How Does Zalando Make Money? The Zalando Business Model In A Nutshell

Zalando is a multi-national eCommerce company founded in 2008 by David Schneider and Robert Gentz, created under the name Ifansho, changed to Zalando as a reference to the Italian word zalare – or “making jokes”. Zalando generates revenues by purchasing stock and then selling it for a profit. Zalando also charges brands it partners with a commission for the privilege of selling on its platform. The commission Zalando collects on each sale is undisclosed. Zalando also collects advertising revenue from ads placed on its website and app.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Zalando’s value proposition centers on providing a wide selection of fashion and clothing items, a seamless online shopping experience, and convenience in terms of delivery and returns. It emphasizes the latest fashion trends, personalized recommendations, and exclusive brands. Zalando aims to be the go-to destination for fashion-conscious customers, offering a one-stop-shop for their clothing and accessory needs.	Offers a broad range of fashion and clothing items to cater to diverse customer preferences. Provides a seamless online shopping experience with personalized recommendations. Emphasizes convenience in delivery and returns. Attracts fashion-conscious customers seeking the latest trends and exclusive brands. Aims to be the preferred one-stop-shop for fashion needs.	– Shoppers turn to Zalando to explore a vast collection of clothing, footwear, and accessories across various styles and price points. – Personalized recommendations enhance the shopping experience by suggesting items that align with individual preferences. – Convenient delivery and hassle-free returns make Zalando a customer-friendly platform. – Fashion-conscious customers value Zalando’s focus on the latest trends and exclusive brands. – Zalando’s goal is to be the primary online destination for customers looking for fashion and clothing items.
Customer Segments	Zalando serves a diverse customer base, including men, women, and children of different age groups. It caters to fashion-conscious individuals and families seeking clothing, footwear, and accessories. Zalando’s offerings range from affordable to premium brands, accommodating customers with varying budgets. The company operates primarily in Europe but aims to attract global customers interested in European fashion.	Addresses the needs of men, women, and children across different age groups. Caters to fashion-conscious individuals and families. Provides a range of affordable to premium brands to accommodate various budgets. Focuses on the European market but seeks to attract global fashion enthusiasts. Offers a comprehensive fashion destination for customers of all demographics.	– Men, women, and children of various age groups shop on Zalando for clothing, footwear, and accessories. – Fashion-conscious individuals and families turn to Zalando to stay up-to-date with the latest trends. – Zalando’s broad brand selection caters to customers with diverse budgets and style preferences. – While primarily serving the European market, Zalando’s offerings have international appeal, attracting fashion enthusiasts worldwide. – Zalando aims to be a comprehensive fashion destination, serving customers across demographics.
Distribution Strategy	Zalando primarily operates as an online e-commerce platform accessible through its website and mobile apps. It offers a user-friendly interface, intuitive search and navigation features, and secure payment options. Zalando leverages its extensive logistics network to ensure efficient and reliable product delivery. The platform also provides a straightforward return process, enhancing the customer experience.	Ensures accessibility through online platforms and mobile apps with user-friendly interfaces. Offers secure payment options for customer convenience. Leverages an extensive logistics network for efficient product delivery. Provides a straightforward return process to enhance the customer experience. Focuses on digital marketing and customer engagement to attract and retain users.	– Users can easily access Zalando’s platform through web browsers and mobile apps, providing flexibility in shopping. – Secure payment options, including various payment methods, enhance the convenience of the shopping experience. – Zalando’s logistics network ensures that products are delivered reliably and in a timely manner. – The straightforward return process contributes to customer satisfaction and confidence in purchasing. – Digital marketing efforts, including online advertisements and email campaigns, drive user engagement and retention.
