Zalando Doubles Revenue to €1.15bn – But Losses Also Up 50 Percent

By David Knight |

Zalando doubled its annual revenue to €1.15 billion in 2012 and claims to be breaking even in its core DACH (German-speaking) region – but the e-commerce giant has still seen overall losses increase by 50 percent to around €90 million, according to preliminary financial results. In 2011, revenue stood at €510 million and overall losses were €60 million.

The Rocket Internet-backed company, which specialises in selling shoes and fashion online, said it has attained a “balanced result” in its earnings before interest and tax (EBIT) in Germany, Switzerland and Austria, an area which contributes more than half of its revenue. The increase in losses is being put down to the massive investment into growth.

And growth has very much been the key word at Zalando recently, with an aggressive advertising campaign in German-speaking markets and the opening of “Europe’s biggest wardrobe,” a €170 million, 120,000 square metre logistics facility in Erfurt.

Berlin-based Zalando stated today in a release that it had “invested in 2012 in the development of new markets as well as the further expansion of its range, its own logistics and IT.”

This growth has seen Zalando become the first European company to generate an annual revenue of more than €1 billion in just fours years of operation as it has been one of the continent’s fastest-growing concerns.

Robert Gentz, founder and CEO of Zalando, said: “We are very proud of the outstanding results we have achieved as a team. This development reaffirms our business model and the trust that our investors place in us. Zalando is a true European success story.”

The increase in sales of 125 percent compared to 2011 was down to both growth in established markets such as Germany and the launch in seven new markets during 2012. “By expanding our busines into 14 European countries,” Gentz added, “we have laid the foundation for Zalando’s growth in the coming years.”

There is still massive pressure on Zalando to start making a profit, although the company points out that its EBIT margin has improved from -12 percent in 2011 to -8 percent a year later. But investors believe that the sheer size of what was once a startup, its success in the cutthroat e-commerce market and its belief in investing in the future will see it come good.

According to a report (quoted by Deutsche Startups) from Swedish investor Kinnevik, which directly and, through Rocket, indirectly owns about 25 percent of Zalando, the e-commerce platform has a generous returns policy as part of its business plan which results in a high average return rate of 50 percent. “This makes it very important to have a cost efficient and best in class logistic set up,” the report stated.

Zalando was founded in 2008 by Robert Gentz and David Sneider. More than 10 million people have ordered fashion items from Zalando and there is currently a total of 150,000 products from ore than 1,500 brands on sale.