Connecting online and physical retail has long been important in the fashion industry; even more so since the beginning of the coronavirus pandemic. Connected Retail is Zalando’s solution that enables brick-and-mortar stores to serve customers on the Zalando platform. The program counts more than 5,000 active stores, selling to millions of Zalando customers online. Learn more about Connected Retail and the solutions it offers here.
Connected Retail – Explained by Carsten Keller
How it works: Local stores sell to millions of Zalando customers online
The Challenges and Opportunities of Stationary Retail
Many customers have changed their shopping behavior during the coronavirus pandemic, resulting in drastically decreased footfall, or non at all, for physical stores. For brands, who often run multiple physical stores, keeping each of them profitable has become challenging. To overcome these challenges, we need to come together as an industry and innovate in more traditional business areas such as physical retail.
Connected Retail helps Zalando partners drive productivity by forwarding Zalando customer orders to their owned or franchised brick-and-mortar stores. Participating stores ship items specified in the order and book the corresponding revenues and profits. This is done with the help of simple, easy-to-use and free of charge tools.
Today, Connected Retail is available in twelve countries for all retailers and brands that have one or more physical stores: Germany, the Netherlands, Poland, Sweden, Spain, Finland, Norway, Denmark, Austria, France, Belgium and Switzerland. Italy will follow over the course of 2021. These are the main benefits for brands and retailers:
- Support during the coronavirus crisis
In order to support our peers in the fashion industry while footfall is impacted drastically by the pandemic, Zalando is waiving commission fees for all new and existing Connected Retail partners. Revenues are also currently being paid out on a weekly basis to assist with cash flow. These additional offers are in place until the end of Q1 2021.
- Easy connectivity
Everything digital is taken care of by us. We provide the content, customer care, payment operations, marketing, platform and infrastructure (such as our software). Connected Retail also comes without outlay costs or expensive system integration. Stores need only set up an automated export from its Enterprise Resource Planning (ERP) system. The model is essentially risk-free for participating stores, as all costs are variable. Commission is only paid for completed (and non-returned) transactions, and stores fully control article prices, capacity (i.e., number of orders per day) and assortment sold on Zalando at all times.
- Higher sales, higher profits
By connecting physical stock to the Zalando platform, partners can greatly increase sales and profits per square meter. Some of our best performing stores are seeing up to 60 percent incremental Gross Merchandise Volume (GMV) on top of their regular topline. At the same time, the number of orders for participating retail partners continues to increase significantly; on average 20 orders per store per day.
- Higher footfall
Besides higher space productivity from Connected Retail transactions, we will also generate physical traffic for the stores. We are aiming to roll out click-and-collect and return-in-store schemes going forward, which will effectively bring Zalando customers to high street stores. Moreover, Connected Retail will also provide transparency over local stock availability. As a result, customers can click-and-reserve items before they hit the high street and enjoy expert in-shop assistance while in store.
- Fast, green delivery
In leveraging our network for speedy deliveries from stores in major cities, we will help ensure an unmatched convenience experience for our customers, while improving Zalando’s current same-day delivery proposition through later cut-off times. Customers are also increasingly aware of the impact of their choices on the environment. Visibility of the inventory allows customers to choose not only the easiest option but also the most sustainable access to the product by choosing the store closest to them. Zalando is also carbon neutral in its own operations and all deliveries and returns.
Connected Retail creates a win-win-win situation
FAQ: 7 Answers to Common Connected Retail Questions
1. How is Zalando benefitting from Connected Retail?
Connected Retail is a key pillar in Zalando’s platform strategy to be the Starting Point for Fashion. The four main opportunities for us are: 1) Availability: There are quarters where we receive up to 10 million requests from customers who would like to buy an article but are unable to because the product is not available in their size. Connected Retail will help us lower this number. 2) Selection: Store partners are able to sell products that we have not yet listed on our platform which makes our assortment more locally relevant. 3) Speed: In many cases, shipments from the store around the corner reach customers faster than those coming from our warehouses. 4) Sustainability: Deliveries from a store in the region of the customer are causing fewer emissions and are therefore better for the environment.
2. How do stores benefit from joining Connected Retail?
Some of our best performing stores increase their productivity by up to 60% per square meter. The number of orders for participating retail partners continues to increase significantly; on average over 20 orders per store per day. The model is essentially risk-free for participating stores, as all costs are variable. The commission is only paid for completed (and non-returned) transactions, and stores fully control article prices, capacity (i.e., number of orders per day), and assortment sold on Zalando at all times. Everything digital, including content, customer care, payment operations, platform, and infrastructure, is taken care of by Zalando. If needed, partners can also book additional marketing via Zalando’s 360-degree marketing unit ZMS (Zalando Marketing Services).
3. What are the prerequisites for partners wanting to join Connected Retail?
Onboarding store partners to the Zalando platform through Connected Retail is simple. Store partners require a) an assortment that is relevant for Zalando customers, b) a computer or tablet connected to the internet, c) a printer for the automatically generated shipping labels. Stores also need to have some form of a digital inventory management system. Zalando supports retailers during onboarding in connecting their inventory to the Zalando platform, and in setting up contracts with partners on logistics.
4. What are the costs for retailers who join Connected Retail?
All costs are variable. The commission is only paid for completed (and non-returned) transactions, and stores set their own article prices. Our commission scheme is below market average and depends on the product category and price point.
To offer support to physical retailers during the pandemic, Zalando will have a reduced commission model for Connected Retail until the end of the year in all international markets. Furthermore, payout cycles have been switched to a weekly instead of monthly rhythm to help stabilize cash flow for store partners.
5. What’s the difference between Connected Retail and Partner Program?
With Connected Retail we connect physical stores of various structures to the Zalando platform, from monolabel stores run by retailers or franchisees to multilabel stores owned by independent retailers who sell products of different manufacturers in their store(s). Manufacturers and retailers with warehouses suited for shipping articles directly to consumers can also connect to the Zalando platform through our Partner Program. There they can choose to ship orders themselves or use our Zalando Fulfillment Solutions.
6. Do retailers worry about losing revenue if more and more stores join Connected Retail?
No, there is no such concern. Our customer’s demand on the Zalando platform is high enough for all participating stores. Especially now that stores can offer items on our platform that have not been listed on Zalando before. With a growing assortment also comes more demand. Every new store partner makes the Zalando platform more attractive, diverse and relevant for our customers and for specific markets and regions.
7. Will you offer click-and-collect and return-in-store from the physical stores?
As part of Zalando’s platform strategy, we are currently testing various new products and services. Our main goal is to make all physical assortment shoppable online. We are thinking about click-and-collect solutions as well as return points in the stores which would also mean increased foot traffic for retailers.
How to join Connected Retail
To get started, stores go through a simple onboarding process that enables the Zalando platform to see store stock levels. Once connected, shop assistants log in to the Connected Retail tool via a standard web browser where they will find orders from Zalando customers. Store staff then pick and pack the order, and the system automatically notifies the carrier and prints delivery documents. The store staff member then hands over the labeled parcel to the carrier who delivers it to the customer. The customer can then either keep their order or return it via the carrier. In the near future, they will be able to return the parcel in store. The processing of orders is straightforward and does not require any technical knowledge. In the store, transactions are booked in the Point-of-Sale system; just like a transaction in the store. As always, Zalando handles the payment process, meaning customers pay us, and we transfer these revenues to the store, weekly and commission free until the end of Q1 2021. After this, reduced commission fees below market standard will apply.
Want to get on board?
If you are interested in joining the Zalando platform with your store(s) via Connected Retail reach out to firstname.lastname@example.org.