What Zalando’s recent results say about the state of retail.
Zalando surprised everyone this week by announcing full year sales would be off, and that it had gone deeper into discounting than it had planned, so we are likely to see a dent in profitability as well.
This isn’t supposed to happen, when you are online only so not subject to all the pressures that stores are under; when you have been doing this for 10 years; and, when you are the largest fashion retailer in Europe above Amazon and ASOS.
While Zalando has blamed the hot weather, which is always the first thing all retailers blame for difficult trading, the truth is, like all other retailers, it is facing the same challenges retailers have always faced.
Firstly, it has had to spend €350 million on its logistics, which were far from market-leading. Secondly, its web site is in no way distinctive from any other discount fashion web site in either look or product set, so it is clearly vulnerable to comparison shopping.
Any of this sound familiar? In the early days, the rate of growth was so spectacular for online players, that they simply didn’t have to worry about getting the basics right. Now, they are all in the same boat.
Here are five things all retailers should be focusing on right now:
Differentation – in brand, UX and product offer
Delivery excellence – Is the customer really getting what they expected and are they having to manage exceptions, and why?
Visibility on the true cost of moving goods around, both out and back (returns) – logistics is killing profitability for some players so it makes sense to understand this
Personalisation – not outbound marketing but inbound experience – what is it like for the customer on site and do they have access to tools like Fit?
Faster innovation – there is ample evidence that retailers are adopting new technology too slowly for it to make the difference they are expecting. Innovation has a much higher risk profile than BAU, so don’t let Procurement spoil all your fun!