zalando-business-model

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.

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 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.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"