Zalando is certain of making profits

Zalando is only five years old, but the online retailer is already selling more than one billion euros worth of products in Europe. But while the fashion retailer generates big sales, it also have made losses every year since. That will change, Zalando knows for sure. “There’s no question about it”, says CEO Rubin Ritter.

Zalando is quite a story. Online startup incubator Rocket Internet, famous for their successfully copying of successful companies, started the fashion retailer in Germany in 2008, and it was inspired by the American online retailer Zappos.com. Now, five years later, they ship more than a million parcels every months from one of their three distribution centers. There are fourteen European countries with an online Zalando store and altogether they have more than 150.000 different products and 1500 brands, while serving 15 million regular customers. More than 100 million people visit their site every month, looking for shoes, fashion, sporting goods and home accessories. Shoes represent half of the company’s turnover.

Percentage loss declined
It became this big, because Zalando got a lot of money from investors and decided to spend an awful lot of that money at marketing. There was a time in Europe where it was almost impossible NOT to see a Zalando ad online or on television. But this didn’t make the company profitable yet. Last year it had to deal with a 90 million euro loss, while realizing a turnover of 1,15 billion euro. But the percentage loss declined last year (8% of sales, compared to 12% in 2011) and Zalando expects the return to keep getting better. Zalando is now able to buy cheaper products, it does its own logistics and the processing of returns is becoming more and more efficient.

Zalando wants to be even more of a fashion brand and also wants to operate more internationally. “We want customers to think of us first when they’re thinking about fashion and lifestyle”, says co-founder David Schneider in an interview with the German newspaper Die Welt.

This week it become known that Zalando is not currently considering a stock market flotation. It was told by retailing group Tengelmann, which has a 7 percent stake in Zalando, to cool speculations the online retailer could be gearing up for a share sale next year.