Online commerce is experiencing its “Golden Age”. The number of first-time buyers is up, and the percentage of returning shoppers is growing, too.
And what items do Europeans shop for online the most? Clothes! Among consumers, apparel ranks first in future online shopping preferences in Spain and second in the UK & Germany. And many of these shoppers get their fix for new fashion at Zalando — a pan-European online clothing marketplace and category leader.
Founded in 2008 in Germany, Zalando now operates in 23 European markets. As of 2021, this eCommerce marketplace accumulated over 48 million active customers and €10.4 billion in revenue — up by 30% compared to 2020.
So, how did Zalando become the go-to fashion marketplace in Europe? This Brand Deep Dive will give you the story — plus, several lessons for others to apply.
Zalando’s Success Story
Zalando’s story started back in 2008, days before the financial crisis. That’s when Robert Gentz and David Schneider came up with the idea for a European eCommerce platform. Modeled after Zappos — a rising US shoe e-tailer, later purchased by Amazon — Zalando was hatched with a €50,000 cash investment from several friends and “leased” software developers.
To begin with, Gentz and Schneider set up a simple storefront for selling flip-flops in Germany. Within the year, they added more footwear categories for men and women. At that time, the competition was non-existent — and Zalando got early traction. Soon after, the team moved from a shared apartment to an office at Torstrasse in Berlin, hired permanent staff, and began fundraising.
Zalando was soon able to expand into Austria and Switzerland with the help of investor cash. And as it turns out, entering two other DACH countries was a safe bet. In both cases, Zalando didn’t have to localize their brand experience that much to engage target audiences. But, they did begin to feel a deeper strain on their logistical operations.
To attract more customers, Zalando offered a free shipping and returns policy — a novel concept at that time. But while fast shipping and easy returns helped them grow their user base, it also ran up a huge courier bill.
At the end of 2010, Zalando reported a net loss of €23.1 million with a negative cash flow from operating activities of €18 million. Thus, much of the money raised in the 2010 Series A round went towards expanding their logistics network as part of a wider pan-European go-to-market strategy.
The Era of Market Expansion
Between 2011 to 2013, Zalando doubled down on market expansion, entering an incredible 12 new markets. However, as this was a major undertaking, some flops were inevitable.
For example — at the time, Zalando decided to use the cheeky brand slogan “Scream of Joy” in its cross-channel marketing campaign. In each market, the premise was the same: You have a group of people (mainly women) in a ridiculous situation, and they inevitably scream with joy when a bunch of Zalando packages enters the frame.
The Italian version featured a famous local TV presenter and singer whose voice sounds unnaturally low and hoarse, unlike her normal, well-known voice. Then, a Zalando courier shows up and hears her — and while she squeals with joy, the courier screams in surprise. The local audiences quite liked it.
Source: Working Not Working
This stupid-funny (but viral) ad campaign secured strong brand growth in German and Italian-speaking markets — but didn’t manage to “translate” in all others.
Case in point — the bank robbery version, dubbed for the Dutch market. Unfortunately, it didn’t perform as intended.
The ad’s absurdity wasn’t perceived as humorous, but as jarring. In fact, this ad was voted as the most irritating ad by locals… twice in a row. But hey, negative comments can be played up to your advantage.
Still, as part of the cross-border expansion, Zalando worked relentlessly on the operational side of things. Its goal was to become a customer experience (CX) leader in every market and win over consumers with unmatched service levels.
Progressively, Zalando localized each element of their brand — from website microcopy and payment methods to customer support and local logistics. As of 2022, Zalando supports 19 languages and 20 local payment methods — and collaborates with hundreds of regional logistics providers.
As brand markers, we know that superb a brand experience is the grand sum of all interactions targets have at different touchpoints. High consistency, localization, and uniform convenience are key to success.
The Era of Product Expansion & Partnerships
Proportionally to market presence, Zalando also expanded its product assortment mix — adding more merchandise and covering new niches from beauty to luxury items. Strong relationships with partners were a growth lever for them.
