Zalando, an online-only retailer for shoes and fashion headquartered in Germany, had its IPO this Wednesday at the Frankfurt stock exchange. Despite some analysts' believe that Zalando failed to excite the market during the first two days of trading, I think it is a big success story and proves the believe that the future of shoes and fashion retailing is in online. Zalando's story also shows how successful online marketing can be. As an article by TechCrunch on Zalando's IPO correctly points out, it would be unfair to view Zalando's IPO in light of Alibaba's IPO earlier this month. One should consider that Zalando is valued around $6.7 billion and managed to build its empire only 6 years after creation and without having ever made a dollar profit. With this view it is a big success story which is likely to continue.
Zalando was founded in 2008 by two German colleague friends. Inspired by Zappos in the US, Zalando started selling shoes via their online website in Germany. One of their key differentiation points in Europe was and is that customers can simply order products from Zalando and return everything they don't like for free, even without any shipping costs.
Soon Zalando started expanding and in 2013, Zalando reached 1.8 billion Euros in revenues and operated in 15 European countries. Many industry experts, competitors and newspapers describe Zalando as a digital marketing genius. They managed to create such an excitement around their service and their brand by levering all digital channels and having an amazing digital marketing strategy.
Despite this massive revenue growth, Zalando has never managed to be profitable so far and always had a loss at the end of the year. Most of this is related to the rather expensive logistics cost in Europe and the large expansion. Even though the company has this constant losses, Zalando is valued at almost 7 billion dollars now at the stock exchange. This shows how much analysts and the market trust in Zalando's strategy and its ability to achieve positive cash flows in the future. The future lies in online retailing and Zalando with its superb digital marketing strategy is best positioned to captured some of this growth.
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