Market challenges posed by ultra-fast fashion have Zalando, if not quite shaken, then at least feeling a little bit stirred.
“We have felt the impact of the recent macroeconomic circumstances on purchase behavior, amplified by Asian fast fashion mega players entering the European markets swiftly and aggressively—for example, Shein,” Lena-Sophie Röper, director of the Berlin-based e-tail giant’s designer and luxury department, wrote in an op-ed in Drapers on Tuesday.
“The size that it [Shein] has grown to in the last three or four years is really quite impressive, but it’s also worrisome that there is such huge demand from a very young customer base for very cheap product,” she said.
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But that doesn’t mean that Europe’s biggest online fashion retailer will descend into the “price wars,” Röper said. Simply put, that strategy doesn’t make sense for Zalando as a whole. But while she admitted that not doing so could hurt top-line performance, an ultra-fast-fashion approach will ultimately serve it ill.
Despite what Röper describes as a “strong shift” toward cut-price garments that can be refreshed virtually every day, on the other side of the “barbell” of demand is another type of customer who wants to buy less but better.
“That is exactly who we are trying to focus on,” she said.
In 2020, Zalando expanded its luxury selection by carrying labels such as Michael Michael Kors, Polo Ralph Lauren and Weekend MaxMara. In the three years since, it has “elevated and expanded” its offerings by adding brands such as Burberry, Moschino, Versace and Vivienne Westwood. Even this was only the beginning, Röper said.
Between the third quarter of 2023 and the first quarter of 2024, the online purveyor will launch a “completely new experience” for the designer category: a “luxury boutique within the Zalando universe, with a completely different look and feel.”
What this means is that the rarified labels will be able to represent themselves through their own branded shopfronts on the Zalando platform.
“It will provide a new environment for luxury brands, giving them much more control over how they appear on the platform and will offer a truly inspirational designer experience to our customers,” Röper said. “It’s a concession model whereby Zalando acts as an access gate to a large consumer spectrum. We won’t try to put our own stamp on it, but instead let the brands shine in their own light.”
Delivering to customers in 25 countries across the continent, Zalando has experienced mixed fortunes amid stubborn inflation rates and dampened consumer demand.
Earlier this month, it reported a second-quarter revenue loss of 2.5 percent to 2.6 billion euros ($2.8 billion). At the same time, its adjusted earnings before interest and tax soared 87 percent to 144.8 billion euros ($157.3 billion) compared with the same period last year, a result, it said, of continued efficiency measures, improved order economics and lower (read: more focused) marketing investments.
Robert Gentz, the company’s co-chief executive officer, also name-dropped Shein at a call with analysts following the earnings release, though he too noted that upscaling was a way of differentiating Zalando from the surfeit of bargain-priced clothing.
“Competition from China has arrived,” he said. “It’s a very different model. We are working with modern, excellent brands and giving the European continent access to high-quality brands across a wide range of portfolios. Our offer is very different from the one at Shein and our overlap is not high.”
Röper wrote that Zalando’s own research shows that it only offers 10-15 percent of the brands that its customers want to see on its website. Searches for luxury brands, in the meantime, have increased steadily over the past few years.
“The latest analysis shows a seven-digit figure in terms of monthly searches,” she said. “This is a clear signal to us that customers expect to discover designer and luxury fashion on Zalando.”
Thus, the decision to snub the quick and cheap model that Shein and Temu encapsulate, even if it means an uphill battle to secure the hearts—and wallets—of the younger generation.
“We need to get closer to not just looking at a transaction but exciting the customer beyond having a good price or a nice garment,” Röper said. “We need to be engaging them, giving them a reason to come back and check us out again and again.”
“It’s a journey, but as a business, we have consciously said we want to pursue quality over quantity,” she added. “Even if it’s tough right now, it’s going to help us in the long run.”