To that end, they’ve been working on an advanced technology platform to be the backbone of their entire operations. Originally, Zalando used a classic eCommerce model, where they purchased stock from some 2,000 brands and shipped it from the company's own warehouses. But this approach had limited scaling capabilities and required a lot of cash.
So, in 2015, Zalando changed course and decided to switch to a marketplace model, similar to Amazon’s. The team developed brand-facing functionality, enabling retailers to list their stock, set prices, and ship orders straight from their locations.
As Carsten Keller, Zalando’s managing director of partner solutions, describes it:
“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 marketplaces like eBay or Amazon.”
Access to large audiences and a seamless sign-up experience enticed many brands to join Zalando as marketplace partners. At the same time, it allowed Zalando to improve their bottom lines as they often lost sales when best-selling items ran out of stock.
After launching the partner’s model in Germany, Zalando doubled its sales within 12 months — and proceeded to expand the program into other markets.
In 2018, their partner-driven approach morphed into a “Connected Retail” strategy, with the newly-developed functionality enabling physical stores to connect their stock to Zalando’s platform in several steps. Smaller brick-and-mortar retailers found this to be a much-needed alternative to building their own online footprint.
In short, they could capitalize on Zalando’s large customer base and move stock faster. This feature became even more in demand during the pandemic, as many physical retailers had to rapidly pivot to online selling. And as of 2021, Zalando offers a host of retail tools and customer intelligence solutions for partnering brands.
The Era of Personalization & Customer Retention
At the same time, Zalando needed to maintain its strong customer lifetime value. Once again, their technical DNA plays a pivotal role.
Zalando was among the first European e-tailers to roll out data-driven personalization — such that goes beyond basic product recommendations. Since Zalando sells stock from multiple brands (which often use different sizing systems), they’ve focused on minimizing confusion with shoppers by creating an advanced sizing personalization tool.
As Stacia Carr, Head of Engineering & Sizing, explains:
“We have a wealth of data available to us, which allows for clear insights around Sizing topics. We can leverage these findings internally, but we’re also able to share this information with our brand partners. Brands gain knowledge from a ‘Size Related Returns’ perspective and customers are better able to make sense of the vast assortment in the Zalando store”.
In 2018, Zalando also pioneered an AI-powered digital outfit recommendation tool. The team used outfit data from Zalon, the retailer’s curated shopping service, to instill “great fashion sense” in the algorithm.
Then, the system was configured to use customers’ “wishlist” items to create different looks and to further hone its performance, stylists provide feedback. Zalando has since reported that outfit recommendations drive 40% larger shopping cart sizes.
Zalando was also among the few retailers to build their own payment method, instead of using a payment services provider. Though this is a costly and complex move, it paid off. Custom payment infrastructure allowed Zalando to customize the check-out experience, reduce fraud and non-payment rates, and rapidly release new payment features such as “try now, pay later” or installment payments.
2019 marks yet another era of Zalando. The new “Free to Be” slogan replaced the long-lasting “Scream of Joy” —- and the team started a more complex brand transition.
Jonathan Ng, Zalando’s director of marketing strategy and campaigns, describes their new brand vector as:
“free to be” expresses a powerful truth about fashion: when we’re free to be who we want, and wear what we want, nothing can hold us back. It also connects to our purpose as a company: to reimagine fashion for the good of all. Zalando believes in a world where everyone is free to be themselves regardless of style, size, age, gender, or background.”
Operationally, they also framed their new strategy as becoming the “starting point for fashion” — the prime destination European consumers navigate to for any apparel purchase. To become this category leader, Zalando plans to further level up its customer experience, focus on customer retention, double down on sustainability-oriented efforts — and become even more inclusive.
3 Brand Lessons from Zalando
Zalando had almost two decades to morph from a shoe-selling startup to a leading multi-brand fashion platform, powered by advanced tech and a vast logistics network.
Though it’s hard to copy them entirely, there are several smaller lessons brand marketers can borrow from Zalando.
