Zalando grows customer base and progresses on platform transition in 2022, on path to be the Starting Point for Fashion.

• 2022 saw growth in customer numbers, partner program and Plus loyalty memberships
• Zalando achieves updated full-year guidance against a challenging economic backdrop
• Focus in 2023 on profitable growth as organization simplifies for innovation and speed
• Company continues to invest in strategic priorities such as driving relevance and curation of assortment and opening up logistics infrastructure to partners
• 2023 guidance: Gross Merchandise Volume (GMV) to grow between 1% and 7%, revenue to develop between -1% to 4%, adj. EBIT of 280 million to 350 million euros

Berlin, March 7, 2023 // Zalando, one of Europe’s leading online platforms for fashion and lifestyle, is progressing on its strategy to grow its customer base and deepen customer relationships, outgrowing the online European fashion market in the three-year period through 2022. The number of active customers grew 6% to more than 51 million last year and Zalando’s loyalty program, Plus, more than doubled its membership to over 2 million compared with a year ago.

“The fact that we were able to continue to grow our customer base in the current economic environment shows that our core strategy is working,” said Robert Gentz, co-CEO at Zalando. “We want our customers to love Zalando and that’s why we are deepening our relationships with them. Understanding their needs and likes is crucial. Then they’ll keep coming back to us and stay longer with us.”

The company will continue to invest in strategic priorities, driving customer attention around sought after brands and assortment on the Zalando platform and helping partners to boost their direct-to-consumer business off the platform. The proportion of partners contributing to Fashion Store GMV was 36%, up six percentage points, and Zalando Fulfillment Solutions shipped 58% of partner items, up three percentage points, in the fourth quarter compared with the same quarter a year ago.

The key financial figures for the full year 2022 all came within the ranges of the updated company guidance despite a challenging economic backdrop. GMV grew 3% to 14.8 billion euros in 2022 with revenue stable at 10.3 billion euros compared with a year ago. Adjusted earnings before interest and taxes (adjusted EBIT) was 184.6 million euros.

The customer growth shows that Zalando is making progress to be the Starting Point for Fashion, the destination people choose for all their fashion and lifestyle needs, especially in a year when e-commerce tailwinds turned into economic headwinds. As consumers went back to in-store shopping post pandemic, e-commerce adoption reversed more than initially expected, albeit at higher levels than pre-pandemic. Low consumer sentiment resulted in elevated inventory levels across the market.

“The challenges of 2022 demanded us to be laser-focused on profitable growth and we acted quickly and decisively with measures that improved margins such as the introduction of minimum order values,” said CFO Sandra Dembeck. “Our healthy balance sheet allows us to continue investing in our strategic priorities whether that’s driving customer excitement around relevant brands and assortment or helping partners to drive their direct-to-consumer business across a variety of channels.”
 
To ensure profitable growth in 2023 and beyond, the company will continue to work on improving its margin, simplifying the organization and investing selectively through the cycle to take advantage of growth opportunities. The company started a program in February 2023 to reduce complexity and embrace simplicity, pragmatism and frugality. This involves removing several hundred overhead roles across many of Zalando’s teams.

To earn and retain the attention of customers, the company is improving the relevance of and curating its assortment. With the help of Highsnobiety, which the company acquired last year, it is highlighting fashion through storytelling, launching a fashion discovery experience that strengthens the emotional bond with customers. Zalando has done more than 80 curated product drops since the start of the collaboration. These drops were viewed by over 7 million unique users, who showed increased engagement with much higher click rates.  

To boost customer loyalty, Zalando is encouraging customers to shop across the different fashion and lifestyle categories, such as Fashion, Beauty, Designer and Lounge by Zalando. The proportion of customers that shop in more than one product category, or proposition, is close to 20% and growing. On average these customers' spend is more than three times that of customers who only shop in one category. Similarly, Plus customers, members of the loyalty program, typically spend about three times that of non-plus members.

“There’s a lot of growth potential within our existing customer base,” said David Schneider, co-CEO at Zalando. “On top of that, we see further opportunity in increasing penetration across our markets, where huge potential lies ahead of us.”

Another long-term growth opportunity for Zalando is to productize its e-commerce infrastructure in order to enable other digital businesses across Europe. In October 2022, Zalando launched a pilot of its new offering for fashion and lifestyle brands called Multi-Channel Fulfillment. Up until this date, the company only offered logistics services to brands selling on the Zalando platform. Now it is extending its logistics solutions for brands selling via other platforms as well as through their own online shops. The offering has generated a lot of interest and partners such as Pepe Jeans, a brand of AWWG Group, are already on board.

Outlook

While consumer demand is hard to predict in the current environment, Zalando’s ambition remains to continue to outperform the online fashion segment in terms of growth. GMV is expected to grow between 1% and 7% this year. In line with the platform transition and the increasing share of the partner business, revenue growth will trail GMV growth. Revenue is expected to develop in the range of -1% to 4% compared with last year.

In this environment, Zalando will continue its focus on profitable growth delivering margin progression while continuing to invest through the cycle for future growth. It expects adjusted EBIT to be between 280 million euros and 350 million euros in 2023. The company expects to approach the higher end of its 3-6% adjusted EBIT margin goal by 2025 and reach double-digit margins in the long term.

“Our long-term ambition remains unchanged,” said Gentz. “We remain confident that we will return to double-digit GMV growth in the mid term, by further executing on our vision and strategy, and eventually serve 10% of the 450 billion-euro European fashion market.”

Zalando hosts its virtual Annual Press Conference today. The Annual Report 2022 is available on the Zalando corporate website. Zalando will report the results for the first quarter 2023 on May 4, 2023.

Definitions are available in the Annual Report