Zalando: Europe’s leading fashion e-commerce powerhouse
Headquartered in Berlin, Zalando is one of the biggest names in fashion e-commerce in Europe. Expressed in figures, the company carries over 2,500 brands and over 600,000 product choices for over 34 million customers in 17 countries worldwide through its platform.
AIN.TECH tells the story of Zalando, the company growing up from the small apartment startup to leading European fashion retailer that passed €1 billion in annual revenue in four years after its founding, and €6.5 billion revenue in 2019.
History of the company
Zalando was founded as an online shoe retailer in October 2008 by German venture builder Rocket Internet, and WHU graduates Daniel Schneider and Robert Gentz.
As it often happens, the emergence of a future successful e-commerce project was preceded by a failure. Schneider and Gentz launched their first common startup Unibicate, a social network for universities in Mexico, Argentina and Chile, being in Monterrey, Mexico. Looking for investment, they went to Oliver Samwer, CEO of Rocket Internet, who rejected their idea. After the founders failed, they were living for eight months with no salary and no possibility to buy a ticket back home to Germany.
The second attempt by Daniel Schneider and Robert Gentz was successful. Inspired by the US online shoe retailer Zappos, now owned by Amazon, they created fashion e-commerce startup Ifansho in Berlin. This time Oliver Samwer invested in their project €50,000 and provided them with programmers from Rocket Internet.
In 2008 the Ifansho team moved to their first office on Torstrasse that had been turned also into a warehouse. The founders’ private cell phone numbers became customer hotlines, and they took all the packages to the post office themselves. Zalando then was officially launched.
The company started with offing free delivery and up to the 100-day right of return, and customers liked the ideas. Zalando began to grow rapidly, and a year after its establishment, it began operating outside Germany – entered Austrian and Swiss, as well as the UK and Italian market. Its net proceeds amounted to €6 million in 2009.
In 2012 e-commerce company launched its subsidiary business Zalando Logistics that in partnership with DHL was responsible for items distribution. That year the company opened its first 120,000 m² custom-designed logistics centre in Erfurt. In parallel, Zalando continued scaling to other European markets including Sweden, Finland, Norway, Denmark, Belgium, Luxembourg, and Spain. Three years later, it expanded to Ireland and the Czech Republic.
In 2014, Zalando undertook one of Europe’s biggest IPO on the Frankfurt Stock Exchange and raised €605 million by selling 11% of the share capital at a valuation €5.3 billion. Investors in Zalando include the Samwer brothers’ Global Founders fund and billionaires Anders Holch Povlsen of Denmark and Yuri Milner of DST. That year Zalando made €2.2 billion in sales.
According to the company’s head of technology Philipp Erler, its success partly connected with technology Zalando provided. For example, it became one of the first major e-commerce sites to deploy image-recognition software, the development of which has been one of the largest projects for its near 1,000 tech staff. The software enables users to upload a picture of an outfit and have the company automatically pick matching items from its catalogue.
In 2015 Zalando opened Fashion Insights Centre in Dublin, the company’s first technology hub outside of Germany, in response to growing demand for experts in the field of research and development, big data analysis, data science and engineering.
“Zalando is the most trafficked e-commerce fashion site in Europe with well over 100 million visits per month. Understanding our customers and gaining deep insights into their purchasing patterns and their behaviour online means we can provide them with a highly personalized and compelling offering. Investing to understand these insights has driven our growth since the earliest days of our company and has been the key to our success. The new Zalando Fashion Insights Centre will play a major role as we continue to lead online fashion and grow our presence across Europe,” Robert Gentz said to EU-Startups.
In the early stages of the company, Zalando received state support that played an important role in its business development.
The first subsidies it became from “GRW fund” by the State of Berlin in the amount of approximately €10.6 This funding includes investment and wage subsidies and allowed the company to create more than 600 jobs, as well as develop technologies, structures and processes.
Focusing on its second central business area – logistics, Zalando received €22.4 million state funds with a planned investment amount of €100 million for the first construction phase of the centre in Erfurt in 2011. Currently, the company operates in four fulfilment centres in Brandenburg, Thuringia, North Rhine-Westphalia and Baden-Württemberg, where it has created over 6,900 jobs.
Besides, Zalando was granted with €0.2 million investments from Industrial Development Authority Ireland for the construction of its first international technology hub in Dublin in 2015.
Zalando focuses on the fashion industry and therefore operates in a variety of business areas. From online retail, private labels and shopping club to logistics and style advice.
It is now active in 17 European markets, offers its customers an extensive range of fashion and beauty items, including shoes, clothing and accessories with free delivery and returns, and more than 20 local payment options, collaborates with different regional logistics service providers and speaks 13 languages in both, online shops and customer services.
The range extends from renowned global brands and fast fashion to local brands and is supplemented by its 11 private labels, which are designed in-house. In total, Zalando works with more than 2,500 international brands.
The company also provides fulfilment solutions and marketing services. Zalando makes its own logistics capabilities available to external partners, as well as offers personalized marketing solutions for brand partners.