1. Get Creative with Ad Personalization
Zalando has two strong competitive points: fast deliveries to anywhere in Europe and top-notch personalization.
They decided to spotlight both in a 2016 #whereveryouare campaign with Cara Delevigne. To give you some background, Zalando has just signed up Topshop (acquired by ASOS in 2021) as their latest big-name partner — and their goal was to prove they can now ship their products to any city.
To amplify the message, Zalando asked Cara Delevigne to read-our various hard-to-pronounce small town names for a funny bloopers-styled video. Then, Zalando reused those mini-clips for a large-scale Facebook ad campaign.
Using FB advanced targeting, Zalando showed ad versions to users, referencing their hometown, and the campaign went viral. As their agency partner reports, it gained:
180 million impressions across social media
40% of these were earned free media
Topshop sales grew by 54%
The Takeaway: Zalando used the tactics of low-hanging fruit — they target audiences in traditionally overlooked markets with highly creative, celebrity-led, and personalized messages. This has allowed them to keep campaign costs low and engagement rates sky-high.
Don’t overlook secondary audiences and less competitive niche markets — be it by location or another parameter. With the right creative, you can reduce your marketing costs, while securing higher conversion rates.
2. Connect Customers to a Story
Emotional connections play a strong part in branding. According to Accenture, 60% of top-performing companies agree that they need to stand for something bigger than the products/services they sell to customers.
In the past, Zalando secured some good brand associations of “free delivery”, “fast shipping”, and perhaps “screaming women”. But until 2019, their brand marketing lacked a wider, more nuanced story. They never mentioned what they stand for and made no attempt to humanize their brand.
The “Free to Be” era changed all that. To work out a sharper brand positioning, Zalando asked some 10,000 consumers what they expected from the brand:
“What did we learn? They want an even more personal, relevant, and emotional approach. It’s about combining our playful, disruptive startup spirit with innovative ways of connecting with consumers, becoming a more confident voice within fashion; the go-to fashion destination for the digital age”.
Zalando leveraged this knowledge to shape the first “Free to Be” campaign video, making it substantially different from anything they did earlier. Moody, narrated, and hero-focused, it spoke straight to the new values Zalando wanted to stand for: body positivity, inclusivity, diversity, and the “freedom to be you”.
In the next campaigns, Zalando incorporated even more “social” themes into their marketing, reflective of current buzz-worthy topics in society — gender, sustainability, and LGBTQIA+ rights.
In 2019, they sponsored London’s Queer Fashion Show, were a chief partner of Helsinki Pride in 2021, and made Rain Dove, a gender non-conforming model, the face of Zalando’s menswear and womenswear.
Overall, the roster of models used on the platform became more diverse in terms of race, age, body size, and gender. Yet, former employees came through with allegations of typecasting and racism in 2019 — suggesting that not all Zalando leadership was on board with diversity initiatives.
Since 2020, Zalando has also made a stronger push towards sustainability. They introduced filtering by the “sustainable” category and encouraged partners to make full disclosures on their production standards. They also launched a pre-loved marketplace section, plus a “care & repair” service for shoppers. Zalando-owned private-label Zign is also cultivated as a sustainable brand.
In a 2021 interview, Zalando’s co-CEO Robert Gentz even went on record saying that “eventually there is no alternative to a more sustainable fashion industry”. But independent research companies found Zalando guilty of “greenwashing” and glossing over its sustainability efforts.
The company uses a higher percentage of synthetic fibers in their sustainable collections — which is incongruous with the green label applied to them.
According to a Synthetic Anonymous report, sustainability claims were made for 86% of all products analyzed — but 79% of them flouted UK’s Competition and Markets Authority (CMA) guidelines for fair disclosures. In actuality, Zalando's main and sustainable collections have marginally different material compositions, suggesting the latter's labeling is primarily for marketing purposes.
