PARIS – Online fashion retailer Zalando continued its recovery in the third quarter, with revenues rising 5 percent to 2.4 billion euros.
It’s the second consecutive quarter of growth for the e-commerce firm as it bounces back from several quarters of losses following the pandemic boom in online shopping which gave the company outsized returns.
The company’s B2B services proved to be the strongest driver of growth, with revenues in that category gaining 11.1 percent.
Zalando, which has taken a page out of Amazon’s playbook to build infrastructure, software and services for brands and other retailers’ e-commerce, saw B2B revenues jump to 239.7 million euros year-over-year.
Zalando’s ZEOS fulfillment service is a comprehensive logistics solution specifically designed for brands within fashion and lifestyle, and the tech can now fulfil orders placed via nine external e-commerce platforms and brands. It added fast-fashion site ASOS to those ranks in the third quarter.
“Consumers love the quality brands we are adding, spend time with our exciting digital experiences, and embrace our expanding lifestyle offerings,” chief financial officer Dr. Sandra Dembeck said in a statement.
It also opened a logistics and shipping center outside of Paris to service France and neighboring countries. It will open another warehouse in Frankfurt, Germany, in 2026.
The B2B strategy and growth of the European logistics network is boosting its bottom line.
“Our partner business continued to outperform our own retail business, showing double digit growth,” Dembeck added in a call following the release of the results.
Analysts reacted positively to the news.
“We believe [Zalando]’s growth will accelerate from here, as the company continues to spend on marketing and enhance its competitive advantage on services. Its improving unit economics, particularly for wholesale orders, should allow it to invest incrementally while still delivering margin improvement,” RBC’s Richard Chamberlain said in a research note.
Adjusted EBIT in the B2B category fell by 3 percent year-over-year, to 6.7 million euros, due to increased technology investments.
The company is ramping up activity at its new Chinese tech hub in Shenzhen, and has made key leadership hires as it continues to staff up.
However, the company has no plans to enter the Chinese market where it would take on e-commerce juggernauts like Temu and Shein. Instead, it plans to use the tech center to explore and develop entertainment and social commerce for its existing markets, based on expertise there. It should be fully operational by the first half of 2025 and will work hand-in-hand with its European tech center.
Revenues in its consumer-facing shopping side increased 4.3 percent to 2.2 billion euros as it added half a million users to its ranks in the third quarter, for 50.3 million active users.
“We saw consumer sentiment really improve, inflation rate coming down, interest rates coming down, and of course, especially in the online world, the headwinds that we had last year now turning into tailwinds where the online is growing again,” Dembeck said.
Zalando has continued to upscale its brand offering, adding Marine Serre and A-Cold-Wall as it seeks to solidify its position as a lifestyle destination with a focus on fashion. It’s also working on becoming a content hub, enlisting fashion influencers to curate fashion selections and create TikTok like short form entertainment videos. Those efforts will accelerate going forward.
The group has made a significant push into sporting goods and athletic wear, expanding its running brands. It added popular specialist brands On and Hoka shoes.
“Those two brands have delivered significant growth for themselves and for us,” she said, though Adidas and Nike continue to be the category leaders. Growth in the running category was fueled by more data and clarity on fit and purpose, supported by live-streaming events which drove “double digit-growth” for the category overall.
The average running shoe spend is now over 100 euros, indicating that consumers are willing to pay more for performance, Dembeck said.
Zalando’s other main consumer growth initiative is building up its loyalty program, shifting from a paid-subscription model to a point-based service that gives customers goodies or early access to sales or new collections.
The system was tested in Spain earlier this year and has just debuted in Austria and France. Zalando will continue to expand the program, launching in Germany in the first half of 2025 and expects it to be live across 16 markets by the end of the year.
The company’s AI assistant, launched in April 2023, has now rolled out in all of its 25 markets.
For the consumer category, adjusted EBIT rose 3.5 percent year-over-year to 86.7 million euros, driven by improved gross margins and lower fulfilment costs.
Gross merchandise volume, or GMV, was up to 3.5 billion euros in the third quarter for a jump of 7.8 percent year-over-year.
Consumers also increased their spend on the site, with the average purchase ringing up at 61.1 euros, up from 58.8 euros over the summer season a year ago.
“The acceleration was mostly driven by a strong autumn-winter season start on soft comparatives,” said Dembeck. New brands delivered “strong growth supported by our strategy to elevate.”
That trend is continuing at the start of the fourth quarter, Dembeck added.
“It’s still very strong or improving compared to the year we had before,” she said.
Revenue was up 2.6 percent in the first nine months of the year, while GMV increased 4.4 percent in the same period year-over-year.
The company confirmed its guidance from Oct. 10, expecting revenue to increase between 2 and 5 percent for the full financial year, with adjusted EBIT to land between 440 million euros and 480 million euros.
