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INTERVIEW IRC 2019: Zalando’s Consumer Insights chief on trading gut feelings for data

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The number of channels brands have to sell to consumers has exploded in recent years; in addition to going through retailers, most brands build their own ecommerce sites. Increasingly, they also sell through platforms such as Zalando.

The German fashion retailer has been energetically pursuing what it calls a “platform strategy”, in which it lets brand partners steer their business on the Zalando site. One part of this is Zalando Marketing Services (ZMS), which offers a mixture of analytics and advertising services.

“The main idea is to enable brands and partners to take more ownership of their brand at Zalando. Brands need additional steering levers to make sure they really achieve what they plan to do on Zalando and marketing is one key activity,” says Martin Schmidt, business owner Consumer Insights within ZMS.

The division analyses data from Zalando’s 28 million active customer in 17 markets, for example to find out which demographics a brand is currently resonating with and uses these insights to help them to reach their target group.

He calls this “database transparency”: a chance for ZMS’s clients to better understand where they can improve their businesses. Required improvements could be across multiple areas, including simply catering the product assortment more effectively to target a certain group of customers.

ZMS then helps brands develop these consumer insights into a marketing campaign, whether through content creation or by connecting them to its network of influencers.

“By providing data insights we tell them about the status quo: who they are currently reaching. If they are trying to be a premium brand targeting 20 to 30-somethings, the reality might be that they are going to price-sensitive 40-year-olds.”

Schmidt’s role at Zalando draws on his previous experience; prior to starting there five years ago he worked in consultancy and venture capital with a focus on commercialising technologies, including founding new companies based on public research. He holds a degree in industrial management and engineering.

Schmidt argues Zalando’s platform offering is complementary to brands bolstering their own ecommerce destinations.

“People who are a lot into this brand and purchase frequently use the brand ecommerce destination to get the latest products and stay up to date with innovative products. However, we know based on our data that the average customer buys around 13 different brands per year and want to shop their entire outfit in one place with the highest degree of convenience. These customers still care about brands, but are more agnostic to whether it’s this or that brand. They like a style or a certain outfit.”

“This is also the reason we as Zalando want to be the starting point for fashion.”                      

The thinking seems to be that customers can start on a multi-brand destination and move to a brand’s own ecommerce site when they are loyal customers.

Schmidt says ZMS is currently investing a lot in brand-building for its clients in addition to classic growth or performance marketing, where the initial focus was.

“Over the last couple of years, because of our large customer base, Zalando has been recognised more as a destination where brands can build their brand image.”

“We’ve seen brands from the US planning to enter the European market via Zalando who are very interested in brand building; they choose Zalando as their partner because of its customer base of 28 million customers and its extensive data insights.”

The company is currently investing in building new offerings that allow clients to pursue awareness campaigns. Initially ZMS’s consumer insights offering consisted of a self-service platform, available through a web interface, which brands could look at to see a predefined analysis comparing their performance to peers’.

A lot of companies utilising the tool, Schmidt says, were not set up in a data-driven way.

“They are trying to make all of their decisions by analysing as much data as needed; however, it is still mostly based on gut feelings.”

Because of the high demand from brands for analytical skills and structure Zalando began offering consultancy services. Sometimes a combination of both approaches works well, with brands using the self-service tool to identify certain issues and the consultancy services helping them to drill deeper into the data.

Making prominent use of data is a new way of working for most fashion brands. Traditional fashion brands used to mostly have brick and mortar business, says Schmidt, a situation where it is hard to obtain data on customers.

“The main information you get as a brand in in the brick and mortar business is the customer going to the counter and staff noting if they are male or female, estimated age and asking them to share their ZIP code.”

“Data collection is difficult in this setup; the whole process is very manual and takes a lot of effort.”

It has become easier to assemble data through the likes of brand’s loyalty programmes and online websites. However, “the difficulty remains that they are only selling their own products; they gain some insights but lack the benchmark.” One advantage of Zalando is that it sells more than 2000 different brands that can be used as peer benchmarks to rate performance against competitors.

This benchmarking provides an alternative to market research through time-consuming and expensive surveys.

Zalando also identifies and sends email surveys to specific relevant customers based on their purchasing behaviour. If a brand wants to introduce a new product category they don’t currently offer, it might be useful to see what very loyal customers of that brand think, he explains. This can be contrasted for example with people who have never bought from that brand but who have shown interest in this type of product.

Zalando’s sector is famously fast-moving and trend-driven, changing from season to season. However, it’s clear that data-driven marketing will be in fashion for the foreseeable future.

Martin Schmidt will be speaking at InternetRetailing Conference 2019, which takes place on 10 October.

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