Industry Updates

EUROPE’S LARGEST ONLINE FASHION RETAILER BETS SALES SLUMP IS JUST A BLIP

Published: August 16, 2022
Author: Fashion Value Chain

According to co-founder and co-CEO Robert Gentz, Europe’s largest online fashion retailer Zalando is betting the current internet shopping slowdown is only a hiccup and it can avoid the kind of widespread job layoffs being implemented by competitors. Thousands of jobs have been lost this year by consumer-facing internet companies like Amazon, Klarna, and Shopify as the online shopping boom that began in the first two years of the pandemic has come to an end. Zalando, a Berlin-based company, has also been severely impacted; revenues fell in the first half of the year for the first time in its 14-year history as a result of €668mn in capital withdrawals and €7mn in operating losses. The group is certain that it can prevent huge layoffs, nevertheless.

“Our plan is to keep employment by the end of this year steady,” said Gentz. Since the end of 2019, its workforce increased by a quarter to more than 17,000 employees. “But we have become much more cautious in hiring,” said Gentz. Gentz describes the market ructions as a temporary blip that will not have a lasting impact on the retailer. Zalando listed in Frankfurt in 2014 but its share price has fallen 68 per cent over the past year to leave the group with a market capitalisation of less than €8bn. “Two years of enormous growth lie behind us. When I think about the fashion industry, my [optimism] has not changed at all,” said Gentz.

He said revenues were still 60 per cent higher than in 2019, the last year that was unaffected by the pandemic. He noted that just above 3 per cent of all of Europe’s clothes purchases are processed thought Zalando, which counts 10 per cent of Europe’s population as active customers.
Zalando has been able to offset the carrier and packaging cost inflation that it has been facing so far, said Gentz, adding that the company was focusing on its profitability. It has scaled back marketing spending and postponed the building of new logistics centres. It also scaled back free shipping offers to limit lossmaking small orders. He also argued that the 29 per cent slump in net cash this year, to €1.6bn, was driven by temporary factors such as a surge in inventory triggered by the sudden drop in demand.

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