On the occasion of the Paris Retail Week trade show, Carsten Keller, vice-president Direct-to-Consumer at Zalando, talks about the launch of the "Connected retail" programme in France, since April, i.e. the opening of their stores on the online fashion platform -now the leader in France.
In April, when you launched your "Connected retail" programme in France, you announced a target of 600 stores by the end of the year.
Since the launch, when we were pleased to announce that Karl Lagerfeld was the first connected store in France, we have integrated local designers such as the Stella Pardo store in Paris as well as international players such as C&A. However, as we have only been in the market for a few months, it is too early to give concrete figures on all the partners that have joined us. France is one of the largest and most sophisticated fashion markets in Europe. For Zalando to be the starting point for fashion in Europe, it is essential to win the hearts and minds of French customers.
Through our program, we are creating a seamless experience between physical stores and e-commerce in France. We have already connected over 5,000 physical retailers to our platform in Europe. With Connected Retail, we aim to build a model that works for all stakeholders.
Connected retail has truly become a win-win-win for the customer, the retailer and Zalando.
And this is also visible when looking at the more than 5,000 stores connected to the platform. Customers benefit because they see more relevant brands and products on Zalando, they receive them faster from a local store and the process is more environmentally friendly because the journey is simply shorter. The stores thus generate higher and more profitable growth, even in times of closures (lock-ups). They sell products faster and can create a more interesting assortment, because even the most cutting-edge looks are easily sold online. And this makes the store even more attractive for the offline customers who pass the shop window. Zalando - as a result - becomes more relevant as a platform.
What is your commission rate?
Our commission system is lower than the market average and depends on the product category and price: the lower the price of the item, the lower the commission. Until the end of the year, we have decided to lower the commission for our French partners in order to support them during this pandemic.
What services do you offer and what are the needs of the brands/stores you work with?
Connected Retail is a central part of our platform strategy. Retailers can connect their stores quickly, easily and without connection fees. Zalando provides the connection software, online content, marketing elements, payment options, customer support and personal account managers, as well as many other services. In addition, Zalando customers will soon be able to support local stores directly by using the option to filter delivery from a store.
As one of the most important fashion markets in Europe, France is a key market for us in our ambition to become "The Fashion Gateway". The French market continues to represent a real growth opportunity. It is the third largest fashion market in Europe, worth around €32 billion, with a relatively low online penetration of 21% (source: Euromonitor). With significant growth potential and fashion-conscious online shoppers, France is therefore a particularly important market for us, in which we are investing heavily. One of our key strengths is our selection of over 4,500 brands, representing price ranges from high to low and from local French brands to international brands.
In France, our payment offering "Paylater - try now, pay later" - was welcomed with a 90% satisfaction rate when we launched it in 2017. It is one of our flagship services. Customers who order via the platform in physical stores through Connected Retail will receive the same level of service.
Why don't you take care of the logistics, unlike some of your competitors?
With Connected Retail, we build a bridge between the offline and the online. We make it easy for retailers to connect while keeping them in control. We connect physical stores of various structures to our platform, whether they are single-label stores run by retailers or franchisees or multi-label stores owned by independent retailers who sell products from different manufacturers in their store(s).
Manufacturers and retailers with warehouses suitable for shipping items directly to consumers can also connect to the platform through our Partner Program. They can then choose to ship the orders themselves or use our order management solutions.
Is it a packaged service or a "brick by brick" service?
The program has been specially designed in collaboration with retailers: together we have studied the technological means, the processes and the support functions. As a result, it is accessible to all types of stores: single or multi-brand, small or large, and more or less digitalized. Connected Retail is literally for all types of store managers.
Stores do not need to bring in digital content (e.g. product photos, descriptions). Zalando has been offering thousands of items for years, and for all of these items, the platform has already produced the content and made it available to the stores. On average, 50 to 60% of the silhouettes offered by a retailer are already created on Zalando. So after a few days of simple integration, stores can start selling on the platform. No investment is necessary.
It is also possible for retailers to integrate brands and items that Zalando does not already offer. In this way, retailers really make Connected Retail their distribution channel and sell what makes sense to them to customers on our platform. They have total control, over item selection, pricing, the number of items to sell per day and everything else. In this way, they greatly expand their catchment area by targeting not only their local customers, but also customers in all other regions of France.
What are you seeing in terms of additional sales for your French customers?
Prior to the crisis, some of our most successful stores increased their productivity by up to 60% depending on size. During periods of lockdown and closure, Connected Retail accounted for 100% of many stores' sales. In normal times, participating stores have also seen a positive impact. Firstly, they are turning over their stock faster - almost back to the per square metre productivities of the 1990s - allowing them to generate more turnover. It also allows retailers to renew their assortments more often during the season. And it makes customers in the physical store want to return more often. Finally, Connected Retail allows for more specialty items to be offered and sold. Without it, a retailer might think twice about putting a fluorescent yellow sweater on the shelf. Now they can be sure they're selling it online, which allows them to display it in their store. This makes the store more lively and the shopping experience more exciting.
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