Letter From the Management Board

In the past weeks, our teams have stepped up to the challenges and the uncertainty that the coronavirus crisis has created for all of us. Within a short time, the virus has turned from being something grave, yet abstract and distant, to having a very concrete and tangible impact on the lives of our teams and our families.

In times like these, our most important priority is to protect the health and safety of all our employees. We are in constant exchange with local authorities, and we are closely monitoring information from the WHO and ECDC to adapt our response to the latest knowledge and best practices. Wherever possible, our teams are working from home. For business units where this is not possible, we have taken protective and hygienic measures and are enforcing social distancing rules. For example, we have asked all employees belonging to risk groups to stay at home while they continue to receive their salary. Thanks to these measures, we can continue to serve our customers even in challenging times, which helps us to protect the jobs for which we feel responsible.

The resolute and necessary measures taken by European governments have certainly negatively impacted our business. As consumers adapt their behavior to the new situation and cut back on discretionary spending in the short term, we have seen a negative impact on sales since the lockdowns in several countries. This is also affecting our bottom line. On this basis, we have taken measures to adjust our commercial steering, our spending and investment activities as well as our financial plan for the year to the new circumstances.

Still, in this difficult time, we have many reasons to be confident as we are convinced that the investments of the past decade provide us with everything we need to live through this crisis. We have strong ties to our 31 million active customers across 17 markets. We have deep and enduring partnerships with more than 2,500 fashion brands, which enable our access to a highly distributed sourcing footprint. Over the last years, we have built a highly distributed and flexible logistics network with 11 sites across five different countries. Finally, our trusted relationships with our shareholders have ensured that we operate with a strong balance sheet and a cash position in excess of one billion euros. Our business is strong, and we will be able to demonstrate resilience in times of crisis.

As Europe’s leading fashion platform, we share risks and opportunities with the broader fashion industry. In recent weeks, we have been in close contact with our partners. From these conversations, we know that we are less affected than many others in our industry and that our platform can make a significant difference to brands and retailers in these times.

Already, we have connected more than 1,500 brick-and-mortar stores to our Connected Retail Program to offer and sell their assortment on the Zalando platform. We are now accelerating this initiative to support brands and retailers to uphold at least a part of their business. From April 1 to May 31, we will waive the commission fee for all new and existing physical stores that are participating in our Connected Retail Program. In addition, we have earmarked 100 million euros of cash for early payments to partners for goods and services they have already delivered to us. Over the coming months, we will look for more ways to support our ecosystem in these difficult times.

Zalando has a clear strategy and a clear direction. While we expect that the current crisis will have a negative impact in the foreseeable future, we do not expect it to change our longer term trajectory. Our vision remains consistent and relevant going forward: to build the Starting Point for Fashion in Europe! We will continue to focus on our strategic priorities: to build even deeper customer relationships and to grow our platform business model. Wherever possible, we are prepared to invest through-cycle and drive long-term value creation even in this adverse environment.

Zalando was founded in 2008 right at the beginning of a financial crisis. Our company culture was defined in a challenging environment where frugality and focus were essential. We learned early that by steering decisively in challenging situations, we can not only prevail but we can thrive as a team.

Over the past weeks, we have been in many discussions with our leadership team, employees and works councils. We would like to thank all our teams for their solidarity and enduring commitment over the past weeks, especially our colleagues in logistics and content production. Thanks to your work and dedication, we have been able to continue to deliver on our customer promises, which are fundamental to our company, ensuring that some things remain reliable even in these incredibly unpredictable times.

Best wishes & stay healthy,

The Zalando Management Board