Central to its differentiation is convenience. From the outset the founders of Zalando believed that they should be focused on a great experience in terms of delivery, and the opportunity to return and call customer service, which requires them to own the logistics, the customer service interface and the online experience.
They invested heavily in front and back office technology to ensure it was all aligned and connected. They foresaw the world of platforms. For example, there is one app for transport (Uber), one major app for entertainment (Netflix) and one major app for music (Spotify). They wanted to be the app for fashion.
The founders looked at best practice from brands such as Alibaba and WeChat, who had developed ecosystems by platforming their assets.
“In fashion, there are still huge inefficiencies. Product development takes a lot of time; there are big bets you need to place; and that’s why there is so much waste. Your inventory — you can get it completely wrong! The retailers, the brands, the warehouses — what if you started connecting inventory and data? This is how we came up with building an operating system for fashion.
“Really tear down the barriers for consumers. Make everything accessible and let the consumer decide by taste and not by product availability in a physical store. Personalize it and make it convenient. And on the industry side, help brands to digitize and make this connection. We felt we could make a very strong contribution and not only to our own business.”
A further component, which is getting to double-digit [revenue contributions], is the partner business: brands connecting directly and selling directly on the platform, earning commission for Zalando. There are additional services like marketing, with over 1,000 campaigns across 200 brands leveraging reach, media channels and data.
Growing the business is not without complexity. “Europe is very fragmented. In order to build a proposition for 350 million Europeans you need to have tons of different cultures, languages, currencies, payment methods. It means that the solutions that we’re building must be very much localized. And in order to achieve a certain scale, we need to invest a lot more than a company from the US or China because they have a whole market which is more or less homogeneous with one language.”
Central to managing this complexity is the digital spine of the business, enabling responsiveness and agile development. It is a business powered by connectivity.