BERLIN: The successful launch of Zalando’s beauty range – the first new category in four years for Europe’s biggest online retailer – provided a bright spark in what was an otherwise a squeezed quarter, hinting at beauty’s curious resistance to Amazon-fuelled commodification.
Zalando launched a beauty category in October of last year, in a move that Co-CEO Rubin Ritter said “reflects the demand of our customers.” Intended to strengthen the service’s position as a complete outfit solution, the brand also trialled a beauty concept store in Berlin.
The physical aspect of the product and the experience is key. In a weekend feature, the Financial Times compared the parlous state of traditional retail to the beauty sector’s boom, as Inkwood Research estimates the total market will grow to $750bn by 2024.
Moreover, Simeon Siegel, an analyst at Nomura Instinet noted that “Apparel has been the most easily disrupt-able business. Beauty has not.” He noted the event-status, the experience of buying, people “wanting to actually be present when they buy makeup. That protects prices from Amazon.”
Zalando treads an interesting middle ground between top-end physical retail and online. So far, Reuters reports, consumers have responded positively to the site’s offer of 4000 products from 130 different brands. In tandem, the company’s Q1 earnings call revealed that active customers have grown, and the average order is now at an all-time high.
“We see an opportunity to build the leading beauty destination,” Ritter told investors, adding that beauty products sold online still hovered around just 5% compared to around 15% for apparel, signalling considerable headroom. Zalando’s advantage in this space appears to be in combined orders, as over 70% of beauty orders also included fashion garments, Ritter revealed. The company intends to extend to other markets and add male-focused ranges.
For brands, Zalando offers distinct advantages over other marketplaces including valuable data to support marketing efforts. “The brands are put in the front seat. They keep control over the assortment, prices and brand representation,” said Carsten Keller, Zalando’s Managing Director of Partner Solutions, speaking to Reuters.
“In an Amazon or eBay environment, brands lose contact with their consumers because they do not get their hands on consumer data,” she added.
Despite a quarterly sales increase of 22%, Zalando’s earnings before interest and taxation fell to €0.4m, short of the forecast €11.5m for the quarter. Ritter noted that uncommonly cold weather across Europe has delayed spring/summer collection sales.
Sourced from Zalando, Financial Times, Reuters; additional content by WARC staff