In a bid to improve profitability, Zalando is to scale back the number of brands listed on its platform, which has grown from 700,000 items in Q4 2020 to 1.8 million by 2022. This comes after the online retailer posted a 0.1% drop in sales to £9.18 billion for the 12 months to 31 December 2022.
Zalando said: “In order to attract and maintain the attention of customers in the long run, we will increase the local relevance of our assortment and curate it more, therefore, we are currently reviewing the brand portfolio on Zalando. As this is an ongoing process, we are currently unable to provide any information on how many brands will be affected.”
“Market conditions are currently difficult and things are anything but simple for fashion companies. Many fashion multiples are cutting back on their orders and this is also true of German online retailer Zalando which is presently reducing its product portfolio to make its assortment more relevant, curated and local. In the past two years, Zalando’s product portfolio grew rapidly with around 700,000 products offered in the fourth quarter of 2020, however this figure had risen to over 1.8 million by 2022.
Zalando only recently released its 2022 annual financial statements and overall, the results were at the lower end of its forecasts, as already announced in November. In the past fiscal year, Group sales amounted to around €10bn - slightly below the level of 2021 (-0.1%) and total gross merchandise volume (GMV), which also includes sales from partner brands on the Zalando platform, grew by 3.2% to €14.8bn. As a result, earnings before interest and taxes (EBIT) shrank by 60.6% year-on-year to €184.6mn.
The restructuring of the offer is only one consequence of the poor results, the group also announced redundancies to its workforce. In addition, Zalando came under criticism, especially among retail partners, because the group introduced fees for their Connected Retail model. From July, a basic fee will be charged for sales on the marketplace for the first time. A new commission model for Connected Retail will take effect as early as April.”