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.
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.
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 businessmodel. Nevertheless, there are subtle differences between each company’s approach.
Below we will compare the nuances of each businessmodel.
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 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 businessmodel.
To that end, customers can purchase clothing made from sustainable materials with more product information detailing how materials are sourced.
ASOS is a British online fashion retailer founded in 2000 by Nick Robertson, Andrew Regan, Quentin Griffiths, and Deborah Thorpe. As an online fashion retailer, ASOS makes money by purchasing clothes from wholesalers and then selling them for a profit. This includes the sale of private label or own-brand products. ASOS further expanded on the fast fashion business model to create an ultra-fast fashion model driven by short sales cycles and online mobile e-commerce as the main drivers.
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.
Slow fashion is a movement in contraposition with fast fashion. Where in fast fashion, it’s all about speed from design to manufacturing and distribution, in slow fashion, quality and sustainability of the supply chain are the key elements.
Fash fashion has been a phenomenon that became popular in the late 1990s and early 2000s, as players like Zara and H&M took over the fashion industry by leveraging on shorter and shorter design-manufacturing-distribution cycles. Reducing these cycles from months to a few weeks. With just-in-time logistics and flagship stores in iconic places in the largest cities in the world, these brands offered cheap, fashionable clothes and a wide variety of designs.
With over €27 billion in sales in 2021, the Spanish Fast Fashion Empire, Inditex, which comprises eight sister brands, has grown thanks to a strategy of expanding its flagship stores in exclusive locations around the globe. Its largest brand, Zara, contributed over 70% of the group’s revenue. The country that contributed the most to the fast fashion Empire sales was Spain, with over 15% of its revenues.
The Ultra Fashion business model is an evolution of fast fashion with a strong online twist. Indeed, where the fast-fashion retailer invests massively in logistics and warehousing, its costs are still skewed toward operating physical retail stores. While the ultra-fast fashion retailer mainly moves its operations online, thus focusing its cost centers on logistics, warehousing, and a mobile-based digital presence.
ASOS is a British online fashion retailer founded in 2000 by Nick Robertson, Andrew Regan, Quentin Griffiths, and Deborah Thorpe. As an online fashion retailer, ASOS makes money by purchasing clothes from wholesalers and then selling them for a profit. This includes the sale of private label or own-brand products. ASOS further expanded on the fast fashion business model to create an ultra-fast fashion model driven by short sales cycles and online mobile e-commerce as the main drivers.
Real-time retail involves the instantaneous collection, analysis, and distribution of data to give consumers an integrated and personalized shopping experience. This represents a strong new trend, as a further evolution of fast fashion first (who turned the design into manufacturing in a few weeks), ultra-fast fashion later (which further shortened the cycle of design-manufacturing). Real-time retail turns fashion trends into clothes collections in a few days or a maximum of one week.
SHEIN is an international B2C fast fashion eCommerce platform founded in 2008 by Chris Xu. The company improved the ultra-fast fashion model by leveraging real-time retail, quickly turning fashion trends in clothes collections through its strong digital presence and successful branding campaigns.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
