Zalando plans foreign hubs to get frocks out faster

Zalando, Europe's biggest pure online fashion retailer, plans to open two new distribution hubs in France and Poland next year, stealing a march on competitors by cutting average delivery times by 1-2 days in an market where prompt dispatch is key.

The two new centres located close to Paris and Szczecin will be its only foreign hubs outside of Milan and should help Zalando better cater to its French market as well as customers in Poland and the Nordics, Head of Operations David Schroeder said in an interview.

Faced with growing competition from Amazon which is expanding into fashion, Zalando is also investing in logistics and technology to offer customers more delivery options.

"Logistics play an incredibly important role for the success of our firm," said Schroeder. Delivery time, costs and the returns process heavily influence levels of customer satisfaction, he added.

With customers growing to expect ever faster, cheaper and more convenient delivery, analysts believe e-commerce retailers like Zalando and rival Asos are better positioned than their bricks and mortar peers.

Zalando's warehouse and logistics network enables it to currently offer same-day delivery to 12 percent of the European population and next-day delivery to 56 percent. By 2020, it expects this to rise to 20 percent and 75 percent respectively.

In future, a package may even be able to locate the customer by using a GPS tracking sensor, Schroeder said.

"We have this vision that the package should fit in with the customer's life and not that the customer should fit in with the package."

STAMPING BY HAND

Established in 2008, Zalando's founders used to package every single order by hand in a Berlin apartment and stamp the wall with a postmark to celebrate each parcel they sent.

The company has since grown to become Europe's biggest online-only fashion group by sales with revenue of 3 billion euros (2.6 billion pounds) in 2015 when it handled some 55 million packages.

Zalando has four distribution hubs in Germany and opened a warehouse in northern Italy at the start of this year. Managing board member Rubin Ritter said last week it was weighing up the Nordics, Spain, Britain and France for further satellite hubs.

"Now is the right time to start the next phase and pay more attention to local customer needs," Schroeder said.

The company no longer wants to be simply Europe's biggest online fashion retailer, but market leader in Germany, France, Italy and other individual countries. That will only work if it differentiates its service according to country, he said.

While Germans like to pay by invoice, the French prefer to use credit cards and in Italy and Poland customers like to hand over cash on delivery.

"You are only successful if you approach every single market in a targeted way," he said.

Zalando will invest 150 million euros in a 130,000 square metre distribution centre close to Szczecin, which will open next summer and employ over 1,000 people, he said.

In addition, Zalando will open a local warehouse operated by an external provider close to Paris at the start of 2017, which will allow same-day or next-day deliveries to customers.

"If we continue to grow our sales by 20 to 25 percent, we will need new logistic capacity in one to two years," Schroeder added.