Zalando, Europe’s largest online fashion retailer, will not weather the current decline in internet shopping and may escape wholesale disruptions by its rivals, co-founder and CEO Robert Jenz told the Financial Times.
Consumer-facing technology groups including Amazon, Klarna and Shopify have cut thousands of jobs this year as the online shopping bonanza that began in the two years since the outbreak has stalled.
Berlin-based Zalando’s revenue fell in the first half of the year as it suffered a cash flow of 668 million euros and posted a loss of 7 million euros.
However, the team is adamant that it can avoid mass cuts. “Our plan is to resume employment at the end of this year,” Gentz said. Since the end of 2019, the workforce has increased by a quarter to more than 17,000 employees.
But we’ve become more cautious about hiring, Gentz said.
Gentz describes the market segment as a temporary blip that won’t have a lasting impact on the retailer.
Zalando listed in Frankfurt in 2014 but its share price fell 68 percent last year to leave the group with a market capitalization of less than 8 billion euros. “We have two years of great growth behind us. When I think about the fashion industry, my [optimism] Nothing has changed,” Gentz said.
He said that the revenue of last year, which was not affected by the epidemic, is still 60 percent higher than that of 2019. Zalando processes more than 3 percent of all clothing purchases in Europe, which counts 10 percent of the European population as active customers.
Gentz is confident that Zalando’s market share can more than triple in the long term. “What’s changed a little bit is the trajectory of getting there.”
Due to the war in Ukraine and rising inflation, Zalando initially struggled to understand the extent of the problem, but the team says it has shifted to damage control. It’s not an easy change for a company that has grown by about 25 percent every year since 2014: “We just have to play a little bit more defensively,” he said.
Jentz said that Zalando has been able to offset the inflationary costs of transportation and packaging that it has faced so far. The company is focusing on profitability. He reduced transaction costs and postponed the construction of new logistics centers. It has also reduced free shipping offers to limit losses on small orders.
It also argued that the 29 percent decline in net cash this year to €1.6 billion was due to temporary factors such as a sudden drop in demand due to increased inventories.
That’s in contrast to late last year, when tangled global supply chains were crippling the industry.
The drain from higher yields will fade in the second half of this year, Gentz said, while extended investments will help preserve cash. “Cash is not a concern for us.”