Sample Case Study Paper on Zalando

The aim of this report is to present a strategic analysis of Zalando. The resources of the
organisation help identify its major capabilities which in turn can help in the
development of the core competency of the organisation. This can lead to competitive
advantages and ensure that there is growth (Hill et al., 2014). This report first presents a
comprehensive analysis of Zalando and its competitive advantage. This is followed by
an assessment of market growth and development opportunities as well as options for
angel investors with respect to the future of Zalando and its growth.
2.0. Competitive Advantage Comparison of Zalando and Asos
Competitive advantage is gained when organisations develop or acquire a set of
attributes which can provide it with the opportunity to outperform its competitors. From
a resource based view, it is argued that competitive advantage is gained through the
notion of core competencies which include major resources including physical, human
and technological resources and capabilities (Barney, 2014). The goal of this section of
the report is to compare the key competitive advantages of Zalando and Asos. This
report addresses each of their competitive advantages and highlights major similarities
and differences.
Improving digital presence and integrated physical presence: When Zolando
launched it was only in two countries, Germany and Austria. However, by 2013, they
extended to over 15 countries. the customised localised service in each country with the
sale of 1500 international brands including premium brands as well as local brands
increased its ability to reach out to its customers (Case Study, n.d). The launch of a
physical store in Berlin and Frankfurt further created opportunities for the brand to
engage with its customers (Garai, 2016). An analysis of the Asos digital presence
shows that while in comparison a similar repertoire of products are seen with its brand
there are no physical stores. Hendriksz (2017) in their assessment conclude that there
is a rise in need for omnichannel retail and the drive of e-commerce sales through
directed and specific physical stores (Verhoef et al., 2015).

Improving its logistics set-up: Key logistics are primary dilemmas for large internet
based firms as their success is dependent on providing the right logistics service to
reach the customers in the right time (Singh et al., 2017). Zalando was one of top e-
commerce based companies in the UK which was able to achieve such effective
logistics and infrastructure. The case study reported that 150 million euros were
invested in logistics and technological infrastructure. Furthermore, the organisation has
also established multiple separate order fulfilment centres at strategic location across
Europe (Smart Insights, 2016). Similar extended logistics set up is evident at Asos with
every country of operation of Asos having major fulfilment centres (Kulach, 2017).
Similar to Zalando there continues to remain contributing investment made in logistics.
Product Portfolio: When Zalando launched it was an organisation which focused
online footwear, women and men's clothing. soon it expanded to include children's
wear, exclusive perfume brands. The presence of these products is unique as Zalando
tailors its product offering to every country where both local and international brands are
balanced (Case Study, n.d). Asos has an engaging brand presence with a similar
product portfolio. Asos hosts over 2500 brands when compared to Zalando (Hendriksz,
2017). Another major success criteria at Asos is its ability to sell own brand products
which is key to its success.
Shipping and Return Experience: Singh et al. (2017) contends that the major
challenge most e-commerce players face is to get customers to return to their
organisation and make repeat purchases. Though many online retailers offer free
shipping, Zalando promises that all buyers across all categories will get free shipping
with a guaranteed 2-4 day delivery time. Similarly, the organisation also has a good
policy of returns when compared to its competitors. There are between30-100 days of
return guarantee with a pick-up service which further improves the overall engagement
of the customers (Smart Insights, 2016). In comparison, it is argued that Asos has a
similar strategy for delivery with most of its products being delivered free. However, the
product return time is much lower than Zalando and there are many complaints online
on the delay in delivery and pick-up.

Cross sell:Verhoef et al.(2015) argued that the success of fashion retail websites is
linked to their ability to engage customers through curated looks and cross-sell
capabilities. Zalando is able to get its customers interested in the product through shop
the look and gift suggestion options (Case Study, n.d). A similar strategy or
competency is relevant to Asos as well. The organisation focuses on creating the right
brand mix with opportunities for cross-sell and all about brand mixes (Kulach, 2017).
The goal is to create an engaged strategy where consumers can curate their own look
from inputs of fashion experts.
Strategic Discounting: Hill et al.(2014) contends that pricing strategies can be
considered a major competency which can position and organisation. Providing too
much discounts can make an organisation less attractive to some demographics. An
assessment of Zalando shows that are discounts but these are linked to specific
durations (e.g. christmas, Black Friday). On the other hand, at Asos this type of
discounting and strategic positioning is quite different. The organisation provides
specific outlet section where there are constant items available on sale.
Product Portfolio: Hill et al.(2014) contends that the strategic growth of any fashion
brand or any retailer who operates in e-commerce with the focus on fashion products is
through the launch of new products. The assessment of Zalando's product offerings
show that there are over 1500 brands of products sold. However, at Asos there is more
engagement to provide consistently new products. Hendriksz (2017) reports that 41% of
the fashion retailers product assortment arrived within the last three months and 10% of
the products change every month.
Unique marketing: The organisation has taken efforts to improve its reach to
customers by integrated its predominantly digital business with its physical business.
For instance, the lead publication at Zalando, has reached a circulation of 1.5 million
copies. This magazine strategically positions major brands and products which is a
source of revenue for Zalando. At the same time, the brand provides this magazine for
free to its customers to increase the overall reach of the magazine. The organisation
also sought to approach its male shoppers through a separate category of book sales.
Similarly, an assessment of the Asos marketing strategy shows that Asos was the first

