PARIS – Zalando’s new strategy is paying off with a strong first quarter, rebounding from losses in 2024.
In the three months to March 31, revenue at the German e-commerce giant grew 7.9 percent to 2.4 billion euros, up from 2.2 billion in the same period last year.
“Our ecosystem strategy is progressing well, and customers and partners are embracing our expanding offerings,” said co-chief executive officer David Schroeder.
Zalando’s “ecosystem” encompasses strengthening its consumer-facing business with things like entertaining content, social shopping and loyalty programs, while building out its behind-the-scenes logistics business that supports brands’ sales on or off the Zalando website.
That dual-pronged strategy has boosted sales, with consumer revenue hitting 2.18 billion euros in the quarter, up from 2.02 billion year-over-year.
The results “will likely placate some of the doubters,” Deutsch Bank analysts said in a trading note released after the results.
RBC’s Richard Chamberlain’s sees continued growth on the horizon for the company is it “continues to spend on marketing and enhances its competitive advantage in services.”
The strength of its B2B segment, particularly wholesale orders, “should allow it to maintain a strong competitive position,” he said.
The stock notched up 1.5 percent in morning trading.
As the U.S. tariffs have upended global trade, Schroeder sees an upside for the European market. “We see brands and retailers really having a larger focus on Europe as a way to also generate some additional demand,” he said, touting Zalando’s pole position in European e-commerce.
“We are one of the key partners that can enable this kind of growth, so we are obviously talking to quite a few brands at the moment on how we can best help them to deal with the situation,” he said.
As tariffs and the end of the de minimus rule hit shoppers in the U.S., Schroeder also sees an opportunity for Zalando to strengthen its ties with upscale fashion brands.
Ultra-fast fashion players Shein and Temu are now subject to import duties as high as 120 percent or a flat fee of $100, set to rise to $200 in June. As a result, the companies have increased their focus on Europe, and upped their ad spend by 35 to 40 percent.
While those new charges just kicked in in the U.S., Schroeder said Zalando has not yet seen any impact and thinks Europe may soon follow suit.
“What we are obviously happy to see is that the European Commission, and also the new German government, is actually looking into the situation and considering steps on how to ensure a level playing field for European companies by also adjusting the de minimis regulation in Europe,” said Schroeder.
While consumer sales were driven by bargains at the end of the season, Schroeder downplayed competition from low-cost Chinese competitors, as Zalando seeks to carve a bigger piece out of the premium fashion pie. “We are really focused on a very different segment of the market,” said Schroeder.
For example, Zalando recently became the exclusive retail partner for Diane von Furstenberg in Europe, and it added Marc Jacobs to its mix in the first quarter.
The company said it logged “double-digit growth” in the designer category. The average basket bumped up to 61.1 euros per order, from 60.4 in the same period last year, with 58.5 million orders – 3.3 million more year-over-year.
It also company added 2.9 million active users to its ranks for an all-time high of 52.4 million customers in the quarter. Gross merchandise volume (GMV) was up 6.5 percent to 3.5 billion euros.
Zalando launched its ecosystem strategy with a focus on more categories one year ago, including adding entertainment into its site to drive engagement and inspiration beyond the simple search-click-buy.
First moves included adding Pinterest-like curated boards, a functionality that has attracted more than 1 million users since it was rolled out to all markets. Zalando will continue to build out this function with users able to create their own boards and interact with other user-generated content to drive engagement.
Other key drivers have been the continued expansion of its Zalando Plus loyalty program, now available in about half its markets so far with a 15 percent enrollment rate. Users can also earn points not only by buying, but also by engaging with content.
Zalando said it sees no signs of slowing down, despite choppy economic waters, with sales in the second quarter off to a “promising start.”
While global trade has gone topsy-turvy, consumer sentiment has not followed, said Schroeder. “We haven’t seen major changes,” he said. “Consumers obviously are still cautious, but they also keep spending.”
Behind the scenes, logistics and fulfilment arm ZEOS has continued to grow its reach. The company scored big when it was selected as TikTok Shop’s preferred logistics partner for fashion and lifestyle in Germany, France and Italy. The first rollout was completed for Germany in the first quarter, as the company expands into social commerce support.
Revenue in that category was up 11.6 percent in the first quarter to 240 million euros.
With double-digit growth the category, Schroeder said the company is “laser focused” on scaling ZEOS with continued improvement in logistics and software.
Acquisition of the Hamburg-based platform AboutYou will support its B2B growth goals, Schroeder said. Integrating AboutYou’s e-commerce capabilities and existing software will strengthen its overall offering.
That acquisition is on track for summer. Zalando has secured 91.5 percent of the shares needed and received approval from the German regulatory body. The next step is E.U. approval, and Schroeder doesn’t see any hiccups in that process.
The company will continue to roll out its platform to new markets. It opened in Bulgaria, Greece and Portugal in the first quarter, and will launch in Norway and Finland “in the coming months,” Schroeder said.
Overall, the company and sees a positive outlook “despite the fast-changing geopolitical and macroeconomic environment,” the company said in a statement.
Some cuts will occur, with 450 customer service jobs slashed, though Schroeder said it will fill about 100 customer service positions “with different skill sets” to offset those cuts. It will also “rely on technology” more in this area, he added.
AI is also coming for the creative class, as Zalando will cut from its studio team. Instead, they will turn to “the latest AI technology to provide our customers with exciting content,” he said, without giving a specific number of layoffs.
Overall, Zalando confirmed its full-year guidance, anticipating revenue to ramp up between 4 and 9 percent over 2024, with adjusted EBIT at 530 million to 590 million euros.
