May 29, 2017

Zalando Is Rethinking Retail in a Fashion Ecosystem

by Digitalization, Point-of-View

Originally published in OpusCapita Journal. 

The success story of Zalando is worth listening to, even if you are not one to surf on the crest of the wave of the latest fashion trends.

Kenneth Melchior, Head of Nordics at Zalando.

Kenneth Melchior, Head of Nordics at Zalando.

Under a decade ago, Zalando was just two guys selling flip flops from a basement in Berlin. Today the noted German online fashion retailer characterizes itself first and foremost as a tech company and has 20 million active customers. Now the model pupil of digitalization is weaving a fashionable ecosystem around itself, creating new opportunities for collaboration, growth, and co-evolution.

Looking at the present situation in the fashion industry, Kenneth Melchior, Head of Nordics at Zalando, mentions two contrasting facts. Most European fashion stock, approximately 90% of it, is still offline, sitting on the shelves of local stores and hanging on the clothes racks in street-level shops. But people, the fashion consumers, are always online with smartphones, used to accessing information and products anywhere, anytime.

This is the gap Zalando aims to close by connecting people and fashion through technology.

“We want to be the enabler who makes access to fashion effortless and convenient, just as Spotify changed the way people listen to music. The music industry underwent similar digitalization development, and as a result, music is now more personal, it is ‘snackable’, and connected.”

Bridging the gap between the online and the offline

Zalando has set out to create a service platform that will bring together all parties in the modern fashion industry: the consumers, brands and retailers, stylists giving fashion advice, and brick and mortar stores, as well as logistics service providers.

In other words, it aims to create a fashion ecosystem that will bridge the gap between the online and the offline. According to Kenneth Melchior, Zalando is rethinking retail. Through its partner program, Zalando is integrating fashion and lifestyle brands’ stock from their logistics centers or local stores into Zalando’s platform.

“Integrated commerce opens up new possibilities. If Zalando’s own warehouse is out of stock, an item a customer is looking for can be shipped directly from a partner brand’s inventory. Or the local store can receive orders through the Zalando online fashion store and deliver them locally – or even have the customer pick up the parcel directly from the store,” Melchior describes.

He believes that many retailers have stayed offline because going online would demand time, resources, and know-how they do not have.

“The ecosystem benefits all parties. Customers will have even more fashion to choose from and will find the items they are looking for. Fashion brands and stores will gain easy online visibility and access for their products while also generating new traffic in their physical stores.”

A vision for the future

At stake for Zalando is the ambitious aim to multiply its share of the European fashion markets from one per cent to five. In 2016, Zalando reached EUR 3.6 billion in revenue.

“We currently operate in 15 countries in Europe, and we have a lot of potential to grow. Alone, growth is more difficult and takes time. In an ecosystem, we can grow faster and at the same time create new opportunities for growth for other players in the industry,” Melchior states.

He describes the future Zalando as the single entry point for customers to access fashion items and related services. For instance, in the DACH region, the Netherlands, and Belgium, Zalando’s curated online shopping service already connects 200 stylists with consumers.

“Imagine you spill coffee on your shirt on your way to a business meeting. The vision is that, with an app on your smartphone, you would be able to check who has your shirt brand and size within a ten-kilometer radius, for instance. You could pick it up on your way to the meeting or have it delivered to the conference site. It all boils down to convenience and an even better experience for the customer.”


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