'Mission Diversity': Zalando’s plans for 2018
For the fourth time in a row, Zalando managed to increase its annual revenue by 25% compared to the previous year, reaching 4.5 billion euros ($5.5bn) in 2017. Its strategy remains as clear as it is complex. Externally, Zalando has set up an aggressive growth plan and continues to open new markets while internally, it is strengthening its service and logistics through innovation. In 2017, it had logistics centres in Southern Germany, France, Italy, Sweden and Poland and the company is now active in 15 countries.
This year, the expansion into new business areas is about to start with the launch of the new Beauty category at the end of March, which will boost sales with a range of over 25,000 products from 2,000 brands. “The market for beauty products is quite large and we see an opportunity here to exploit our strengths in the areas of brands, customers, technology and logistics. To do so, we will start with around 100 brands in Germany, test how the offering is received and learn about the things we can improve, for example, in logistics,” explains Zalando Co-CEO Rubin Ritter.
With this in mind, the company wants to create around 2,000 new jobs, particularly in Berlin. Last year, the number of employees increased from 12,000 to 15,000. And the number of existing customers grew from just under 20 million to 23 million in 2017. As part of the expansion, the online giant is simultaneously personalising its service, for both end consumers and partner brands, and clustering its activities, such as the purchase and transformation of the Bread & Butter trade show into a consumer festival where the end consumer meets the brands and vice versa.
In 2015, it introduced the shopping club Zalando Lounge; the personal shopping service Zalon; and Zalando Media Solutions, a digital advertising company. Last year, these and other initiatives were among the biggest winners in the company’s financial report, generating a 45% increase in revenue. In 2016, the e-tailer entered the physical retail space and now sells, in some locations, selected products with a one-hour delivery service via the ZipCart app. Finally, Zalando’s return on demand service and its same day delivery option accounted for even more orders, especially in the DACH region, last year.
For 2018, Zalando plans to personalise the shopping experience for its customers with customised stores. Overall, the company is investing 350 million euros this year and is pushing ahead with the expansion of its automation technologies with the aim of increasing logistics capacity.
Additionally, it is investing in start-ups which can support its several projects, such the logistics robotics start-up Magazino, which received an investment from Zalando this week. “We are constantly gaining market share, and investing to keep it that way,” said Rubin Ritter on the corporate strategy. The company’s shareholders are less satisfied with the high levels of investment, as well as the significantly lower profit, which reached 101.6 million euros ($124m) in financial year 2017. In 2016, profits were 120.5 million euros. According to the annual report, the decline was partially due to the continued investment in capacity and customer experience.
Viewed in perspective, Zalando seems to harness a kind of neural network that, on the one hand, is spreading internationally, and on the other, is systematically creating space for improvement in every point of contact with partners and customers. This binary strategy ensures both stable revenue growth and profit fluctuations. Zalando seems to be going for diversity in every possible way.
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