Written by: Effrosyni Tigka
“Brand names are more important online than in the physical world” (Jeff Bezos, chairman, president and CEO Amazon.com Inc.)
There is a widely held belief that start-up companies cannot be tremendously successful and compete efficiently with the already established ones. In this paper, itisgoingtobeexaminedtheprocessthroughwhichastart-up retailing company has achieved a step-by-step growth in order to become a giant fashion e-retailer. More specifically, the case study will be Zalando, a German fashion company based in Berlin. Zalando is today the biggest exclusively online fashion retailer in Europe and one of the fastest developed companies as well, with its net salesexceeding 2 billion in 2014, having obtained this number only six years after it was founded (Zalando, 2016). Interestingly enough, the means which Zalando has used to boost its development and exceed expectations will be further reflected in this paper.
In today’s constantly changing business world and in the middle of a global financial crisis, start-up companies were brought out to be a deep breath in numerous markets around the world, as many of them not only survived but also were proved to be huge boost for the economy. According to Calopa (2014), start-ups are mostly companies presenting high-tech projects, constantly developing and operating under market research by offering easily reproduced products. Apparently, for a start-up to obtain an organic and constant growth so as to become a competitive, strong enterprise, it is necessary to build its brand name and obtain recognition.
Amongst all the channels where a newly founded company can be promoted and operate, we will focus on the exclusively online presence for the purpose of this paper. Online business can benefit a start-up since it is low-cost and offers the opportunity to avoid risk-taking decisions such as the opening of a physical store. In addition, the online company is able to scan the market and estimate whether it is worth investing or not (Kiskis, 2011). In combination with the online store, a newly introduced company will make nowadays an extent use of social media in its effort to establish itself.
A start-up company which drew our attention as it achieved a huge popularity and became an online retailing colossus in a very limited amount of time is Zalando. Hence, it will be further discussed how Zalando obtained the leadership into the online fashion world.
Zalando: How everything started
Back in 2008, Robert Gentz and David Schneider started working on a quite simple idea: providing shoes of a great variety to customers, in a very easy and reachable way. And what would be the best way for them to start? An onlineshop, withouthugeexpensesandhavingtheabilitytoreach consumers all over the globe was their main idea (Zalando, 2016).
Nevertheless, here we detect the first barrier: customers’ uncertainty about the attributes of the fashion product can influence their willingness of buying it online (Bell etal, 2014). For this purpose, Zalandodevelopsaplatform adapted for the fashion industry to meet in the most efficient way their needs and make them order again. Products are presented through the high- technology platform and people become better informed about their attributes and start to get convinced. It is supported by Jayawardhena et al. (2007) that any previous online purchase affects the future ones. Besides, once a consumer is satisfied from his online purchase, finds the correct size and has it delivered on time, it is most likely that he will rely on particular online purchases in the future again (Bell et al, 2014).
Moreover, the choice of individuals working in Zalando had a great impact on the success of the business. The open spirit and the simplicity of a start-up should characterize them, along with the expertise knowledge demanded for the needs of the company (Zalando, 2016).
When it comes to delivery, Zalando had its warehouses placed in a way that it does not take more than 9 hours for the products to be delivered to most of the users. This fact was determinant for the upcoming success, as consumers are always demanding concerning the time it takes to receive the product since they are quite impatient. In addition, fulfilling orders via delivery can mean distribution centers in less expensive areas, which is cost-saving for the company. Also, control of demand is better achieved, especially for products such as fashion ones with great variety (Bell et al., 2014).
Zalando: The big boom
In 2010 Zalando decides to extend its products and includes apparel. This is when the uptrend starts. The company expands in countries such as the Netherlands, France, United Kingdom and numbers start going crazy. By 2015, Zalando operates in total in 15 countries. In short, in 2014 the Net Sales were 2,2 billion Euro and the visits per month exceed the number of 130 million (Zalando, 2016).
But how all those numbers are achieved for this online start-up company in such a small period of time? Well, the answer consists of many factors.
First of all, let’s take into consideration the experience offered to the audience. People usually go online not only in order to purchase products for their necessities but also to spend time by searching, comparing and evaluating their choices (Nirmala, 2011). Furthermore, according to Seock and Bailey (2008) shopping enjoyment is related to information searches and purchases online. Consumers love spending time by browsing and look at fashion items. Thus, for Zalando “shopping fashion and shoes is, above all, an emotional event. It is the emotional experience that turns clothes into your new favorite outfit, with the first impression being just as important as a detailed presentation”. Through the web page, they try to offer this kind of emotional satisfaction by keeping it rather convenient in the meantime.
