Zalando aims to be the operating system for fashion

Zalando was founded in 2008 by two friends and has grown from a small online store into a business that is challenging the entire industry. One of the company’s long-term goals is to create a completely personalised online shopping experience for every customer.

Zalando’s objective sounds impossible: 24 million stores, one for each of the company’s European customers. When realised, this would revolutionise the entire world of retail. Ten years ago, the idea would still have been completely unrealistic, but with the aid of technology, Zalando may just succeed in its goal of becoming the “operating system for the fashion world”.

Regional Lead Nordics at Zalando David Hejgaard, who will also be speaking at YIT’s Sustainable urban environments event on November 1, describes Zalando’s long-term goals.

Hejgaard highlights three factors that allow Zalando to offer a personalised online store for each customer: bringing together different players from the fashion industry, relevant personalisation and development of innovative technical solutions such as integration of offline stock from retail partners on the Zalando platform.

“As Europe’s leading online store for fashion and lifestyle, we play a central role in shaping the future of the fashion industry. We combine fashion with technology and approach problems with data as our aid. This is not an easy task in an industry that is highly based on trends and emotions”, Hejgaard says.

The goal is to be the operating system for the entire fashion world

Zalando is known as an online store for fashion and lifestyle products. However, like many modern companies, Zalando is a technology company first and foremost. Much like Amazon, the key to Zalando’s success lies in its algorithms, customer knowledge and ability to incorporate the needs and services of the physical world into a digital platform.

Hejgaard refers to Zalando as the operating system for the fashion world.

“In practice this means that Zalando brings together all willing online and offline players in the fashion world, whether they’re brands, retailers, stylists or consumers.”

"For example we can offer fulfilment solutions to our partner brands. Many smaller brands do not have the resources to ship to 17 markets. They can join Zalando’s partner programme where they send their products to Zalando and we ship it for them. Thereby, we can be a gateway to Europe for smaller Finnish fashion brands”, Hejgaard adds.

The company already has over 200 partner companies and 780 brand partners in its partner programme.

“The goal of the partner programme is to give brands access to Zalando’s unique platform and our 24 million active customers across Europe, while at the same time allowing customers to benefit from a wider assortment. The programme is growing fast, and in the second quarter of this year its portion of the sales was already about ten per cent”, Hejgaard adds.

Always something targeted for the customer

Personalisation and mobile devices are currently the two largest forces for change in the fashion industry. For example, more than 75 per cent of Zalando’s users access their website via mobile, which is also used to place 60 per cent of the orders. At the same time, there is still plenty of room for the online store to grow.

“The European fashion market is worth 420 billion and currently only 13 per cent of that comes from online stores. According to the Euromonitor, that portion will be 20 per cent already by 2022.”

What about personalisation – what does it mean in practice? In the past, personalisation mostly meant having a product selection that was as wide as possible. The idea was that this would help serve all customers.

It’s not a bad idea in theory, but in practice it led to customers having to wade through a seemingly endless selection of products before maybe finally finding what they were looking for. The experience can’t have been very personal – or pleasant.

One way to overcome this problem is Zalando’s Algorithmic Fashion Companion (AFC), which is rolled out in all markets at the end of October.

“It’s a digital, scalable outfit recommendation tool, that provides the customer with unlimited outfit suggestions. For example, a customer who has bought a pair of sneakers is shown recommended outfits that are centered around that same pair of sneakers when visiting Zalando."

Local knowledge is essential, even in an online store

Brick and mortar stores have been pitted against online stores for as long as online shopping has been possible. For now, there is still demand for both. As the situation continues to develop, Hejgaard believes it will develop toward a combination of the two.

“It’s important for consumers to get the product they want, whenever and wherever they want it. They don’t draw a distinction between physical and online stores but want a seamless shopping experience.”

As an example of a seamless shopping experience, Hejgaard brings up the option of ordering a product from your local store via Zalando’s online service. The combines the convenience of online shopping with the immediacy of offline shopping.

The importance of the offline world is also highlighted in customer and local knowledge. It’s easy to think of Zalando and other online retailers as faceless operators without a country, who live far away from our concrete everyday reality. However, geographical and cultural knowledge is one of Zalando’s strengths. This is guaranteed by the company’s 15,000 employees, who represent a hundred different nationalities.

For example, consumers in the Nordic countries are interested in local fashion brands, which is why Zalando makes sure to offer a wide variety of local brands in its selection. Cultural differences are also taken into account when it comes to payment methods. In Italy, customers want to pay with cash when receiving their order, while most people in Denmark prefer to use a credit card.

“These are just a few examples of how we always try to localise our services in order to better answer the needs of consumers.”

David Hejgaard, Regional Lead Nordics at Zalando, will be speaking at YIT’s Sustainable urban environments event on November 1. Hejgaard will be sharing his views on how online stores are going to shape the retail and the shopping habits of consumers. You can read more about the event and speakers here. (in Finnish)

For further information, please contact:
Heidi Kauppinen, Communication manager, YIT Corporation, tel. +358 (0)40 574 3170, heidi.kauppinen@yit.fi
Hanna Malmivaara, Vice President, Communications, YIT Corporation, tel. +358 (0)40 561 6568, hanna.malmivaara@yit.fi

YIT is the largest Finnish and significant North European construction company. We develop and build apartments, business premises and entire areas. We are also specialised in demanding infrastructure construction and paving. Together with our customers our 10,000 professionals are creating more functional, more attractive and more sustainable cities and environments. We work in 11 countries: Finland, Russia, Scandinavia, the Baltic States, the Czech Republic, Slovakia and Poland. The new YIT was born when over 100-year-old YIT Corporation and Lemminkäinen Corporation merged on February 1, 2018. Our pro forma revenue for 2017 was over EUR 3.8 billion. YIT Corporation's share is listed on Nasdaq Helsinki Oy. www.yitgroup.com