in launching such a lookbook which was made available to its customers at various
Improving Consumer Experience:Hill et al. (2014) contends that understanding and
improving the customer needs and customer experience is key to long term success. An
analysis of the customer experience at Zalando indicates the organisational ability to
provide a consistent and unique experience. The organisation has used technology to
understand the differences in consumer purchase habits. Even though Zalando
operates in over 15 counties globally, they were able to provide a unique experience to
its customers in each country trough targeted marketing and payment options.
A comparison of the competitive advantage elements at Asos and Zalando show that
both brands have been successful through the launch of an advanced logistics set-up,
improved product portfolio and quality, cross-selling of products, unique marketing and
focusing on customer service experience. Zalando has been more effective in providing
longer duration for customer engagement with the brand through unique options
including Zalando club cards and a physical store space. They also have taken efforts
to address the independent needs of male and female shoppers. On the other hand,
Asos has competitive advantage through the brand reputation of its own products and
using strategic discounting. This report concludes that a potential reason for the rising
profitability of Asos could be linked to its ability to use its own products and increase
profit and focus on both strategic discounting as well as exclusive products. Zalando on
the other hand focuses on increasing its product range.
3.0. Market Selection
The purpose of this section of the report is to conduct market selection and identify
areas where Zolando can expand its operations. The operation of Zalandos focuses
predominantly on Europe. It is evident that while the organisation started its foray in
Germany and Austria, it has expanded to other countries including Netherlands, France
and six other countries.
Figure 1 : Location of Zalando Operations


Source: Smart Insights (2016)

Schu and Morschett (2017) conclude that market selection could be based on two sets
of factors including firm related factors and market related factors. This research will
expand on both these elements to arrive at the right choice. Firstly, firm related factors
are those which deal with firm level aspects. At the firm level, the goal is to understand
what locations can be targeted where similar firm operations and ethos could be
extended. A key firm level factor that can be addressed is similarity in operational
requirements and legal frameworks. From a simple firm level perspective, keeping this
in mind other locations in both Western and Eastern Europe can be targeted. Eastern
European countries which could be within the EU would indicate similarities in
operational goals and similarities in legal frameworks (Wallace et al., 2015). An analysis
of the case study statistics shows that overall growth in Eastern Europe (e.g. Hungary,
Estonia) is from 0.9 in 2006 to 2.2 by 2011. Similarly, Case Study (n.d) also shows that
Eastern Europe has shown growth in overall apparel sales with the rising attraction of
many Western European brands. This report concludes that the choice of Hungary or
Estonia could be an ideal choice from a simple firm perspective and ease of legal

extension of operations (Nagy, 2016). Another aspect which may determine the firm
level factors which drive inherent growth is objectives of growth and the inherent growth
potential of the market to aid in this growth. An assessment of Zalando market growth
requirements shows that the growth is on market expansion and slow organic growth to
profitability. In line with this view, extension to similar product preference countries (e.g.
Eastern European countries) could help in creating this increase in margin of sales. This
extension could be easier to handle from an overall infrastructure perspective. Nagy
(2016) concludes that expansion and market selection is often immediately driven by
the need for extensive analysis of available support and infrastructure (Schu and
Morschett, 2017). From the following figure, the strategic location of the technology and
distribution and packaging centres are seen. Therefore, the choice of Hungary or
Estonia could help in reaching out to larger population base while having closer
distribution and other infrastructure logistics already present.
Figure 2 : Location of Physical and Technical Infrastructure Support

