The fashionable ecosystem

January 13, 2017

"What does digitalization mean for our industry? What about the fact that people are always online with their smartphones?” asks Kenneth Melchior, the Head of Nordics at online fashion retailer Zalando. “For us, it’s an opportunity to rethink fashion retail. It’s all about connectivity; a chance to seamlessly connect people and fashion through technology.”

Kenneth

Melchior presented the German company’s platform strategy at the Finance 4.0 event, organized by OpusCapita and Talouselämä in November for finance and procurement professionals.

The topics of the Finance 4.0 event included digitalization, technological innovations such as blockchain and machine learning, and other changes in the operating environment. These all sparked enthusiastic conversation about disruption in the purchase-to-pay process. The conclusion? In the future, organizations will operate in open ecosystems where all parties can engage and collaborate with each other effectively – whether we are talking about fashion retail or the value chains of B2B corporate trade.

“Our goal is to create a service platform bringing together all the different actors in the fashion industry: consumers, brands and retailers, stylists giving fashion advice, the brick and mortar stores, as well as the logistics service providers,” said Melchior. “We want to bridge the online and the offline so that they are not positioned as opposites, but rather are combined to give the customer an even better experience.”

Integrated commerce benefits all

According to Melchior, 90% of European fashion stock is still offline, situated in local stores and street level shops. Recognizing this as an opportunity, Zalando has now launched a partner program that gives fashion and lifestyle brands an opportunity to take advantage of its platform as a sales channel. For instance, if the item the customer is looking for is sold out from Zalando’s own warehouse, it could be shipped from the partner brand’s own inventory. The local stores could also receive orders through the Zalando online fashion store and deliver them locally, which makes it possible for the customer to choose to pick up the parcel directly from the store.

Today Zalando has 1,300 employees in its technology hubs, kept busy by the 18 million active customers of the online store and the integration of the partners’ inventory and sales systems to the platform. Zalando has described itself as ultimately a tech company.

“We want to be an enabler and make consuming fashion effortless and convenient, just as Spotify changed the way we are listening to music,” says Melchior. “The service platform and the integration of commerce benefit all parties. Customers will have more fashion to choose from and will find it even easier to shop the items they are looking for. Fashion brands and stores will gain easy online visibility and access for their products, while also creating new traffic to their physical stores.”

Melchior said that Zalando aims to multiply its one percent share of the European fashion markets to five percent. The company currently operates in 15 countries, and reached 3 billion euros in revenue in 2015.

"By building and developing the ecosystem we can grow ourselves, and at the same time also create the opportunities for growth for the other players in the industry,” says Melchior.

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