* Zalando margins under pressure
* Amazon gaining market share in fashion
* Zalando has signed up 700 brands to partner programme
* Says scheme should help to lift profitability
By Emma Thomasson and Nadine Schimroszik
BERLIN, Dec 13 (Reuters) - Europe's top online-only fashion
retailer Zalando is stepping up its fast-growing brand
partnerships programme, building on ties with the likes of Nike
and Superdry to repel the challenge of U.S. interloper
The German company's share price has come under pressure as
Amazon's big push into fashion has prompted Zalando to increase
investment in logistics and technology to keep pace, forcing it
to trim profit forecasts.
But Zalando sees its new business line giving it an edge
over its U.S. rival.
Launched in Berlin in 2008, Zalando has grown fast to sell
almost 2,000 brands in 15 countries via a classical e-commerce
model, buying in stock to be sold online and shipped from its
It started complementing that with a partner programme two
years ago to increase choice, charging fashion labels a
commission for selling additional stock through the Zalando
website and shipping the goods direct to customers. The brands,
meanwhile, can keep control of pricing and presentation.
After a pilot with Adidas, Zalando has signed up
700 brands and the programme now accounts for nearly 10 percent
of the total value of goods sold on its site, with a long-term
target of 20-30 percent.
Carsten Keller, Zalando's managing director of partner
solutions, expects the scheme to support profitability and
cement relationships with brands, some of which remain wary of
listing on Amazon, where third-party sellers compete on price.
"The brands are put in the driving seat. They keep control
over the assortment, prices and brand representation. It is a
very different environment to other market places like eBay
or Amazon," Keller told Reuters.
German shoe brand Birkenstock is withdrawing from Amazon
because of concerns over counterfeit products, while luxury
brands last week won the right in Europe to stop retailers
selling their products on online platforms.
Zalando says the partner scheme's expected profitability
should help the company to reach a long-term target for an
operating margin of 10 percent. But analysts have their doubts,
on average forecasting 5.9 percent by 2020, up only slightly
from the close to 5 percent Zalando expects in 2017.
British rival ASOS, by comparison, forecasts a
stable operating margin of 4 percent but is growing sales faster
than Zalando and is seen as better insulated from Amazon's
advance thanks to a focus on fashion-mad youngsters.
"We think expectations look demanding, as does the company's
longer-term margin guidance, given Zalando's desire to push for
market share, more intense online competition and expansion into
lower-margin regions," said RBC analyst Richard Chamberlain.
Keller, a former McKinsey consultant who joined Zalando last
year, says the partner programme was born because Zalando
realised it was losing millions of potential sales when it ran
out of stock on top-selling items.
"It is growing with very high momentum. We doubled it over
the past 12 months," Keller said. "It adds substantial value and
has a positive effect on the bottom line."
Nike is particularly pleased with the arrangement -- so much
so that its executives mentioned it three times on a recent
"Our partnership with Zalando is creating growth and shaping
the digital marketplace in and beyond Europe,” said Elliot Hill,
who runs Nike's wholesale and direct-to-consumer businesses.
Zalando is attracting brands that do not normally sell
wholesale, such as Inditex's Oysho, while also
persuading others to offer exclusive ranges. Nike, for instance,
released new colours of its classic Air Force 1 shoe for the
"Amazon is a strong competitor, but is more transactional,
offering more basic and discounted fashion. Zalando gets edgier
stuff," said Macquarie analyst Andreas Inderst, who has an
"outperform" rating on Zalando.
"It is a virtuous cycle because the more consumers come to
the home page, the more Zalando can leverage consumer insights
through data analytics, the more brands are attracted."
Zalando is offering its partners data about who is buying
what and where, as well as helping brands with their marketing
strategies, online content, logistics and inventory management,
buying two software firms that help brands with digital
"In an Amazon or eBay environment, brands lose contact with
their consumers because they do not get their hands on consumer
data," Keller said.
Some analysts remain sceptical that Zalando will be able to
fend off Amazon for long. Amazon more than doubled its share of
the western European market for online fashion in five years to
6.5 percent in 2016, just behind Zalando on 7.4 percent,
Euromonitor data shows.
Amazon has signed up more than 350 brands in Europe in the
past year and is running a pilot with Nike in the United States
in return for more control over its goods on the site.
"At the moment, Zalando has better brands and Amazon doesn't
have as broad a range of current-season products," said
Berenberg analyst Michelle Wilson, who rates Zalando a "sell".
"But it is only a matter of time until Amazon can convince
brands they won't destroy their brand equity."
(Editing by David Goodman)
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