Online retail giant Zalando is never short of news. Conducting an interview with its managers is as exciting as it nerve-wracking – if you don’t type it down and publish it in the very instance, you can almost be certain that some further, most probably very unexpected news will break from the retailer beforehand.
Last week, Zalando announced its decision to shift the fashion festival it originally planned to host on the former Bread & Butter grounds during next January’s Berlin Fashion Week to give room for a charity event to support refugees.
Shortly before this announcement, the e-tailer launched its massive new ‘Share your Style’ campaign for fall/winter ‘15 starring top-class celebrities such as actress Christina Hendricks or models Caroline de Maigret and Lucky Blue Smith. In the same month, Zalando also opened up a new tech hub in Finland and disclosed its latest sales growth figures: in the first half of 2015, the company achieved sales of €1,38 billion; a 32% rise compared to the previous year.
Here, Zalando founder David Schneider and the company’s Vice President Brand Marketing Carsten Hendrichs give some insight into their turbulent tech enterprise: They explain their motivation behind buying an insolvent trade show, explore the threats and treats of mobile commerce and personalization and illuminate why return rates don’t really bother them so much. Interview by Maria Hunstig
Your company has acquired Bread & Butter GmbH a few months ago. How does the online retailer Zalando benefit from purchasing a fashion trade show?
Carsten Hendrich (CH): We are generally interested in creating connections and platforms between the different parties of our business and we want consumers to gain direct access to a fashion event normally exclusive and inaccessible for public. In our digital times with all its options for personalization, consumers have gained a much more central role. Consumers are the reason why we are here and we want to put them into focus and offer them an additional, exciting offline experience.
Was it very low-budget to purchase the insolvent Bread & Butter company?
David Schneider (DS): We’ll see how cost intense it was, depending on what we’re making out of it. But of course buying BBB was also partly an idealistic decision. I believe I’ve been to Bread & Butter for the first time in 2009 – that was such an experience! We are Berliners and we want to make a statement on how important Berlin is in the international fashion industry and to take it up to the next level: a fashion event that doesn’t exclude the public can neither be found in Paris, Milan or New York so far.
Last week, Zalando announced its decision to shift the fashion festival it originally planned to host on the former Bread & Butter grounds during next January’s Berlin Fashion Week to give room for a charity event to support refugees.
Shortly before this announcement, the e-tailer launched its massive new ‘Share your Style’ campaign for fall/winter ‘15 starring top-class celebrities such as actress Christina Hendricks or models Caroline de Maigret and Lucky Blue Smith. In the same month, Zalando also opened up a new tech hub in Finland and disclosed its latest sales growth figures: in the first half of 2015, the company achieved sales of €1,38 billion; a 32% rise compared to the previous year.
Here, Zalando founder David Schneider and the company’s Vice President Brand Marketing Carsten Hendrichs give some insight into their turbulent tech enterprise: They explain their motivation behind buying an insolvent trade show, explore the threats and treats of mobile commerce and personalization and illuminate why return rates don’t really bother them so much. Interview by Maria Hunstig
Your company has acquired Bread & Butter GmbH a few months ago. How does the online retailer Zalando benefit from purchasing a fashion trade show?
Carsten Hendrich (CH): We are generally interested in creating connections and platforms between the different parties of our business and we want consumers to gain direct access to a fashion event normally exclusive and inaccessible for public. In our digital times with all its options for personalization, consumers have gained a much more central role. Consumers are the reason why we are here and we want to put them into focus and offer them an additional, exciting offline experience.
Was it very low-budget to purchase the insolvent Bread & Butter company?
David Schneider (DS): We’ll see how cost intense it was, depending on what we’re making out of it. But of course buying BBB was also partly an idealistic decision. I believe I’ve been to Bread & Butter for the first time in 2009 – that was such an experience! We are Berliners and we want to make a statement on how important Berlin is in the international fashion industry and to take it up to the next level: a fashion event that doesn’t exclude the public can neither be found in Paris, Milan or New York so far.
Zalando x Gap campaign imagery
What is your main goal when cooperating with brands such as Gap or Topshop?
CH: With Topshop and Gap, we work with two iconic brands with an extremely high appeal. These are strategic partnerships with which we really want to emphasize our fashion competence whilst they benefit from our distribution and our presence in 15 markets. Looking at Gap we make their products available in additional markets and to more consumers. It’s a great USP for us to offer the brand in countries where it is normally not available and for Gap as a brand it’s great to extend its reach and enter new markets. We definitely want to expand these sorts of partnerships in the future and are currently speaking to several interesting brands – but nothing is set yet.