Moreover, customer service proved to be another driving force for Zalando, as it is the means to build trust and loyalty with the final consumers, who will visit eventually the web page and order the products they need. The relationship the company builds with the customers is of great significance as there are no intermediaries and it is them who constitute Zalando’s main target. According to Kennedy (Cauley, 2015), “Customer service is the way that companies are able to make up for and earn the trust of their customers, who are very used to buying things online”. As a result, in order to engage customers who can order their products from another online store, Zalando handles in the most efficient way all the orders from customer care unit with external service providers by telephone or mail. Having established a delivery network all over Europe, the employees try to assist purchasers when they orderinadifferentlanguageorconcerningthepaymentprocess. Itall happens through high IT systems and service quality dimensions such as consistency, access, liability etc. (Vlasich, 2012).
Consumers have a tendency to look for the well-known brands through websites and this brand consciousness is positively connected to information searches and purchases online (Seock and Bailey, 2008). The more they are interested in brand names, the more they check the latest fashion updates and styles by clicking on different e-retailers. Zalando has thus created collaborations with the biggest global brand names, selling both private labelsand famous ones. Many big brands are also sold online for the first time through Zalando and benefit from its awareness and target groups. In total, more than 1500 brands are adopted by Zalando, all of them fulfilling high standards and obeying to the Group-wide Zalando Code of Conduct (Zalando, 2016).
When it comes to e-stores such as Zalando, that distributes products in 15 countries, standardization of the processes all over those countries would limit the uniqueness of each market and would not cover efficiently customers’ needs. According to Vazquez (2014), localization of the web page can add value and accessibility privileges. As a result, the company has decided to create personalized patterns for each country and meet local needs, by creating sites translated into several languages, adapting the distribution system and fashion patterns.
Use of social media
Every fashion retailer nowadays uses social media as a way to reach consumersandobtainaninteractionbetweenthemandthecompany (Berthon et al, 2012). Hence, social media are easily accessible and usually offer huge numbers of visitors (Brogan, 2010). Especially for the fashion field, socialmediaareembedded since they offerimages and videos and the interested person is able to see a great assortment with one click. Zalando has established itself into the social media world successfully.
Zalando’s Facebook pageZalando has currently more than 3 million “likes” on its Facebook page and some thousands of “shares” per day.
Zalando’s Instagram page
Through Instagram, one can upload pictures wearing Zalando apparel and shoes, create hashtags like #zalandostyle and immediately be linked to Zalando’s account (tech.zalando, 2015).
From the onset, this paper made us wondering whether a start-up company has the perspective to evolve and reach a point where it would literally lead the market and form new trends in its field. We examined the case study of Zalandotocomeupwiththeconclusionthatitisindeedpossibleand identified the actions needed to achieve this growth.
Zalando is proved to be a pioneer in the online fashion field and this is due to manydrivingforces. First, thecustomers’ experience is givengreat importance as the online environment is easy-to-use and in the meantime the audienceisinfrontofagreatdisplay oftheproducts. Furthermore, the customer service is well supported and since they communicate with the final purchaser, there is a great effort to solve efficiently and on time the problems. Additionally, the selection of brands is also of great significance as the combination of well-known/luxury ones with the local/affordable ones offers the consumer a huge assortment where he can choose from. The fact that the company has adjusted into some markets and does not perceive them as awhole has made it easier to establish it there and meet the local needs. Apparently, theuseofsocialmediacannotbedisregarded, astheir contribution is substantial for a fashion company.
Overall, even if Zalando has a presence limited only into the online world, it has achieved to absorb a huge part of the European market in zero time and seems to have a broad future in front.
After having examined Zalando’s strategy in the frame of the biggest online retailer in Europe, some further implications could be considered. According to Bell et al. (2014), hybrid experiences can be created from fashion stores, meaning that customers could have the possibility to buy the products online and pick them up in stores, the “BOPS”. Apparently, those stores offer convenience since anyone can take a look at the prices and the availability online but also go to the physical store, try the apparel and shoes on and see the attributes before ending up to the purchase. In 2012, Zalando went offline
for the first time for three days in a pop-up store in Berlin with a great success (Vlasich, 2012). Thus, this strategy of coexistence between the online store and the physical one could work in future, always by respecting the online nature of the company and paying primarily attention to it.
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