Zalando’s New Strategy Results in Acquisitions, Growth in 2024
In uncertain times for e-commerce, German online shopping giant Zalando’s new strategy of hedging its bets is working well. After several years of static or negative growth, Zalando notched revenues of 10.57 billion euros in 2024, growth of 4.2 percent.
In e-commerce, the number of consumers is still rising. But there’s also a lot more competition in the sector. And after benefiting from the pandemic boom for online shopping, where the platform regularly saw increases as high as 30 percent, Zalando had struggled to return to growth.
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In response, the platform launched a new strategy last March, shifting toward what it calls a “pan-European ecosystem for fashion and lifestyle e-commerce.” This sees Zalando following Amazon’s lead, using its multiple logistics hubs and software services to attract more business-to-consumer and business-to-business opportunities, while also consolidating and enriching existing services for fashion consumers.
Speaking at an online press conference from Berlin on Thursday morning, Zalando executives credited the new “ecosystem” strategy with the platform’s turnaround. Zalando’s revenues had risen slightly every quarter in 2024, ending with 8 percent growth in the fourth quarter and revenues of 3.3 billion between October and December last year.
“Last year we set ourselves some tough targets and I am really proud we not only achieved but actually exceeded them,” Zalando co-chief executive Robert Gentz said.
Other indicators at the company were also up. Zalando’s gross merchandise value, or GMV, grew 4.5 percent to hit 15.3 billion euros in 2024. GMV measures how much inventory the platform has moved and is usually higher than the company’s revenues.
Zalando also counted the most active customers it had ever had, with an increase of 4.5 percent to 51.8 million shoppers. The number of orders placed with the platform grew 2.5 percent to 251 million and the value of each customer’s average order also rose slightly, 2 percent, to 60.90 euros per basket.
With outlays in logistics and software, Zalando has had trouble making profits in the past but this number was also positive in 2024. The company’s adjusted EBIT rose 46 percent to 511.1 million euros, higher than consensus estimates.
Responding to Major Shifts
During the press conference, Gentz and fellow co-CEO David Schroeder explained how their new strategy was allowing them to respond to major shifts in e-commerce, and discussed changing consumer expectations, low-cost competition out of China, the impact of social media shopping on TikTok and Instagram, and technological changes involving advanced computing and generative artificial intelligence, as well as ever-growing customer demands for more speed, convenience and sustainability.
Zalando has put distance between itself and retailers like China’s low-cost giants Shein and Temu by promoting its platform as offering quality products in a trustworthy environment.
That is why Zalando is in ongoing talks with a number of higher-end brands, company bosses explained. Last month Diane von Furstenberg made Zalando the brand’s sole retail partner in Europe and there may be similar updates on other brands during the year, Schroeder noted.
Zalando has also expanded its offerings to shoppers. “Our idea is to play an expanded role in people’s lives,” Gentz explained. “When it comes to entertainment and inspiration, you spend more time on fashion apps [with entertainment and inspiration] than actually purchasing. Purchasing isn’t the most frequent thing. So we feel we can play a broader role there.”
Zalando has been working with things like pinboards, talent profiles, an AI-shopping assistant, the company’s trend spotting data and livestream shopping — big in China but not yet so big in Europe, Gentz noted — and other “content journeys.”
For example, Gentz said, since the launch of lifestyle-related “Stories” in 2023, Zalando has told 500 stories, utilizing 700 brands and 7,000 products. That kind of content has an impact on sales.
“Seventy percent of our running shoes now sell at a price point above 100 euros,” Gentz enthused, after demonstrating the company’s enhanced sporting goods channel.
Also in the pipeline: more localization, more personalization, more payment options and better options for assessing online fit, as well as richer product details.
Zalando is planning to bring some of that together in their own mobile phone app in the next few months, with what they’re calling a “discovery feed,” Gentz continued.
A video clip the executive played showing how the feed would work indicated it would be similar to scrolling through something like Instagram, except in this case your feed would be personalized with fashion and lifestyle content curated by Zalando.
Zaland also upgraded its loyalty program in 2024 and now has around 10 percent of its customer base enrolled in it. The loyalty program, which allows users to collect points by doing things like completing a fit profile, exploring a new shopping category or providing personal style details, will be further expanded in Europe this year.
Finalizing an Acquisition
This week Zalando ison the verge of finalizing its biggest acquisition ever, having paid just over 1 billion euros for another German fashion shopping platform, About You, headquartered in Hamburg. Once the merger is approved by German financial authorities, Zalando will likely take control of About You later this summer, executives said. The current plan is to keep both platforms running simultaneously.
Asked whether About You would be suitable competition for low-cost Chinese fashion platforms, the Zalando executives would only say that they wanted to offer customers other options. “They [customers] have different preferences and needs,” Schroeder told WWD. “Some customers prefer a style-led experience, where they follow an influencer, and we think that’s where About You’s strength lies. Our intention is to have these two strong brands with distinctly positioned offerings.”
On the other side of the cashier’s counter, Zalando’s ecosystem strategy in 2024 had involved growing business-to-consumer and business-to-business activities, offering the brands that participated ever-changing software and logistics solutions, including data-driven insights and inventory management.
In November 2024, Zalando unveiled a new partnership with U.K.-based clothing retailer Next. Zalando will now fulfill online, direct-to-consumer orders for most of Europe for the British company and will be building some unique software solutions for Next that will eventually be able to be shared with other brands.
As a result of the platform’s positive 2024 results, Zalando executives were buoyant about the coming year.
Despite news about the potential for a global trade war sparked by the Trump administration’s tariffs, they said they had not noticed any impact on European consumer confidence as yet. The first quarter of this year has been positive for Zalando so far and Gentz and Schroder also emphasized that they were focused solely on the European market.
The year “2024 marks the first year since the pandemic, that e-commerce penetration is back to a strong growth trend and more and more customers are shopping online,” Gentz enthused. “As a result we remain very bullish about the long term opportunity.”
Zalando’s guidance for 2025 predicts growth of between 4 and 9 percent for both revenue and GMV. Zalando also expects adjusted EBIT to increase to somewhere between 530 million euros and 590 million euros over 2025.
Market analysts from the likes of Deutsche Bank, UBS and Warburg Research agreed with the outlook, saying that Zalando was well positioned to continue accelerating growth.
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