Source: Smart Insight (2016)
The next segment to be focused on is the market related factors. Market related factors
are considered as key elements which can create the final decisions. Over the years

there are various factors which have been identified.Firstly, Mathews et al. (2016)
contends that economic factors including economic stability, GDP growth trends and
general availability of disposable income are key factors which can drive choice of
markets. In line with this view, economic policies including government regulations,
taxation could also be considered as drivers of market selection (Cavusgil et al., 2014).
This research contends that the choice of India is an ideal market that could be
considered based on economic factors and governmentpolicies.An analysis of the e-
commerce retail market in India is expected to be worth $12 billion which is driven
predominantly by the launch of 4G networks and rising consumer access to internet. It
is seen that there is a rise in consumer spending capability with more disposable
income and there are more Tier II and Tier III cities in India where e-commerce is
becoming a major player to cater to individuals (IBEF, 2017). Given that India has one
of the fastest rising youth population, this research contends that e-commerce focus
should be on this region as it can create long term growth options for Zalando.
Additionally, recent changes in government's foreign direct investment policy further
creates better fiscal and legal policies which can create entry into this region.
Apart from these factors, culture is considered as a major determinant of choice which
can drive the overall market selection decision (Cavusgil et al., 2014). It is argued in
research that cultural differences can create major challenges for organisations to
expand to newer markets as significant differences if left unaddressed can create major
issues of operational failure and lack of customer base development. This could create
challenges for an organisation to expand and become a major player in any new
location. As seen in the following figure, there is a definite impact of cultural differences
on organisational growth in Zolando as there are major cultural differences between
Germany and India. Therefore, the option of expansion from a market opportunity,
customer availability perspective is high but the associated risks are also high which
need to be understood and attributed.

Finally, this report also suggests that Zalando can look at launching in the US. This is
linked to the booming e-commerce market in the country and rise in acceptance of

pureplay e-commerce outlets. It is expected that the e-commerce growth in the US
would e by 15% by the end of 2018 and more importantly the growth in North America is
driven by mobile commerce and strategic positioning of products (IPC, 2018). The
choice of expanding into the US can help provide two major market selection
advantages including ease of bureaucracy and procedures. Compared to the three
other countries discussed as part of this report, US has much better procedures and
establishment of operations and transparency in this region can be high. Additionally, it
can also be argued that the US can act as a Market hub or a base from which Zalando
can reach other North American markets including Canada and Mexico.
Therefore, it is concluded that the choice of USA, India and Hungary (or Estonia) are
the three primary options for Zalando to expand.

4.0. Pros and cons for Investment
The final section of this report aims at understanding the major implications for Anders
HolchPovelson. He recently gained 10% of stake at Zalando from early investors. It is
important to note that he also has a 27.5% stake in Asos, the direct competitor of
Zalando. The investment by Povelson in Zalando can be considered as an Angel
investment. The purpose of this section is to address the major advantages and
disadvantages for Asos/Zalando through his investment and expertise and the potential
challenges that he may face with this investment.
Firstly, if one were to examine the pros and cons from the perspective of the angel
investor, it is argued that the investor is presented an individual who can provide
strategic management support, resource acquisition and mentoring. Given that he is in
the industry and has experience with prior fashion retail, there could be opportunities
that he could provide some advice for the organisation (Parhankangas and Ehrlich,
2014). Additionally, given that they are direct competitors there are some challenges of
conflicts and therefore greater role in everyday operations could not be provided which
could work as a disadvantage for both organisations.

The major opportunity that Povelson has is the ability to invest in an industry that is
growing. There are evidences which show that Zalando has been extending its lead
over the British rival, ASOS as one of the largest European online fashion brands.
Therefore, through an early acquisition into Zalando and AsosPoverson has the first
opportunity to gain big through structured IPO (initial public offerings) (Reuters, 2017).
The second advantage for Povelson is that the acquisition of stake in two major
pureplay online retailers provides an opportunity for his brand, Bestseller to expand its
market reach. Given that Bestseller is the eight biggest retailer in the Asia-Pacific
region, the stake acquisition in Asos and Zalando can provide Povelson with
opportunities to network and get a platform to integrate his offline product brand with the
pureplay online retailer (Case Study, n.d).
From the investor perspective, investment in Zalando could have major challenges
especially if there are no real support opportunities for the firms to grow. Currently,
Zalando continues to operate with no profitability which indicates that there is a chance
that Povelson will lose his investment as well as his ability to gain profits through the
investment (FT, 2017). Therefore, there could be challenges of loss through any one of
the businesses. Secondly, given that Povelson has invested in both companies there
can be challenges linked to potential conflicts and therefore information on the inherent
operations and strategic directions or direct competitor directed strategies will not be
disclosed to him. This can create challenges as he may not have direct information on
how everyday operations are carried out. This can be potential disadvantage.

