Zalando to expand platform business and support brands in Coronavirus crisis

Zalando, a leading European online platform for fashion and lifestyle, aims to accelerate its platform business in 2020. The company has introduced several new initiatives to support fashion brands and retailers during the coronavirus crisis. These will allow partners to connect more easily with the Zalando platform and to access the company’s growing customer base of 32 million active customers as of March 31 (+17% year-over-year). 

“Over the past weeks, we have taken decisive action to protect our employees and our company from the impact of the coronavirus. Going forward, we will focus our efforts and our investments on accelerating our platform strategy throughout this crisis. For the fashion industry, the time to go online is now, and we can make a difference by supporting our partners to grow their business on our platform,” says Zalando co-CEO Rubin Ritter. 

Zalando offers immediate support to its brand partners in the Partner Program by allowing them to connect more easily with the Zalando platform. Until the end of June, partners in need of immediate cash relief benefit from faster pay-out terms. Zalando will further improve the visibility for small to midsize partners in its shop. During the Easter Weekend alone, Zalando partners sold more than one million items through the partner program, up more than 100% compared to last year.

The company has also initiated further measures for brick-and-mortar retailers to uphold parts of their business during the lockdowns. Until May 31, partners in the Connected Retail program can sell via the platform without paying commission fees. This led to around 35,000 items sold by brick-and-mortar stores over the Easter Weekend alone. 

Zalando will also expand its offering to customers, adding textile face masks to its assortment in the next weeks. All profits generated from the sales will be donated. In line with increasing demand in the sports category, especially for items such as yoga wear and running clothes, Zalando has launched its first ever remotely produced marketing campaign, #TogetherIAmStrong, inspiring customers to stay active at home.

After strong growth in January and February this year, the company initially noticed a significant decrease in customer demand as a consequence of social distancing measures that were taken across Europe. In the three weeks following March 9, Zalando observed negative growth of its Gross Merchandise Volume (GMV) of minus 8% year-over-year. In the two weeks following March 30, GMV started to grow again compared to last year. 

According to preliminary figures for the first quarter, Zalando has grown its GMV by 13.1% – 14.3% to 1.98 to 2.00 billion euros (Q1 2019: 1.75 billion), and group revenues by 10.1% – 11.6% to 1.52 to 1.54 billion euros (Q1 2019: 1.38 billion). Zalando expects an adjusted EBIT in a range of minus 90 million to minus 110 million euros (Q1 2019: 6.4 million) as a result of lower sales growth in the first quarter and an exceptional inventory write-down of 40 million euros as a result of the revised sales expectations for the current season. The Zalando Group has access to a current cash position of around 1.03 billion euros (as of March 31, 2020), which allows it to invest through-cycle even in this challenging time.

The company has launched a holistic savings effort for 2020 to counter the negative impact from the coronavirus crisis. Planned savings of 250 million euros in marketing and overhead, as well as reduced capital expenditure of around 100 million euros, will ensure continued financial health and will enable the acceleration of strategic growth initiatives, such as the platform transition. The current plan does not require layoffs or state loans.

“We look back at a challenging quarter. Nevertheless, we have managed to grow our business, and the first weeks of April make us optimistic for the second quarter. We have initiated the right response in order to safeguard the financial success of our business in challenging times and continue to build our strong position in the market,” says Zalando CFO David Schröder.