How do you select the brands to cooperate with?
DS: That´s easy: We want to provide the best fashion assortment, work with the most interesting brands and engage with exciting products and stories. With more than 16 million customers, we have a lot of insights on their preferences and interests. We strive constantly to select brands in line with these expectations. CH: When we are planning a bigger cooperation such as Topshop and Gap, we check the brand’s awareness and if the products fit with the search queries on our site and on our app. Interestingly, we found out that Gap is very well known, even in Germany, where the brand wasn’t even that present during the past few years. Based on those findings, we tailor our communication and visual assets– do I first have to create brand awareness or can I build up on something and rather explain what Gap stands for today, product-wise?
Has it become easier for you to get cool brands on board nowadays? In the past, brands were often struggling with the Zalando image…
CH: This is obvious if you look at brands like Topshop and Gap which have both voluntarily decided to make us the first big multi-brand online store they work with. We are striving for a much stronger fashion profile and are especially working on building up a stronger visual identity. This is something we have started at the beginning of the year and have since then consequently carried out across the different channels of communication. And our media mix has changed, too: We can see where our customers come from and we therefore target the different digital channels much more specifically. This is definitely paying off right now.
How exactly do you target people personally?
DS: The future is about personalization. So in a first step we think more in sub-segments and form clusters based on how customers are acting and what they are looking for - in the long run you can always narrow that down to a single customer. There are some things that we have already added to our offer like a personal, Pinterest-like fashion feed where users can follow the brands they like, but we still see A LOT more opportunities in that field. Mobile will change the world once again. It’s not about scrolling over the pages of an (online) catalogue and it’s not about having that one teaser anymore, it’s about much, much more personalized offers. And that also kind of gives us the freedom to still have a rather broad offering.
Does that mean that Zalando still doesn’t intent to showcase the very top end of fashion?
DS: Zalando is generally laid out quite broadly. We are not the progressive fashion lead and we are also not really involved in the luxury segment. I could imagine going one step further in the future, especially if a brand has a certain relevance and appeal, but I don’t think it will be a priority for us. The reality is that even highly fashionable customers still buy their basic shirts and people who only buy basics still like to be inspired. In the end every customer group – not only based on their fashion degree but also on their approach to buying – can be targeted separately.
What does mobile mean to you?
DS: People still ask me the question “How do you do SEO?“ nowadays. With mobile devices it’s not about opening a browser and searching for something, it’s about being in social feeds, in apps etc. It’s a completely new relationship. For me, the most exciting part is where the two worlds, online and offline connect. We’ve had that discussion a lot within Zalando and I strongly believe in connecting both worlds much stronger in the future.
We see ourselves as the ones connecting, e.g. developing the technical requirements, building up strong networks and enabling others out there.: If, for instance, a customer is looking for a product, in my vision we could either ship it to him the other day but we could also tell him to pick up the product in a shop next door or maybe even send a messenger who delivers it within 20 minutes.
Even if that shop isn’t Zalando-owned?
DS: Exactly, we’d like to open up much more in that segment. We’d like to think more as a network and not pursue a “we do everything by ourselves” strategy – we want to be the ones making everything possible. Right now, our brand partnerships are about making products available on our platform, but we can link our businesses so much more closely together in the future and really benefit from that strategically. Why shouldn’t the Zalando customer pick up his parcel in a Gap store? There are so many options.
Are return rates a problem from the past (like SEO) or are you actively fighting them?
DS: There are wanted and unwanted returns. The unwanted returns are everything concerning fit, quality, any sort of defaults – that, of course, you have to fight via improved product presentation, customer relations and quality checks. On the other side customers often order several items to have a selection and that is simply part of the game! I wouldn’t pull out the changing rooms of a retail store either, would I? People like to try on and try out, but there are markets, like Italy for instance, where returning is something that’s not a habit.
CH: We even ran a campaign in Italy which was entitled „Trying is for free“ that aimed at taking away the people’s barrier of returns – both on a rational level such as “will I get my money back?” as well as on a very emotional level so that you don’t have to feel bad returning something.
Acquiring a fashion trade show, continuously launching new apps and services, hiring models-of-the-moment Cara Delevingne or Lucky Blue Smith for your campaigns and teaming up with some of the most sought-after international fashion brands for exclusive e-commerce partnerships - what’s up next on the turbulent agenda of taking Zalando to world power?
