Zalando Sees Slow Sales, Enters Luxury
European online fashion retailer Zalando SE looks to further expand its selection of premium and luxury items. Moreover, it aims to enter the vintage clothing market, as it expects sales growth to slow this year after ending 2019 on a strong note.
The move comes as the Berlin-based group saw moderate sales growth that led it to explore other segments. These segments include cosmetics and more products for men.
The company’s sales in the fourth quarter were up by 19.5% to €2 billion ($2.17 billion), while adjusted earnings before interest and taxation reached €110.4 million. Both figures surpassed analysts’ forecasts as a result of robust performance during the cyber week around Black Friday.
Zalando now estimated a 15% to 20% improvement in its sales for 2020, lower than the previous forecast of 20.3%. Still, the group sees gross merchandise volume (GMV), sales generated on its website by itself or its partners, to climb by around 20% to 25%.
The forecast did not include the potential repercussions from the spread of the COVID-19 coronavirus, according to the online retailers.
Zalando to Offer High-end Brands and Vintage Garments
Zalando now aims to double its premium and luxury offerings by the end of 2023. The group recently included designer labels like Moschino Couture and Alberta Ferretti.
Co-chief executive Rubin Ritter said selling more premium items should be able to support the company’s average basket value. The metric has been struggling, as consumers often opt for their smartphones to shop, but spend less every time, resulting in higher logistics costs.
The online seller’s profitability came under pressure. Amazon.com Inc.’s fashion ramp up prompted Europe’s largest online-only fashion retailer to use many of its financial resources on its logistics.
Last year, the company registered, 20 million searches for luxury brands it does not currently carry, according to Ritter. He then noted that the luxury area was going online much quicker than the other sectors of the fashion industry.
It plans to offer second-hand or vintage clothes in response to growing environmental awareness. The group will start marketing selected pre-owned luxury items from the third quarter of 2020, and purchase products from its customers.
The online seller also intends to invest approximately €330 million this year. Part of the investment is going into a new warehouse in Spain.
A longer-term recovery in margins is expected. As its platform becomes more of a channel for brands – providing logistics and marketing services – rather than just being an online retailer of garments, jewelry, and cosmetics.
The partner program represented 15% of the GMV at the end of last year. Its logistic service delivered about 40% of the items from the partner program during the fourth quarter. Chief of finance David Schroeder stated that he looked to achieve more than 50% this year.
- Check-out Financebrokerage’s comprehensive review on Forex.com
