Home Economy News Zalando jumps as online fashion retailer sees return to growth

Zalando jumps as online fashion retailer sees return to growth


Zalando bets on Gen Z and logistic services as it sees return to growth By Reuters

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Published Mar 13, 2024 02:17AM ET
Updated Mar 13, 2024 01:00PM ET

© Reuters. FILE PHOTO: A person with a shopping bag of Zalando outlet walks along Kurfuerstendamm shopping street looking for bargains on the second weekend of advent in Berlin, Germany, December 3, 2022. REUTERS/Lisi Niesner/File Photo

By Linda Pasquini and Chiara Holzhaeuser

(Reuters) -Zalando will target younger buyers and encourage more brands to use its network to sell into complex European markets, the German online fashion retailer said, after forecasting a return to growth this year.

The stock jumped as much as 18.5% after the company also said late Tuesday it would buy back up to 100 million euros ($109 million) of shares, starting from March 13.

Zalando, a multi-brand platform that sells clothes, shoes, and accessories, has faced weakening demand after a growth boom during the pandemic, as consumers grappling with inflation and high interest rates cut spending and turn to cheaper options offered by fast fashion rivals like China-based Shein.

Zalando said it would focus on quality brands to pursue a bigger share of its customers’ wallet, as it believes younger consumers will pay a premium for more durable items.

It is also opening up its logistics business (B2B) to more players.

“Zalando seems to be reckoning that the historical growth story relying on even-increasing online fashion penetration is now close to the glass ceiling,” said Bryan, Garnier & Co analyst Clement Genelot.

“Hence the shift towards a logistician business to address the over-capacity issue in its existing fulfilment network.”

Zalando plans to offer its logistics network, software and services to its partners through one operating system, to facilitate their e-commerce transactions regardless whether they take place on its platform.

This will also help retailers to sell on different channels from only one inventory pool, avoiding overstocking and discounts, it said at its Capital Markets Day on Wednesday.

The apparel market saw heavy discounting towards the end of 2023 and into 2024, as companies aimed to cut down inventories amid slowing demand.

In its fashion and lifestyle business (B2C), Zalando is seeking to tap into Gen Z and Millenial buyers by offering personalized content and AI-powered advice features directly on its platform, and curating specific markets such as the fast-growing sport segment.

In B2B, Zalando said it has not seen an impact from customers getting redirected to brands’ own websites or other platforms, as it is simply enabling transactions which were already happening.

The platform could expand to other categories beyond fashion, such as home and pets, it said.

“As long as you’re not trying to ship groceries with us or your next bedroom furniture, then we can be your partner,” Chief Operating Officer David Schroeder said.

Zalando expects gross merchandise value (GMV), a key metric measuring the value of all goods sold, and revenue to grow between 0% and 5% this year, after single-digit percentage declines in 2023.

“The wider range reflects the continued uncertainty we see in the market,” finance chief Sandra Dembeck told reporters, adding later that the company expects consumer sentiment to improve in the second half of the year.

Zalando targets a compound annual growth rate of 5-10% for GMV and revenue through 2028.

Shares were up 17.9% at 22.55 euros at 15:40 GMT.

($1 = 0.9153 euros)

Zalando bets on Gen Z and logistic services as it sees return to growth

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