Zalando, the popular fashion e-tailer, remains optimistic about its future prospects despite encountering difficulties in the first quarter of the year. The company experienced a loss in adjusted earnings before interest and tax (EBIT), largely due to changes in consumer behavior. Shoppers are now showing a preference for either value or quality products, leading to a shift away from the mid-market segment.

In Q1, Zalando reported a loss of €51.8 million, compared to an operating profit of €93.3 million during the same period last year. This loss can be attributed to a decrease in the gross margin resulting from increased promotional activities to attract customers and higher fulfillment costs. As a result, the company expects sales for the year to grow at the lower end of its forecasted range of 12% to 19%. Additionally, adjusted EBIT is expected to fall within the lower end of its projected range of €430 million to €510 million.

Despite these challenges, Zalando’s performance should not be considered weak when taking into account the current economic climate and other external factors. In Q1, the company saw a 1% rise in Gross Merchandise Volume (GMV) to €3.2 billion compared to the previous year. However, its revenue declined by 1.5%, which can be attributed to the transition of the business to a platform model.

Zalando has been actively focused on strengthening its customer relationships by promoting its loyalty program, Zalando Plus, and increasing customer engagement in its Beauty, Lounge, Designer, and Pre-Owned categories. The company’s active customer base grew by 5.2% in Q1, reaching nearly 49 million, while Zalando Plus memberships increased by 150%. Furthermore, Zalando experienced significant growth in its Partner Business, which accounted for 32% of Fashion Store GMV. This growth demonstrates the increasing number of international and local businesses utilizing the platform to sell their fashion and beauty products.

However, Q1 was impacted by macroeconomic factors and shifts in consumer preferences. Rising inflation and increased household costs led to a more cautious consumer sentiment, while the easing of pandemic restrictions caused changes in customer preferences. Presently, customers are gravitating towards seasonal and trend-based items. Zalando has noticed a polarization among shoppers, with some opting for high-end products while others are shifting towards affordable options, resulting in the abandonment of the mid-market segment.

Nevertheless, Zalando is actively managing these challenges by adjusting its offerings to accommodate changing consumer spending patterns, enhancing order economics, and implementing cost-efficient solutions. The company remains committed to investment in order to deliver exceptional customer experiences, improve partner services, and enhance e-commerce capabilities. Co-CEO Robert Gentz expressed confidence in Zalando’s ability to overcome short-term obstacles and meet long-term consumer demands.

To improve performance and enhance its logistics network, Zalando is taking proactive steps. The company is expanding its fulfillment centers to offer faster delivery times. Construction has already commenced in Frankfurt, Germany, Bydgoszcz, Poland, and most recently, in the Paris region of France. Additionally, Zalando plans to launch in Hungary and Romania in May, expanding its market reach and further solidifying its position as a leading fashion e-tailer.

In conclusion, despite the challenges faced in Q1, Zalando remains positive about the future. The company’s focus on customer relationships, expansion in partner business, and investments in logistics and platform enhancements position it for long-term success. Zalando’s agility and adaptability provide confidence in its ability to navigate the volatile market environment and emerge stronger.

Useful Links:
1. Zalando Official Website
2. Statista: B2C E-commerce Sales in Central and Eastern Europe