Revenue Streams	Zalando generates revenue through multiple sources, primarily sales of fashion and clothing items. It charges customers for the products they purchase, covering the cost of the items and a margin for the company. Additionally, Zalando offers premium subscription services such as “Zalando Plus,” providing benefits like express shipping and extended return windows for a recurring fee. Advertising and brand partnerships also contribute to revenue.	Relies on revenue from sales of fashion and clothing items as a primary income source. Charges customers for products purchased, including item costs and a margin. Offers premium subscription services like “Zalando Plus” for additional recurring income. Generates revenue through advertising and brand partnerships. Diversifies income streams to support financial stability.	– Customers pay for the clothing, footwear, and accessories they purchase from Zalando, contributing to the company’s core revenue. – Premium subscription services like “Zalando Plus” offer added benefits and generate recurring income. – Advertising partnerships and brand collaborations provide additional sources of revenue for Zalando. – Diversified income streams help maintain financial stability, even during fluctuations in sales volume and consumer behavior.
Marketing Strategy	Zalando’s marketing strategy includes digital advertising, content marketing, partnerships, and seasonal campaigns. It focuses on showcasing the latest fashion trends, exclusive collections, and personalized shopping experiences. Zalando actively engages with influencers and fashion bloggers to promote its products. The company also runs seasonal campaigns, sales events, and collaborations with brands to attract and retain customers.	Utilizes digital advertising and content marketing to promote the latest fashion trends and personalized shopping experiences. Collaborates with influencers and fashion bloggers to showcase products. Runs seasonal campaigns, sales events, and brand collaborations to attract and retain customers. Focuses on customer engagement and retention to build brand loyalty. Appeals to fashion-conscious consumers with a diverse range of products and styles.	– Zalando’s digital advertising campaigns highlight the latest fashion trends, exclusive collections, and personalized recommendations. – Influencers and fashion bloggers play a significant role in promoting Zalando’s products and engaging with the target audience. – Seasonal campaigns, sales events, and brand collaborations create excitement and encourage customer participation. – Zalando’s emphasis on customer engagement and retention aims to build lasting brand loyalty. – The diverse range of products and styles appeals to fashion-conscious consumers looking for variety and personalization.
Organization Structure	Zalando operates with a centralized structure overseeing product selection, marketing, customer support, and logistics. The company collaborates with numerous fashion brands to offer a wide range of products. Zalando maintains a dedicated customer service team to assist users with inquiries, orders, and returns. The platform actively engages with fashion influencers and partners to enhance its product offerings.	Employs a centralized structure to manage product selection, marketing, customer support, and logistics. Collaborates with fashion brands to provide a diverse product range. Provides customer service teams for inquiries, order management, and returns. Actively engages with fashion influencers and partners to enhance product offerings. Focuses on maintaining a strong brand presence in the fashion e-commerce industry.	– Zalando’s product selection team curates a wide range of fashion items from various brands to offer customers diverse choices. – Customer service teams assist users with inquiries, order management, and returns, ensuring a seamless shopping experience. – Collaboration with fashion influencers and partners enhances the platform’s product offerings and brand visibility. – Zalando’s centralized structure and emphasis on brand presence contribute to its leadership in the fashion e-commerce industry. – Continuous efforts are made to stay updated with the latest fashion trends and maintain a competitive edge.
Competitive Advantage	Zalando’s competitive advantage lies in its vast selection of fashion items, personalized shopping experiences, and efficient logistics. It offers a one-stop-shop for fashion-conscious customers, including a diverse range of brands and styles. Zalando’s collaborations with influencers and brands enhance its product offerings and appeal. Its focus on user-friendly platforms, convenient returns, and seasonal campaigns solidifies its position as a leading fashion e-commerce destination.	Provides a vast selection of fashion items and personalized shopping experiences for customers. Offers a one-stop-shop with a diverse range of brands and styles. Collaborates with influencers and brands to enhance product offerings. Focuses on user-friendly platforms, convenient returns, and seasonal campaigns. Maintains a strong position as a leading fashion e-commerce destination.	– Zalando’s extensive selection of fashion items appeals to customers seeking variety and personalization. – Collaborations with fashion influencers and brands enhance the platform’s product offerings, creating exclusivity. – User-friendly platforms, convenient returns, and seasonal campaigns contribute to customer satisfaction and loyalty. – Zalando’s competitive advantage is reinforced by its commitment to providing a comprehensive and enjoyable fashion shopping experience. – The company’s leadership in the fashion e-commerce industry is maintained through continuous innovation and brand collaborations.

