Case Study 2

Zalando to Deliver Orders for Adidas French Website

BERLIN: Online fashion retailer Zalando has launched a pilot to deliver orders placed by
customers in Paris on the website of Adidas as it extends moves to allow brands to use the
logistics network it has built for its own ecommerce business.

The pilot is the first time the German firm is delivering goods not ordered on its own site and
marks an expansion of its platform strategy under which it charges brands a commission to
list on its website rather than selling the products itself.

“It is a win-win situation for us,” Jan Bartels, Zalando senior vice-president for customer
fulfillment, told Reuters. “It increases the density of deliveries if you combine and bundle
volumes from different channels.”

Under the pilot, Adidas is storing sneakers at a Zalando warehouse close to Paris and using
the Zalando network to deliver orders placed on its site the same or next day. Zalando is not
worried that helping brands like Adidas with their own e-commerce operations will draw
customers away from its site because it believes most shoppers want to buy a range of brands,
Bartels said.

“We are not afraid of cannibalisation. We have a very strong proposition in multibrand
retailing,” he said. “We don’t want to become a third party logistics provider. We are still a
fashion platform.”

Zalando, Europe’s biggest online-only fashion retailer, is working to counter a squeeze on

profitability as it has invested heavily in logistics to speed delivery as Amazon and other
players have expanded rapidly in online fashion. It forecasts that its margins should improve
as its “partner programme” expands because the sales commission business, and providing
logistics and advertising services, is more profitable than its core online retailing operations.

Bartels said offering same-day delivery should increase how often Adidas customers order
and push down return rates, a major issue for Zalando given that half of orders are sent back.

“It will help them deepen their relationship with customers,” he said.

Zalando shares jumped earlier this month after it raised its profit guidance following a big
jump in visits to its website as it offered more speedy delivery options.

Zalando doubled the number of parcels delivered on the same or next day in Germany, its
biggest market, from the previous quarter and said it is testing same-day evening delivery in
the Zurich region.

Last month British rival ASOS issued its third profit warning since December, saying
problems at warehouses in the United States and Germany had restricted product availability,
hitting sales and raising costs.

Question c: What are your recommendations?

Ans:

First of all, Zalando can consider changing its core business from online retailing to
sales commission business or providing logistics and advertising services. This is
because Zalando had invest huge amounts of capital but the core business is not
profitable.

Second recommendation is Zalando can improve its packaging on the item to reduce
return rate. This is because packaging can protect product during transit and the right
packaging can prevent damage. Most of the customer return product due to the
damage of item. Zalando can reduce the frequency of return damaged product by
having a proper packaging.