Zalando, the leading fashion e-tail giant, has reported a 3% increase in gross merchandise value (GMV) in 2022, reaching €14.8 billion. However, even with this growth, the company faced challenges due to the economic climate, including the cost-of-living crisis and the Russia-Ukraine war. These factors, coupled with changing consumer behavior, impacted Zalando’s profitability. Despite these challenges, Zalando experienced growth in customer numbers, its partner program, and Plus loyalty memberships.
The company’s revenue remained stable at €10.3 billion, but adjusted earnings before interest and taxes (EBIT) fell to €184.6 million from €468.4 million the previous year, and net income dropped to €16.8 million from €234.5 million.
In response to the uncertain economic conditions, Zalando has revised its full-year guidance for 2023. GMV is expected to increase by 1% to 7%, while revenue is predicted to decline by 1% to rise by 4%. The company projects that adjusted EBIT will range between €280 million and €315 million.
Looking ahead to 2023, Zalando’s focus will be on achieving “profitable growth” by streamlining operations for innovation and speed. The company plans to invest in strategic priorities such as driving relevance and curating assortment. Additionally, Zalando aims to open up its logistics infrastructure to partners.
Zalando’s customer base grew by 6% to over 51 million in 2022, indicating successful efforts to expand its reach and deepen customer relationships. The Plus loyalty program saw a significant increase in membership, more than doubling to over 2 million.
Co-CEO Robert Gentz highlighted that achieving these results in the current economic environment demonstrates the effectiveness of Zalando’s core strategy. The company intends to continue investing in driving customer attention to sought-after brands and assortment on its platform.
Zalando emphasized the growing contribution of partners to Fashion Store GMV, which reached 36% in Q4, up six percentage points from the previous year. The Zalando Fulfillment Solutions also experienced growth, shipping 58% of partner items.
However, 2022 proved to be a challenging year for Zalando as e-commerce adoption decreased due to consumers returning to in-store shopping post-pandemic. The company faced low consumer sentiment and elevated inventory levels across the market.
To ensure profitable growth in 2023 and beyond, Zalando has devised strategies to improve margins, simplify its organization, and selectively invest in growth opportunities. The company initiated a program in February 2023 to reduce complexity and embrace simplicity, pragmatism, and frugality by eliminating several hundred overhead roles.
Zalando is also focused on enhancing its product curation by improving the relevance and curation of its assortment. Through its acquisition of Highsnobiety, the company aims to highlight fashion through storytelling and launch a fashion discovery experience to strengthen its emotional bond with customers. This collaboration has already resulted in over 80 curated product drops, viewed by over 7 million unique users, who have shown increased engagement and click rates.
In an effort to drive customer loyalty, Zalando encourages customers to explore different fashion and lifestyle categories, such as Fashion, Beauty, Designer, and Lounge by Zalando. This strategy has been successful, with close to 20% of customers shopping in multiple categories and spending three times more than customers who only shop in one category. Plus customers, who are members of the loyalty program, also tend to spend three times more than non-plus members.
Co-CEO David Schneider sees significant growth potential within Zalando’s existing customer base and aims to increase market penetration across their target markets. The company believes that substantial potential lies ahead and is committed to expanding its reach and driving customer engagement.
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