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Origin Story

Zalando is a multi-national eCommerce company headquartered in Berlin, Germany.

The company was founded in 2008 by David Schneider and Robert Gentz. Initially created under the name Ifansho, the name was changed to Zalando as a reference to the Italian word zalare – or “making jokes”.

Inspired by US retailer Zappos, Schneider and Gentz began selling footwear. After aggressive expansion across Europe, Zalando began to market itself as a digital shopping mall.

Fashion and lifestyle products are now offered by retailers who can sell items using the Zalando Partner Program.

By integrating their stock into the Zalando Fashion Store, retailers get access to 17 European markets encompassing 38 million active consumers.

This is underpinned by a suite of propriety technology the company uses to manage logistics, mobile shopping, customer service, and distribution.

Zalando revenue generation

Like all retailers, Zalando generates the bulk of its revenue by purchasing stock and then selling it for a profit.

In part, profitability is achieved through economies of scale. With most of the European market cornered, Zalando can purchase goods in bulk and offer competitive prices to its customers.

But money is also made by enhancing the online shopping experience. Zalando seeks to make shopping on its platform inspirational.

It incorporates up-to-date and extensive information on its products and also offers fashion advice in the form of a glossary and blog.

Zalando also maximizes profits by offering free delivery and returns, with the latter being particularly important in an industry where return rates can be as high as 50%.

To that end, detailed size guides and product presentation reduce the likelihood a consumer will have to return an ill-fitting product.

Partner program

Zalando also charges brands it partners with a commission for the privilege of selling on its platform. The commission Zalando collects on each sale is undisclosed.

In the partner program, merchants get access to Zalando’s expertise and the vast amount of consumer data is collects on purchases.

The company also offers a brand solution service to merchants, enabling them to sell on the Zalando platform under their own brand name.

Merchants can also select between fulfillment by Zalando or fulfillment by their brand.

Depending on the level of service provided, the company collects a commission.

Advertising revenue

Zalando also collects advertising revenue from ads placed on its website and app.

Under the Zalando Media Solutions banner, brands and other advertisers are encouraged to place marketing content on the platform.

This content can also be re-used on affiliate websites where Zalando collects a commission from each referred sale.

Zalando vs. ASOS business model

Zalando and Asos are two third-party fashion giants that operate under the marketplace business model. Nevertheless, there are subtle differences between each company’s approach.

Below we will compare the nuances of each business model.

Zalando business model

Zalando uses the platform-based marketplace business model where fashion brands can sell their products.

The company is a reseller of wholesale products and also works with brands that want to utilize its customer base in targeted European markets.

To that end, businesses are provided with various performance and analytics tools to maximize their sales.

The company notes that three areas are essential to the success of its platform strategy:

Customers

Zalando offers a diverse range of seasonal, on-trend fashion items and importantly, strives to maximize item availability.

The company has also invested heavily in supplier, payment, and customer service initiatives to make the process of ordering clothes online as efficient as possible.

Brand partners

Zalando’s partner program allows third-party brands to easily integrate their stock on its platform.

Leaders at the company also recognize the connection between brand assortment, product availability, and growth in both the customer and partner base.

Infrastructure

As hinted at earlier, Zalando is skilled at coordinating its own logistics operations through scalable infrastructure.

In Europe, the company has eight distribution centers across five countries. Infrastructure incorporates warehousing, delivery, and customer service – but this also includes content creation.

In recent years, Zalando has tweaked its business model amid rising concerns over the sustainability of the fast fashion industry.

In 2021, it partnered with Save Your Wardrobe, a British Company which seeks to help consumers repair or clean clothes they already own and ultimately, purchase fewer new ones.

While this could impact Zalando’s bottom line, the partnership is part of a wider strategy toward a more sustainable business model.

To that end, customers can purchase clothing made from sustainable materials with more product information detailing how materials are sourced.

Consumers can now use the Zalando platform to buy or sell used clothing with the range now exceeding more than 200,000 items.

