Zalando and Target: M-commerce and omnichannel drive growth

Screen Shot 2016-03-01 at 12.46.39.pngCompetition in the purely fashion e-tail sector is heating up but omnichannel retailers are also upping their game. Which means today’s news from Zalando (pureplay) and Target Corp (omnichannel) makes interesting reading.

Basically, Zalando is powering ahead, investing in expansion, and has the rise of m-commerce to thank, while Target is going for hell-for-leather into click & collect as it sees this as key to its future. And it’s bagged a top exec from Amazon to help it get ahead.

Zalando: M-commerce and apps

Europe’s biggest purely line fashion store is investing heavily in growth and said m-commerce is becoming even more important to its business.

The eight-year-old German company offers over 1,500 brands in 15 European countries and is going head-to-head with Asos. The Uk rival is building a massive warehouse in Berlin, moving physically into Zalando’s home market as well as virtually after its EU sales rose 29% in the last quarter.

Is Zalando worried? It doesn’t seem to be. Management board member Rubin Ritter told a conference call that “we don’t have to be overly concerned about what the competition is doing.”

Screen Shot 2016-03-01 at 12.47.44.pngHe’s not worried about Amazon growing its fashion footprint either as he says Zalando has more fashion expertise.

I suppose it’s easy to be that dismissive when last year’s sales rose 33.6% to €2.96bn, when it made adjusted operating profit of €107.5m and when it’s predicting 20% to 25% growth this year. OK, that 2016 estimate is a slowdown, but the bigger Zalando gets, the slower its growth rate has to be. Yet even at the lower end of that forecast, it’s an impressive rate.

What was particularly interesting about the latest figures was that 59.9% of site visits came from mobile devices in Q4, up from 47.9%, as the firm focused on app development. Its apps downloads more-than-doubled from 7m in 2014 to 16m in 2015.

The point about m-commerce is that it drives sales growth by its very nature because we don’t have to be sat at a computer to shop. We can do it on the bus, while walking the dog, just about anywhere we can get a mobile signal. It’s one of the reasons Zalando’s number of active customers rose 22% to almost 18m at year-end with average orders-per-customer at an all-time high

The company is investing around €200m this year in driving further growth (it spent €70m last year) and hopes this expansion will allow it to take a 5% share of the European fashion market soon, up from 1% now.

Target: Collect in-store

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Target Corp for Vogue

Meanwhile, across the Atlantic, a currently-buoyant Target Corp is showing that purely retailers don’t have the online fashion space to themselves. In fact, it’s showing that the existence of physical stores can boost online sales for a company.

And it hopes an exec from a pureplay background can help boost those sales even more. It just announced the appointment of Arthur Valdez, who was an Amazon exec, to head up its omnichannel supply chain transformation.

His appointment is part of a process during which the firm has been boosting stock levels at its stores in order to fulfil more online orders via click & collect. The company said its increased stock levels in its 1,800 stores helped boost its click & collect orders to 30% of all online orders in Q4.

The company’s online sales are surging (by 34% last quarter) and it wouldn’t have been able to offer click & collect so widely if it hadn’t put in place various improvements to the availability of its in-store stock for online customers. Last week it said out-of-stock metrics were 20% better than they were a year ago. Newcomer Valdez, who spent 16 years at Amazon, will be in charge of making sure that improvement continues.

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