Zalando SWOT & PESTLE Analysis

Strength

1. Leading multi-brand fashion aggregator: Zalando has emerged as a leading multi- brand fashion aggregator with a #1 ranking in Europe for ‘most visited fashion site’ in 2018. Studies have shown that nearly 45% customers prefer to shop on a multi brand platform. The company has a vast portfolio achieved through partnerships with numerous brands including verticals, sport specialists and premium luxury brands. In 2018, the company had over 400 brands included in its partner program and over 2000 brands under its Wholesale 2.0 business model. Major brands like L’oreal, Clinique, Swarovski, Maybelline, Mac, Hugo Boss and Bershka are only some of the more popular brands being showcased by the company. The Zalando in fact is well known for claiming “If it is not on Zalando, it does not exist.” The company’s foray into multi brand marketing on social media sites like FB and Instagram has helped also helped it increase demand and acquire new customers at a faster rate.

2. Diversification into allied fields: The company has been successfully been able to spin off several subsidiaries; this includes the launch of their own individual label selling their own clothing range which has been tailored and customized on the basis of the changing trends. They have launched their own fulfillment services for the partner that makes it more convenient for smaller brands to be a part of the larger brand and permits to keep them partners at fair terms. They have their own successful beauty and make up studios as well as the “Zalando lounge”. Many of these may be categorized under the same roof but the setup permits them to be independent and mold itself to the location where its set up but also allows Zalando to have absolute control and make sure it stands up to the norms set by the other arms of the company. It also has an established media service called “Zalando media services” which serves clients in 15 countries.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Waste accumulation due to use and throw goods: In cases of fast fashion the rate at which styles change is very rapid due to which the consumer is always urged and convinced to buy new goods. But with this comes the burden of disposing of the old goods which have been used or have not been sold. This becomes a big task as the recycling of these goods is tough as well as the disposal of the raw materials used for the manufacturing of these goods is tough. Apart from this the current trend in the industry is the use of disposable plastic and synthetic packaging materials which are single time use and being relatively small in size have to be used multiple times in a single order for individual goods. This accumulation leads to hazardous levels of waste and is therefore necessary to switch to more eco-friendly substitutes and try to pair more items to reduce the amount of waste that is generated.
Zalando is already on a path to reduce waste. it has a plan under motion which will result in the company completely eliminating single use plastics from its production line by 2023. It is also researching ways of increasing the life of nearly 50 million fashion products. In 2019, the company succeeded in doing this for nearly a million products by collecting from customers and reselling on the Zalando website. The company is also seeking to reduce packaging wastes by bringing together multiple product orders at a single warehouse before packing it together for delivery. Currently, only 5% of its total orders are shipped under multiple packaging.

2. Environmental impact due to fuel used: Currently most of the modes of transit used for delivery in the industry are using fossil fuels as their main resource. This means there is a very large burden on the ecosystem, this issue is further accentuated by the services such as same day delivery and free returns since they are using large amount of fuel for smaller number of items. A few methods have been brought about to possibly tackle this issue, by introducing electric vehicles to the fleet of vehicles, using cycles and other such means to deliver smaller goods within the city limits. Apart from this even solar and wind energy has started being used to power large scale facilities.
Zalando has aimed to reduce the emissions it generates through delivery and returns through a carbon credit program. Avenues are being explored in Australia to see if customers are interested in paying to reduce the carbon emitted as a result of their product being delivered. Machine learning is also being employed to allow customers to gain a better insight of product size and fit, leading to lesser number of returns. The company is also in the process of exploring alternative fuel sources, including the use of electric vehicles. A trial for the same is already underway in Hamburg.