Zalando’s shift from being a wholesaler to a marketplace may be held back by brands’ reluctance to use its fulfilment service, according to a major investment firm.
UBS downgraded the retailer’s investment rating on the basis of interviews with some of the biggest partners of Zalando Fulfilment Solutions (ZFS), claiming that these partners were more reluctant to use the service than Zalando had projected.
Wholesale currently accounts for 90% of the value of goods sold on the site but the retailer wants to grow its partner programme, in which brands manage and sell their own merchandise on the site, allowing the company to expand its range without taking on additional costs. On this Zalando marketplace dropshipping accounts for 70% of items, with the brand keeping stock site in its own warehouse and fulfilling the order.
Zalando Fulfilment Solutions (ZFS) accounts for the remaining 30%, a service launched in 2017 through which Zalando keeps the brand’s stock in its warehouse and ships it to the customer for a fee. The German retailer had projected that ZFS would prevent its margins being eroded by higher fulfilment costs per basket by allowing it to ship wholesale items alongside partner programme items.
However, UBS said partners were concerned about splitting their inventory pools for ZFS. Sending stock to Zalando warehouses and paying per item costs would create less flexibility in stock allocation, leaving the brands vulnerable to potentially losing sales and seeing their goods sold at a discount on Zalando.
One interviewee said: “We can’t access them easily and get them back at the end of the season. We can get the programme to sell through Zalando Lounge – especially those fast fashion items don’t want to get them back. [ZFS is] for very low value items, for items you want to sell yourself, the PP is still most preferred.”
The partners also told UBS that the cost savings of ZFS were more significant for smaller brands with less developed logistics capabilities and in countries where baskets are smaller or where brands had less developed logistics capabilities.
A Zalando spokesperson told eDelivery in an email that the company was receiving “positive feedback” on ZFS from partners.
“Thanks to ZFS, we can make deliveries more efficient. ZFS provides benefits for customers, as Zalando and partner articles can be sent in one single package. By benefitting from our international logistics network our partners can concentrate on their own core competencies.
“We are constantly developing our services together with our partners. This includes the efficient steering of stock volumes, for which we are considering multi-channel solutions as one example.”
https://edelivery.net/2019/04/zalando-free-delivery-ends-uk-ireland-spain/
