Topic 6: Competitive Analysis of E-commerce Sites
Wiki
Team: Denise Hanicke; Melina Draht; Carina Wigge
Select two businesses that are competitors in the same industry and that use their Web sites for
electronic commerce. Visit these Web sites. You might compare, for example, the Web sites for iTunes
and Napster, Amazon and BarnesandNoble.com, or E*Trade and Scottrade. Prepare an evaluation of
each business’s Web site in terms of its functions, user friendliness, and ability to support the
company’s business strategy. Which Web site does a better job? Why? Can you make some
recommendations to improve these Web sites?
Zalando
Zalando is an online retailer for shoes and fashion based in Berlin and is one of the German flagship
Internet companies in terms of growth.
The mail order business (or distance selling ) is a type of retailing where the products are
sold by catalog, brochure, internet, television or representatives.
The order of the desired products may be oral (eg by phone or representatives ) be made in
writing ( eg by letter or fax) or online. The subsequent Payment can be made by credit
card, cash, bank transfer , direct debit or on account. According to the rapidly increasing
importance of the Internet as a distribution channel gain electronic payment systems in
importance.
Functions
Zalando advertises shoes and fashion from over 1,500 top brands , which can be ordered free shipping.
In keeping with the season, there are cheap fashion trends and basics.
“About half of the proceeds will be generated in Germany”, the Frankfurter Allgemeine Zeitung is
citing Zalando Managing Director Rubin Ritter. (http://www.faz.net/aktuell/wirtschaft/onlinehaendler-zalando-aus-dem-keller-zu-einer-halben-milliarde-euro-umsatz-11825451.html)
This means that the home market and Austria , Sweden, France, Spain and Italy as previous foreign
markets are of the same importance. Although the figures are broken down not only by country but
also by product: Approximately half the turnover between the core segment shoes and other sectors
such as clothing, home furnishings and accessories.
The website is divided into inspiration, clothing, shoes, sports, accessories, premium, home, brands,
Fashion Buyer, Sale and lounge.
The range of women's clothing, ladies shoes to accessories for women is growing at Zalando online
shop daily. Over 2000 brands in different categories are available in wide range and any request will be
fulfilled in terms of styling. Thus, many women aren’t matching their shoes to their outfit, but choosing
their look even better after the favorite shoes. Due to the large variety of women's shoes in terms of
shape, color, models and sales, every woman can enjoy their special favorites. For every occasion and
party, be it an elegant ceremony or the ultimate New Year's party, the perfect pair of women's shoes
exists for any young woman and situated lady. Whether Classic pumps, wedge heel or ballerina there
are no limits in terms of shades of color or heel height and heel. (www.zalando.de)
Beach dress, wrap skirt, sarong or pareo- the Zalando online shop also offers an all-around choice of
beach and swimwear. In addition to the latest bikini trends, bikini types will be presented, which fit
exactly to your body types.
From party dresses over summer dresses to case and maxi dresses, Zalando offers these in every
conceivable color and shape. Top brands, exclusive designers and new and upcoming labels also
present their collections to street wear. The most worn garment, jeans, combined with a shirt or top is
a classic for a casual recreational outfit, just as women's trousers or skirts that are worn with a blouse
and about a vest.
Userfriendlyness / advantages
The website is designed very clearly and user friendly. With the shrill slogan "Schrei vor Glück oder
schick’s zurück", which immediately burns at one’s head, Zalando has taken the spirit of the times. In
an age of abundance, in which time is probably the most valuable asset, at Zalando one can order
online convenient and easily and receive free shipping home.
For the customer Zalando creates the perfect balance between an enormous selection and attractive
offers. Through always current so called online coupons the customer receives more financial
discounts in comparison to other stores or online suppliers.
Probably the biggest advantage over Zalando 's competitors is an additionally granted 100 - day return
policy. The shipping & return shipping is free and the company is also active in France, Italy, the
Netherlands, Switzerland, Austria, England, Spain, Belgium, Sweden, Denmark, Finland, Poland and
Norway. Also here the shipping is usually for free.
Crux of returns
Interesting in the shoes- or fashion industry are the return rates, because sometimes a considerable
part of the income could be destroyed by this again. Actual numbers for this purpose Zalando still does
not publish. That is understandable on one hand, but on the other hand suggests that the values
should not be too small. In the news and press there is always a figure of 70 percent rumored - which
would mean quite a considerable burden.
Because Zalando has taken back the advertising animating people to send back (“ Schrei vor Glück,
oder schick’s zurück”), Zalando hopes for a defusing.
Regardless of this potential problem, the company aims to grow further. Poland and Norway will be
added as the next markets and in December 2013 a center for software development was opened in
Dortmund, where up to 60 developers are supposed to work. Meanwhile, the IT department of the
consignor is now 250-people strong. In a few weeks the new warehouse and logistics center in Erfurt is
also going to be opened, in which more than 100 million euros was invested.
Ability to support the company 's business strategy
Due to the many benefits that Zalando offers over other online platforms, the ability to support the
company 's business strategy is particularly easy for the end user. The modernized and creative
concept of the former business unit of “Otto” is overhauled by Zalando. However, looking at the
figures, the company is growing rapidly, but because of high investment (600 million Euro) does not
generate profits.