The Takeaway: You can’t become an “ethical” brand overnight. It’s a multi-step process, that required sweeping changes across departments. However, the public has a positive sentiment toward brands that address and atone for past mistakes and mishaps in their branding.
But consumers are understandably suspicious of companies that suddenly add an “ethical” or “sustainable” dimension to their marketing and take a stance on values only for marketing purposes.
If you’re planning to rebrand in this direction, make sure that your changes go beyond the surface level. Collect consumer data to understand what truly matters for your audiences and then work on cultivating the right associations — by addressing both internal and customer-facing elements of your brand.
3. Take A Subtle Approach When Introducing New Categories
Zalando started by selling fast-fashion and mid-market brands. They primarily focused on younger demographics, often with limited disposable income. But their brand positioning has evolved over time.
Thanks to their super-convenient shopping experience, shoppers grew comfortable with buying expensive items from Zalando. Their target audiences also became more mature and affluent. Both factors made Zalando more attractive to apparel brands in the higher-end segment — and Zalando was happy to cultivate this relationship. After all, a higher average order value could help them increase their profit margins.
In 2020, Zalando began expanding in the “luxury” product vertical. While FarFetch and Net-a-Porter are the go-to online destination for Gen X and Millennial fashion editors, influencers, and fashionistas alike — Zalando decided to secure a future stake with the Gen Z shoppers.
As Lena-Sophie Röper, Head of Premium & Luxury Purchasing at Zalando, says:
“Zalando has the largest customer base of GenZ and millennials in Europe. These groups are predicted to make 55 percent of all luxury purchases by 2025. This is very interesting for brand partners, as they can access new customers through the designer destination within Zalando."
While their timing was unfortunate — cue pandemic and declined luxury spending — Zalando’s push into the luxury market was well-executed from a brand-building perspective.
Instead of adding a “luxury” or “premium” tag to some of its merchandise, Zalando decided to name the high-end section “Designer” — and encouraged shoppers to discover “their interpretation of luxury.”
They purchase collaborations more often (67% vs 50% of general True-luxury consumers) — and prefer different designers.
They are more influenced by sustainability and shop second-hand luxury items more often.
Also, they are more likely to mix-and-match items across categories — few appear all designer-clad. Instead, 56% of Gen Z partially shifted to purchasing a mix of premium, fast-fashion, niche, and sports brands — and Zalando sells all of these categories in one place.
Zalando’s activation of Gen Z luxury shoppers began with a #RealLifeLuxury I Designer Campaign for AW 2020 — which is whimsically wonderful and somewhat reminiscent of Wes Andreson movies.
In 2021, they followed up with a blended “Luxury On Your Terms” campaign that consisted of a shoppable film series, The Life of Liberty. In each episode, you meet characters, donning garments from Zalando’s Designer section — all oozing that subtle luxury vibe.
They also launched a series of promotional TikTok and Instagram content, made by diverse young creatives such as queer activist William Ernult and non-binary actor Lachlan Watson.
The Takeaway: Brand development is a marathon, not a sprint. You can’t “sell” a new brand association to target audiences with one announcement or several savvy targeting ads.
Not only do you need to perform precise segmentation to identify the best targets, but you also need to be subtle with your marketing push to avoid alienating (or belittling) other prospective customer segments. Precise brand performance data from advanced brand moniotring software can help a lot here.
From starting out as a Zappos clone to evolving into a distinctive brand of its own — Zalando has come a long way over the last two decades.
In its home market, Zalando boasts nearly as high aided brand awareness numbers as Amazon. In Austria, the platform holds an estimated 15%-20% market share — well ahead of the competition.
A strong focus on customer service levels and technical know-how helped them reach these results. But the team has strategically aligned product development with marketing and brand-building initiatives — and their tech complements and reinforces the main brand differentiators and competitive points.
Although their recent transition to a value-based brand strategy was positively received, gaps do remain. The brand still appears to be on shaky grounds when it comes to its externally projected brand ethos and internal practices. But those are relatively easy to resolve with some effort, and we’re interested to see how it develops.