Following today’s release of Zalando’s figures for FY2022; Pippa Stephens, Apparel Analyst at GlobalData, a leading data and analytics company, offers her view: “The return to physical stores alongside a downturn in consumer confidence drove Zalando to experience a slowdown in FY2022, with its total revenue falling marginally by 0.1% to €10.3bn after years of impressive growth. Its profits suffered even more, as soaring operating costs caused adjusted EBIT to fall by 60.6% to €184.6m, with the retailer announcing in February that as a result, it is cutting hundreds of jobs. Zalando’s DACH region experienced the largest decline, with fashion revenue falling 3.9%, down to it being more established in these countries and particularly weak consumer sentiment in its home market of Germany. The rest of Europe experienced modest growth of 1.8%, though this performance is also disappointing given its expansion into new markets such as Croatia, Estonia and Latvia. For FY2023, the retailer now expects revenue growth between -1% to 4%, as the cumulative impact of inflation continues to squeeze shoppers’ discretionary incomes and online fast fashion begins to falter.
“The retailer has hugely focused on driving customer loyalty and basket sizes through promotion of its loyalty program, the introduction of minimum order values and enhancing its marketing to encourage shoppers to purchase from multiple categories, such as fashion and beauty. While it achieved 6% growth in its number of active customers in FY2022, it has faced growing competition in Europe from other online marketplaces like ASOS and ABOUT YOU, which have similar product offerings. Zalando must better differentiate itself from these rivals to drive growth going forwards, through exclusive brands and products, pop-up shops in key cities, and more innovative collaborations with influencers and celebrities.
“Zalando is appealing to eco-conscious consumers through its array of sustainability initiatives, such as the launch of a circular design capsule collection in February 2023 designed by the winner of its Spring/Summer 2022 Sustainability Award, Nikolaj Storm, and the redesign of its packaging to reduce waste. Though it discontinued its dedicated resale platform Zircle in November 2022, it still sells secondhand items on its own website and app, increasing the category’s awareness among its existing customers. It has also been catering for consumers’ ongoing demand for sportswear and athleisure, with its website featuring dedicated landing pages for different sports, including running, yoga and training. As well as launching specialist sports brands like Brooks to boost top of mind appeal, it should also partner with emerging players too, like AYBL and Tala, to stay ahead of competitors.”
