German online fashion retailer Zalando is investing in new delivery services and fulfilment centres in Europe after posting a strong 34% revenue increase in 2015 and is targeting revenue growth of up to 25% this year.
In Germany, Zalando has launched a new same-day delivery service for the local electronics online retailer notebooksbilliger.de in Berlin this month. As part of the cooperation, notebooksbilliger.de is using Zalando’s existing delivery network, with Zalando delivering the orders that are made by 1 pm between 7-10 pm on the same day. Notebooksbilliger.de charges €5 per delivery for the same-day service.
In September last year, Zalando already started testing same-day deliveries in Germany itself, in cooperation with the Frankfurt-based start-up Liefery. Following successful tests in Cologne and Bonn, it extended the pilot to ten more German cities in December last year. With free delivery and returns being part of Zalando’s policy, the same-day service is being offered for free in the moment.
Last month, the fashion and shoe retailer launched a free pick-up service for products that don’t fit and need to be returned. The pick-up service for returns is now being tested in Cologne and Amsterdam in partnership with Liefery, following successful tests in London.
In terms of its fulfilment footprint, Zalando is now constructing its fourth logistics centre in Germany, which is located in Lahr, Baden-Württemberg, with an overall investment amounting to about €130 million. The facility is due to start operating (test operations) in autumn 2016, with the ground-breaking ceremony having taken place mid-February this year.
With an area of 130,000 sqm, the centre will be the retailer’s biggest facility, surpassing the size of its existing logistics centres in Erfurt and Mönchengladbach (125,000 sqm each) and in Brieselang (25,000 sqm). After Erfurt and Mönchengladbach, Lahr will also be Zalando’s third self-operating logistics centre.
The new facility will allow Zalando to serve customers in southern Germany, Switzerland and France even faster and to keep up with growing demand. About 1,000 jobs are due to be created at the site located in the Upper Rhine region.
Beyond Germany, Zalando opened its first international satellite fulfilment centre in Stradella (Pavia), northern Italy, in January this year, and partnered with logistics service provider Fiege, which will operate the 20,000 sqm facility. This allows Zalando to serve its local customers in Italy even faster and further expand its European activities.
At the Italian facility, Zalando will cover the majority of Italian orders. “The investment in the international expansion of our logistics network gives us the possibility to evaluate the benefit of being even closer to our customers. Together with the services implemented over the past year – direct injection from our German fulfillment centre into Paris, same day delivery tests into several German cities and the simplified return process, to name a few – this pilot shows the commitment of Zalando to continuously improve the satisfaction of our customers,” Christoph Stark, Vice President Logistics at Zalando, said.
“Due to Zalando’s strong growth momentum, planning for a further large hub has been accelerated,” the company said in a statement.
In 2015, Zalando recorded revenue growth of 34% to €2.96 billion, with continued strong revenue growth expected in 2016, estimated at the upper range of 20-25%.
The company said it aims “for roughly neutral working capital at year-end and about €200 million of capital expenditures in 2016”, excluding mergers and acquisitions. Despite these continued investments, Zalando expects an adjusted EBIT margin of 3.0-4.5% for 2016.
Rubin Ritter, Member of the Management Board, said: “Our market position has never been stronger, and we have never faced so many great opportunities. We want to excite even more customers and gain further market share. We deliberately pursue growth while maintaining solid profitability – we think this is the best way to create long-term value.”
Zalando is also exploring ways to speed up delivery, including the use of Uber-style networks of freelance drivers, but Ritter said the company did not currently plan to invest in its own fleet.
Zalando’s shops attract over 135 million visits per month. In the fourth quarter of 2015, around 60% of traffic came from mobile devices, resulting in close to 17.9 million active customers by the end of the quarter. App downloads more than doubled to 16 million in 2015, from around 7 million in 2014.
Zalando’s brand value was enhanced through successful joint campaigns with brand partners. As a result, the number of active customers increased by 22% to almost 18 million at the end of last year, and “average orders per active customers reached an all-time high”.
Launched in Berlin in 2008, Zalando now serves customers in 15 European markets with more than 1,500 brands.