DS: Most recently, our cooperation with brands, the launch of our curated shopping service Zalon and the development of apps for mobile/user generated content (e.g. the partner app Amaze) have been key topics for us. But there is always something happening. Sometimes we are astonished by all the things that are currently in the making at Zalando ourselves (smiles). With the mix of technology-oriented people and creatives in our company, there is an incredible power of ideas coming up – the challenge is to select the best of them.
Where do you find all those creative people working for you?
DS: Of course the number of our employees is growing with the number of markets we work in but it’s a real challenge to develop an international brand and to cater for local needs. I strongly notice our internationalization in the recruiting process: By now, we do receive a lot of speculative applications and even people from New York apply for some of our positions. It’s not about growing the team, it’s also about creating a workspace that stands for a certain company culture. In Germany, only companies like Adidas, Puma or SAP really have a similar international focus.
Are you scared of anything?
DS: We are definitely monitoring very closely the whole mobile development. It is so fast-paced. European behaviors in terms of mobile use are for example different in China, where it is a whole new ballgame over there.
We have always been put in the discussion of “Do we destroy classic retail models?” but that’s not what it’s all about any more - we could say exactly the same thing about mobile destroying classic e-commerce now. At the end of the day, the consumer out there is the one with power. We started with a desktop-based web shop seven years ago and today, 60% of our traffic is mobile. The dynamics are completely different. Now think two or three years ahead and the landscape will drastically change again. You really have to keep your eyes open and that is why we actively invest in technology. For instance we opened up a new tech offices in Dublin (Ireland) and Helsinki (Finland) and we plan to hire several hundred more engineers in the running year to make sure we have the top talents.
We want to be the ones shaping the field. Every idea and product we are developing is primarily conceived “Mobile First” – desktop-version comes second.
The international Zalando shops register more than 135 million visits per month. In the second quarter of 2015, 57% of these visits arose from mobile devices. Zalando has 16.4 million active users.
CH: With Topshop and Gap, we work with two iconic brands with an extremely high appeal. These are strategic partnerships with which we really want to emphasize our fashion competence whilst they benefit from our distribution and our presence in 15 markets. Looking at Gap we make their products available in additional markets and to more consumers. It’s a great USP for us to offer the brand in countries where it is normally not available and for Gap as a brand it’s great to extend its reach and enter new markets. We definitely want to expand these sorts of partnerships in the future and are currently speaking to several interesting brands – but nothing is set yet.
How do you select the brands to cooperate with?
DS: That´s easy: We want to provide the best fashion assortment, work with the most interesting brands and engage with exciting products and stories. With more than 16 million customers, we have a lot of insights on their preferences and interests. We strive constantly to select brands in line with these expectations. CH: When we are planning a bigger cooperation such as Topshop and Gap, we check the brand’s awareness and if the products fit with the search queries on our site and on our app. Interestingly, we found out that Gap is very well known, even in Germany, where the brand wasn’t even that present during the past few years. Based on those findings, we tailor our communication and visual assets– do I first have to create brand awareness or can I build up on something and rather explain what Gap stands for today, product-wise?
Has it become easier for you to get cool brands on board nowadays? In the past, brands were often struggling with the Zalando image…
CH: This is obvious if you look at brands like Topshop and Gap which have both voluntarily decided to make us the first big multi-brand online store they work with. We are striving for a much stronger fashion profile and are especially working on building up a stronger visual identity. This is something we have started at the beginning of the year and have since then consequently carried out across the different channels of communication. And our media mix has changed, too: We can see where our customers come from and we therefore target the different digital channels much more specifically. This is definitely paying off right now.
Zalando's fashion feed
DS: The future is about personalization. So in a first step we think more in sub-segments and form clusters based on how customers are acting and what they are looking for - in the long run you can always narrow that down to a single customer. There are some things that we have already added to our offer like a personal, Pinterest-like fashion feed where users can follow the brands they like, but we still see A LOT more opportunities in that field. Mobile will change the world once again. It’s not about scrolling over the pages of an (online) catalogue and it’s not about having that one teaser anymore, it’s about much, much more personalized offers. And that also kind of gives us the freedom to still have a rather broad offering.
Does that mean that Zalando still doesn’t intent to showcase the very top end of fashion?
