Businessmodel of Zalando

Customer Segments

Zalando has a mass market business model, with no significant differentiation between customer segments. It markets its products to men, women, and children. That said, approximately 75% of its customer base is female and most are between ages 25 and 45.

Value Proposition

Zalando offers five primary value propositions: accessibility, price, customization, innovation, and brand/status.

The company gives consumers access to a large selection of products (150,000 each season) from a wide range of brands (over 15,000) that include global, local, and private label offerings.

The company is able to offer customers low prices due to its operational model. It only orders products from its manufacturer partners after a sale has been completed, enabling it to save on storage, inventory, and logistics expenses. These savings are then passed on to buyers. The company also offers frequent discounts to customers who are registered with its site. The specific section “Zalando Lounge” provides daily notifications of limited-time deals offering savings of up to 75% off the manufacturer’s suggested retail price (MSRP) for top brands. Customers can stay aware of current and upcoming promotions by subscribing to daily and weekly e-mail newsletters. Zalando also offers free delivery and returns with a return policy of up to 100 days.

The company enables customization by creating country-specific versions of its website and mobile apps. Further, it allows customers to select the type of newsletter they receive via e-mail. They can choose between a daily newsletter featuring all current deals and a weekly newsletter previewing upcoming promotions. They can also tailor their settings in order to turn off newsletter notifications or suspend them for a period of time.

The company fosters innovation by cultivating its in-house expertise. It maintains a team of over 1,000 technology experts, who work in teams to turn new concepts into prototypes that are quickly tested and rolled out into stores for customers to enjoy.

The company has established a strong brand due to its success, and bills itself as Europe’s top online fashion platform. It serves more than 18 million active shoppers in 15 countries. Its website generates more than 135 million visits a month and had net sales of €3.0 billion in 2015.

Channels

Zalando’s main channel is its website, through which it acquires most of its customers. That said, it also operates brick-and-mortar stores in Berlin and Frankfurt. The company promotes its offerings through online (search and affiliate) advertising, TV advertising, and its social media pages.

Customer Relationships

Zalando’s customer relationship is primarily of a self-service, automated nature. Customers utilize its website or mobile app while having limited interaction with employees. The company’s site includes a virtual tour of its various sections, a “Size Guide” identifying specific measurements for various categories (Small, Medium, Large) by country, and answers to frequently asked questions. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Zalando’s business model entails maintaining and updating its platform for its 18 million customers.

Key Partners

Zalando maintains the following key partnerships:

Fashion Stylists – The company retains the services of independent fashion stylists who provide personal shopping tips to its customers through an online tool called Zalon. Stylists receive a commission for their advice.

Logistics Providers – The company works with a wide variety of logistics companies, including last-mile delivery and long-haul service providers. One of its most prominent partners is PostNord. Zalando also has eight return centers across Europe managed by third-party service providers.

Marketing Affiliates – The company maintains an online marketing technology platform on its website and app through which third-party brands can advertise their offerings. These brands market Zalando on their sites and apps in return. Both parties earn a commission as a result.

Key Resources

Zalando’s main resource is its proprietary software platform that underlies its website. Its main physical resource is its group of three fulfillment centers, which forms one of the largest online retail footprints in Europe. Its main human resources are its team of 1,000 technology experts across 100 countries who continously come up with innovations, and its team of 400 fashion employees (product managers, buying teams, trend scouts, etc.) who study the industry for the latest trends.

Cost Structure

Zalando has a cost-driven structure, aiming to minimize expenses through low operating expenses, significant automation, and low-price value propositions. Its biggest cost driver is cost of materials, a variable expense. Other major drivers are in the areas of sales/marketing and distribution, both fixed costs.

Revenue Streams

Zalando has two revenue streams:

Product revenues – The company generates revenues from sales of third-party and private label products on its website and mobile app.

Advertising revenues – The company earns a commission from third-party companies who advertise their offerings on its marketing platform (website and mobile app).