth strategy by which they deliberately sacrificed short-term profits for long-term growth. The great risk lies in the generous shipping and return policies which are both free of charge for customers, while maintaining a variety of payment options of which 'payment after delivery' constitutes the most risky but also most attractive option for consumers.
|Year||Revenue (bn. Euro)||Profit/Loss in bn. Euro||Revenue growth||EBIT margin|
The German newspaper Bild reported on statements of the German Federal Economic Ministry indicating that Zalando received around 3,3 million Euro, between 2007 and 2012, in subsidies from regional development programs. Zalando also requested subsidies for the year 2013. The Deutsche Mittelstandsnachrichten reported that the Samwer brothers’ business model is predicated on using foreign capital and cheap labour to quickly build up a company, selling it as fast as possible.
In July 2012, German TV channel ZDF broadcast a report on the packing and distribution centre operated for Zalando by a provider near Berlin. The report showed the appalling working conditions at the company providing logistical services to Zalando. In the logistical center of Großbeeren certain staff, who often commute more than 200 km per day from nearby Poland, are not allowed to sit down during their working day. It was further shown that employees were subject to continuous scrutiny, workspace was extremely confined and for several hundreds of employees there was only one filthy toilet container. The ZDF also criticized the hourly wage of €7,01, which was nonetheless in conformity with the minimum hourly wages for agency workers in Germany. Following the ZDF report it was revealed that Zalando had also received a 22,5 million euro subsidy from the government of Thüringen to build a new headquarters. According to a ZDF reporter who went undercover, around 40 employees are being paid by the taxpayer between seven and nine days every month in the framework of apprenticeship programs, while one third of the employees are agency workers. Following the report, Zalando announced that it would scrutinize its service providers more strictly.
In April 2014 RTL broadcast the documentary Unrelenting pressure in the workplace (Arbeiten unter Dauerdruck), which had been made with the support of undercover journalist Günter Wallraff. The documentary led to renewed criticism on the labour conditions at Zalando. Journalist Caro Lobig worked undercover for three months as an order picker in the logistical center at Erfurt. During an eight-hour shift she had to walk up to 27 kilometres (17 mi). After five weeks she started to suffer from circulation problems. According to an anonymous employee working at the ambulance service, there is hardly a day when they are not called to the logistics center. According to a labour judge interviewed by RTL, Zalando violates German Labour law because of its rules on breaks, by prohibiting its employees from sitting down and by imposing airport-security-type measures on its employees. Through its tight control over its employees, Zalando would also be in violation of privacy rules. RTL requested Zalando to give comments to the allegations but Zalando refused. Instead, Zalando filed a complaint against Lobig for revealing corporate secrets. Lobig in turn filed a complaint against the company regarding her severance pay.
In November 2015 the Centre for Protection against Unfair Competition in Germany filed a suit claiming that Zalando misled consumers on the availability of certain products suggesting that they needed to act fast to buy them. Zalando said that they had already changed their marketing practices, taking the Centre's concerns into account. They claimed that they no longer informed consumers that there were "three items available" when more than three were available.
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