Fashion giant Zalando has been in the news a lot in the last few days. On the one hand, due to the expansion of its Connected Retail with the fashion chain C&A. On the other hand, Zalando’s largest investor Kinnevik announced that it will exit after almost 10 years, including its investment. C&A filled two key positions in human resources and communications. Their goal is to make their culture, employees and brand the central focus of the company.
Many fashion companies, like C&A, missed the train to gain a foothold in the digital world. Retailers recognised the trend of online shopping too late and did not want to invest in such risky visions of the future at a time when it was easier to get started. This is exactly where Zalando comes in and gives the fashion houses a hand to cooperate with them. Zalando calls this cooperation “Connected Retail”. They now have over 2000 such cooperations.
Is Zalando the saviour of the lost traditional fashion houses?
Opinions are divided on this. There is a long list of pros and cons, which may only be viewed one-sidedly by the clientele. We have listed the positive and negative aspects of connected retail for the fashion houses here.
- The sales channel is extended to the EU
- The fashion houses will reach many more customers on the Zalando platform.
- Click & Collect and Return in Store are offered
- A filter function makes it possible that only products from the stationary trade are displayed. This way, the customer can consciously support the brick-and-mortar shops
- Despite lockdown, fashion stores can sell
- Despite lockdown, employees can take over logistics and work
- Until Q1 2021, Zalando will waive commissions and pay out weekly to ensure liquidity
- Short notice period for retailers
- Loss of brand values
- Difficulty in a kind of marketplace is to build up regular customers
- Great competition on Zalando
- Branding is no longer equally visible
- The Zalando rules of the game apply, i.e. they determine, for example, shipping time and returns handling
- Build up a new logistics network to pack and ship the parcels
- Commission to Zalando
- Profit margin decreases, due to the fees to Zalando and the shipping costs.
- Retailers pay for shipping costs and packaging
- To increase visibility, Zalando needs to invest in marketing.
During the retail crisis, it can make sense to look at connected retail and use this cooperation to generate another sales channel. Zalando is very accommodating to retailers during the pandemic by cutting commissions and paying out weekly.
Apart from the pandemic, Connected Retail needs to be looked at more closely and assessed individually for each business. In general, one cannot say it is good or bad. The concept is very dependent on the performance, the contribution margin and the deals of the shops. The question is also, where do the shops want to see themselves in 10 years?
If you are considering a Connected Retail cooperation or a Marketplace entry and need an honest opinion and assessment, we will be happy to help you.