DS: Zalando is generally laid out quite broadly. We are not the progressive fashion lead and we are also not really involved in the luxury segment. I could imagine going one step further in the future, especially if a brand has a certain relevance and appeal, but I don’t think it will be a priority for us. The reality is that even highly fashionable customers still buy their basic shirts and people who only buy basics still like to be inspired. In the end every customer group – not only based on their fashion degree but also on their approach to buying – can be targeted separately.
What does mobile mean to you?
DS: People still ask me the question “How do you do SEO?“ nowadays. With mobile devices it’s not about opening a browser and searching for something, it’s about being in social feeds, in apps etc. It’s a completely new relationship. For me, the most exciting part is where the two worlds, online and offline connect. We’ve had that discussion a lot within Zalando and I strongly believe in connecting both worlds much stronger in the future.
We see ourselves as the ones connecting, e.g. developing the technical requirements, building up strong networks and enabling others out there.: If, for instance, a customer is looking for a product, in my vision we could either ship it to him the other day but we could also tell him to pick up the product in a shop next door or maybe even send a messenger who delivers it within 20 minutes.
Even if that shop isn’t Zalando-owned?
DS: Exactly, we’d like to open up much more in that segment. We’d like to think more as a network and not pursue a “we do everything by ourselves” strategy – we want to be the ones making everything possible. Right now, our brand partnerships are about making products available on our platform, but we can link our businesses so much more closely together in the future and really benefit from that strategically. Why shouldn’t the Zalando customer pick up his parcel in a Gap store? There are so many options.
Are return rates a problem from the past (like SEO) or are you actively fighting them?
DS: There are wanted and unwanted returns. The unwanted returns are everything concerning fit, quality, any sort of defaults – that, of course, you have to fight via improved product presentation, customer relations and quality checks. On the other side customers often order several items to have a selection and that is simply part of the game! I wouldn’t pull out the changing rooms of a retail store either, would I? People like to try on and try out, but there are markets, like Italy for instance, where returning is something that’s not a habit.
CH: We even ran a campaign in Italy which was entitled „Trying is for free“ that aimed at taking away the people’s barrier of returns – both on a rational level such as “will I get my money back?” as well as on a very emotional level so that you don’t have to feel bad returning something.
Zalando's new 'Share your Style' campaign
Acquiring a fashion trade show, continuously launching new apps and services, hiring models-of-the-moment Cara Delevingne or Lucky Blue Smith for your campaigns and teaming up with some of the most sought-after international fashion brands for exclusive e-commerce partnerships - what’s up next on the turbulent agenda of taking Zalando to world power?
DS: Most recently, our cooperation with brands, the launch of our curated shopping service Zalon and the development of apps for mobile/user generated content (e.g. the partner app Amaze) have been key topics for us. But there is always something happening. Sometimes we are astonished by all the things that are currently in the making at Zalando ourselves (smiles). With the mix of technology-oriented people and creatives in our company, there is an incredible power of ideas coming up – the challenge is to select the best of them.
Where do you find all those creative people working for you?
DS: Of course the number of our employees is growing with the number of markets we work in but it’s a real challenge to develop an international brand and to cater for local needs. I strongly notice our internationalization in the recruiting process: By now, we do receive a lot of speculative applications and even people from New York apply for some of our positions. It’s not about growing the team, it’s also about creating a workspace that stands for a certain company culture. In Germany, only companies like Adidas, Puma or SAP really have a similar international focus.
Are you scared of anything?
DS: We are definitely monitoring very closely the whole mobile development. It is so fast-paced. European behaviors in terms of mobile use are for example different in China, where it is a whole new ballgame over there.
We have always been put in the discussion of “Do we destroy classic retail models?” but that’s not what it’s all about any more - we could say exactly the same thing about mobile destroying classic e-commerce now. At the end of the day, the consumer out there is the one with power. We started with a desktop-based web shop seven years ago and today, 60% of our traffic is mobile. The dynamics are completely different. Now think two or three years ahead and the landscape will drastically change again. You really have to keep your eyes open and that is why we actively invest in technology. For instance we opened up a new tech offices in Dublin (Ireland) and Helsinki (Finland) and we plan to hire several hundred more engineers in the running year to make sure we have the top talents.
We want to be the ones shaping the field. Every idea and product we are developing is primarily conceived “Mobile First” – desktop-version comes second.
The international Zalando shops register more than 135 million visits per month. In the second quarter of 2015, 57% of these visits arose from mobile devices. Zalando has 16.4 million active users.