5.0. Conclusion
From the above analysis three major implications can be gained. Firstly, the competitive
advantage of Zalandos over that of Asos is largely linked to its more effective customer
engagement policy and ability to adapt to cross-cultural internet marketing. The
organisation is also able to expand its presence quickly across Europe through
established logistics. The focus on increasing margin of sales and revenue over profits
however requires more directed assessment of own-brand products and potential
expansion into other markets. This report also suggests that as market choices Zalando

could look at three countries including India, USA and Hungary (or Estonia) as potential
opportunities for growth. The choice of these countries is based on firm level factors of
ease of operations (e.g. Hungary), market factors of growing demand (e.g. India) and
opportunities for market hub (e.g. USA). An analysis of the investment by Povelson
shows that while investment in both Zalando and Asos provides him with opportunities
to be a part of a pureplay e-commerce sectors conflict of interest challenges will exist
due to the direct competition between the two firms. Therefore, this report contends that
understanding the major opportunities for future growth at Zalando requires a more
targeted investment opportunity.

6.0. References

Barney, J. B. (2014) Gaining and Sustaining Competitive Advantage. Pearson
Higher Ed.
Case Study, n.d.Zalando: How can online apparel retailer turn financial losses
into profits?. Case Study Text.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G. and Rose, E. L.
(2014) International Business. Pearson Australia.
FT, (2017). Make informed decisions. Become an FT subscriber. Retrieved
[Accessed 11th Jan 2018].
Garai, T. (2016). The Zalando Case Files: From Amazing Customer Experience
to Enormous Profit. Retrieved from:
amazing-customer-experience-enormous-profit/ [Accessed 15th Jan 2018].
Hendriksz, V. (2017). 5 reasons why Asos continues to be successful. Retrieved
be-successful/2017081825534 [Accessed 12th Jan 2018].
Hill, C.W., Jones, G.R. and Schilling, M.A. (2014) Strategic Management:
Theory: An Integrated Approach. Cengage Learning.
IBEF, (2017). E-commerce Industry in India. Retrieved from: [Accessed 8th Jan 2018].
IPC, (2018). State of e-commerce: global outlook 2016-21. Retrieved
ecommerce-figures-2017 [Accessed 10th Jan 2018].
Kulach, K. (2017). Here’s what made ASOS online store into a global
ecommerce giant. Retrieved from:
store-global-ecommerce-success/ [Accessed 14th Jan 2018].

Mathews, S., Bianchi, C., Perks, K. J., Healy, M. and Wickramasekera, R.
(2016), “Internet marketing capabilities and international market
growth”, International Business Review, Vol.25, No.4, pp.820-830.
Nagy, S. (2016), “E-commerce in Hungary: A Market Analysis”, Club of
Economics in Miskolc TMP, Vol.12, No.2, pp. 25-32.
Parhankangas, A. and Ehrlich, M. (2014), “How entrepreneurs seduce business
angels: An impression management approach” Journal of Business
Venturing, Vol.29, No.4, pp.543-564.
Reuters, (2017). Danish investor takes stake in German online retailer Zalando.
Retrieved from:
idUSBRE97C0AA20130813 [Accessed 13th Jan 2018].
Schu, M. and Morschett, D. (2017), Foreign market selection of online
retailers—A path-dependent perspective on influence factors. International
Business Review.
Singh, S., Singh, R. K. and Seth, N. (2017), “Ranking of critical success factors
for online retailing by TOPSIS approach”, International Journal of Productivity
and Quality Management, Vol.21,No.3, pp.359-374.
Smart Insights, (2016). Smart insights: Online brand strategy international
marketing zalandos explosive online growth infographic. Retrieved
marketing/zalandos-explosive-online-growth-infographic / [Accessed 10th Jan
Verhoef, P.C., Kannan, P.K. and Inman, J.J. (2015), “From multi-channel retailing
to omni-channel retailing: introduction to the special issue on multi-channel
retailing”, Journal of Retailing, Vol.91, No.2, pp.174-181.
Wallace, H., Pollack, M. A. and Young, A. R. (Eds.). (2015). Policy-Making in the
European Union. Oxford University Press, USA.