The sales has more than doubled from 510 million Euro in 2011 to 1.15 billion Euro in 2012, as the
company announced. However operating income before interest and taxes (EBIT) was, according to
preliminary numbers at about minus 90 million Euro (2012) compared to minus 60 million the year
before. (www.zalando.de/press)
In this case, the distribution of sales has changed accordingly: More than half of the Zalando turnover
is generated outside the core category shoes and Zalando already makes 50 percent of its sales outside
its home market Germany, keeping in mind that in Europe alone, Zalando is represented in twelve
markets, while there are also global offshoots.
The dimensions of Zalando, which generates up to 100 million page impressions a week, also reflects
in the numbers of staff: Around 1,000 employees work for the online shop, of which 250 alone in the IT
department. According to the Frankfurter Allgemeine Zeitung as much as 3,000 employees could work
for Zalando until the end of the year. Thus Zalando would probably recruit as many employees as the
old delivery giants ( e.g. Amazon) released straight into unemployment.
Especially Zalando creates through its invested capital assets: In Erfurt, Brieselang and Großbeeren
three large warehouse and distribution centers were built for allegedly more than 100 million Euro,
while in Dortmund, a new technology location for around 60 developers is created. And also with the
software there is a private shop system created and its own software tools for managing logistics,
product procurement, and customer portfolio on the credit side.
The usual indicators take at Zalando thus quite proud dimensions, but at the same time it comes again
and again to the discussion of how sustainable Zalando economic activity is and whether the online
shop is only a giant Bubble. However the online giant also developed some real assets, which are
nevertheless also facing immense costs (and thus risk factors).
So these are probably Zalandos most expensive cost drivers and margin-eater :
Pre-financing: As other traders Zalando also has to pre-finance its goods. The Berlin branch for
instance orders different products and brands and fill up heir stock. However does the purchasing
department make an error of shopping, the stock shelves are quickly full of products that were not
sold. Not for nothing Zalando has created the Zalando Lounge as a private shopping club in Berlin and
maintains a private Zalando Outlet. Remaining goods block their own stocks, create expensive process
costs and should therefore be sold on quickly.
Storage costs: With the purchase of goods, their storage is always connected - a factor which has to be
taken into account in e-commerce always. With three different logistics centers, you can already guess
the complexity of this undertaking in the case of Zalando.
Shipping cost: Since Zalando pays both the outward and the return shipping costs, the shopping giant
arises corresponding costs, that are certainly included in the product prices. Above all the logistics flow
itself is a major cost factor. In Zalandos storage area itself people work according to Zalando in a three
shift cycle, where even at night the working class is kept strong with a “Gulaschkanone”. How much
costs, can easily be imagined.
Returned items: As always in the fashion segment, also Zalando will deal with a high rate. Usually
depending on the segment up to 40 percent, but in some press reports it can be read that it could be
even up to 80 percent at Zalando. The number of returns will certainly vary depending on the topic,
but because of the free shipping, it is likely to make Zalando susceptible to this problem.
Expensive marketing: From advertising on receipts from grocery shops such as Kaisers, advertising
placements at Germany's Next Top Model, to online marketing and TV commercials- Zalando has
always been driven the full advertising program and puts itself already to a brand awareness of 60
percent in Germany. However everybody can guess how outrageously high the costs of comprehensive
SEO and SEM campaigns, not to mention TV spots during the best prime- time are.
Exit scenario
The concept behind Zalando’s exit strategy originates from the Chinese fashion company VANCL
(www.vancl.com). A geographically slightly narrower model for the Zalando scenario appears to be the
Barcelona-based INDITEX, a fashion distributor who is responsible for Zara and other labels
(www.inditex.com).
Zara is indeed available in every major city now and can almost be counted rather as a logistics
company. The Spanish company succeeds supposedly within two weeks ( ! ) to create a clothing line
and get in the shops. If Zalando achieves a similar construct, margins would rise even further.
With Third Party Inventory (external brands, which are distributed through Zalando) "only" a margin of
30 to 60 percent is resulted estimately. Depending on the segment and the purchasing conditions this
value varies certainly, but at the same time the the returns ratios, the high logistic costs and
warehousing costs accordingly, ultimately lower the margin (see above) .
With a private label, however, Zalando can generate a much higher margin.
Zalando share
It is therefore to assume that Zalando will shift its range more and more in conditions of Zalando own
brands, so as to achieve higher margins and this process has already begun: even now there is a
Zalando Collection, which is advertised right next to the brand products on the start screen, and with
“Zign” a Zalando label is already created.
Especially Zalando is indeed going to create an appropriate infrastructure that makes Zalando a
logistics company and ensure a degree of independence from the brands.
Already Zalando has such a purchasing volume that it should belong to the most important customers
in the fashion industry. This will also continue to change to Zalandos favor, when Zalando offers its
customers in addition to the brand product their own brands, which will be cheaper and attractively
advertised. Unlike Zara or all the other stores, Zalando does not have to bear the costs of their own
stores, but may deploy its marketing keyboard for a purely online-based construct.
That only leaves the question of how Zalando is going to silver its assets. Who should buy Zalando? The
tendency would certainly lead to large retail giants such as Otto (www.otto.com) or the E -commerce
giant Amazon (which has already bought Zappos). However, it is much more likely that Zalando will
commit an IPO.
Within the next three years, it could lead Zalando to the stock market and with an awareness level of
60 percent in Germany, it might not be bad for Zalando. If the business growth and international
expansion continue to move forward accordingly, no longer only the customers -but also the investors
could then be “screaming with happiness”.