ASOS business model

Breaking down how Ultra-Fast Fashion Business Models work.

ASOS has a multi-faceted business model with a core focus on a customer experience for millennial consumers.

As part of its value proposition, the platform adheres to the following three pillars:

Personalization – ASOS fashion items cater to most body shapes and sizes, such as petite, tall, plus size, and curvy.
Customization – as a global fashion retailer, ASOS must also be able to customize its range and website according to factors such as seasonality, trends, and culture.
Convenience – the company also ships to nearly every country around the world with express or next-day options and detailed order tracking. ASOS also offers a convenient app with product recommendations.

Scalability and sustainability

As a fashion platform and seller of private-label products, the company’s multifaceted business model is inherently scalable.

Indeed, these platforms tend to facilitate mass-market adoption where the number of interactions between buyers and sellers is maximized.

One way ASOS keeps customers on its platform is via free delivery subscriptions, where customers pay $19 per month for next-day delivery on all orders.

ASOS’s business model is also robust because it has spent the better part of 20 years collecting data on its buyers.

For a competitor to steal market share from the brand, it would need to be an established player such as Amazon.

Happily for ASOS, Amazon’s efforts to sell fashion items have been disjointed and subpar at best.

In the meantime, ASOS continues to utilize its data to create private label products that are on-trend, profitable, and affordable.

Key takeaways

Zalando is a multi-national eCommerce company founded in Berlin with significant reach in the European market. It was founded in 2008 by David Schneider and Robert Gentz under the name Ifansho.
Zalando primarily makes money by enhancing the traditional online retail experience and buying in bulk to increase profit margins. The company offers detailed sizing guides, fashion advice, and free returns for ill-fitting goods.
Zalando also takes a commission from each sale through its Partner Program for eligible brands. It also collects advertising revenue and affiliate commissions from advertisers.

Key Highlights

Origin and Growth: Zalando is a multi-national eCommerce company headquartered in Berlin, Germany. Founded in 2008 by David Schneider and Robert Gentz, it initially started as a footwear retailer inspired by US retailer Zappos. It later expanded aggressively across Europe, transforming into a digital shopping mall for fashion and lifestyle products.
Business Model: Zalando generates revenue by purchasing stock from wholesalers and selling it for a profit. Its scale allows for bulk purchasing and competitive pricing. The company focuses on enhancing the online shopping experience through detailed product information, fashion advice, and free delivery and returns to minimize returns due to sizing issues.
Partner Program: Zalando operates a Partner Program where brands can sell their products on its platform. Zalando charges these brands a commission for each sale, though the exact amount is undisclosed. The program provides access to Zalando’s consumer data and expertise, enabling brands to maximize their sales.
Advertising Revenue: Zalando collects additional revenue from advertising on its website and app through its Zalando Media Solutions. Brands and advertisers place marketing content on the platform, and Zalando may also earn affiliate commissions for referred sales made through this content on affiliate websites.
Marketplace Business Model: Zalando operates as a platform-based marketplace where various fashion brands can sell their products. The company resells wholesale products and collaborates with brands targeting specific European markets. Performance tools and analytics are offered to brands to optimize their sales.
Infrastructure: Zalando’s success relies on three core areas: Customers (offering diverse and seasonal fashion items), Brand Partners (partner program for easy integration), and Infrastructure (logistics, warehousing, delivery, and content creation). Zalando coordinates its logistics operations through scalable infrastructure, including multiple distribution centers across Europe.
Sustainability Focus: Zalando has embraced a more sustainable business model over the years. It partnered with Save Your Wardrobe to promote repairing and cleaning clothes to reduce waste. The platform also offers sustainable clothing options and a marketplace for buying and selling used clothing.
ASOS Comparison: ASOS is a similar third-party fashion retailer with a slightly different approach. ASOS offers personalization, customization, and convenience to millennial consumers. Its business model is highly scalable and data-driven, with a focus on private-label products. ASOS’s main competition comes from established players like Amazon, while Zalando’s focus is primarily on the European market.