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Zalando Fulfilment Solutions volumes grow 400% as it targets brand concerns with new features

Zalando

The number of items shipped through Zalando Fulfilment Solutions (ZFS) has grown 400% in the last year, Zalando announced, as it unveiled three new features designed to win over more brands. ZFS is a service launched in 2017 through which Zalando keeps a brand’s stock in its warehouse and ships it to the customer for a fee.

The fast fashion giant’s Q2 results presentation also revealed that the share of items sold via the partner programme that used ZFS grew 200%. Meanwhile, the number of ZFS partners grew 300% to over 100 in total.

Looking to expand its customer base further, the German retailer announced that it would add three new features to the ZFS proposition. The first was that it would begin serving Switzerland, which CFO David Schröder said on an investor call can be complex due to customs duties. This service is already being piloted.

He called the country a “very attractive market that has been complex to serve for many partners from their own logistics footprint”.

In addition, ZFS will now allow partners to shift remaining stock to Zalando’s discounted Zalando Lounge range, which the company said would increase stock flexibility and limit inventory risk. This will be piloted in the fourth quarter of the year.

Finally, ZFS is adding a multichannel option, meaning it is capable not only of serving orders for partner programme but also of fulfilling transactions in other areas such as brand’s own ecommerce channels. This will be piloted in the second half of 2019.

“It’s clear from [these numbers] that brands continue to be very much attracted by the ZFS proposition,” said Schröder on the call.

Schröder said more brands were signing up and current users were increasing their volumes, which he said was “strong proof that the proposition was already strong”.

He added that the three new features were an attempt to “serve the top three needs we hear from partners”.

“It will become even more attractive to put inventory in our warehouses…brands can also sell across multiple channels.”

The new features apparently aim to alleviate a range of concerns over the service’s impact on stock availability and flexibility, which were highlighted by investor firm UBS earlier this year.

UBS said in May that ZFS accounts for 30% of the value of goods sold on the site, a service launched in 2017 through which Zalando keeps the brand’s stock in its warehouse and ships it to the customer for a fee. The German retailer had projected that ZFS would prevent its margins being eroded by higher fulfilment costs per basket by allowing it to ship wholesale items alongside partner programme items.

However, UBS said partners were concerned about splitting their inventory pools for ZFS. Sending stock to Zalando warehouses and paying per item costs would create less flexibility in stock allocation, leaving the brands vulnerable to potentially losing sales and seeing their goods sold at a discount on Zalando.

The ability to fulfil their own ecommerce orders using stock allocated to ZFS as well as access to Zalando Lounge should add more flexibility to the service.

The company is planning to build a new fulfilment centre in the Netherlands as it looks to support ambitious growth targets in Western Europe. Strategically located next to the A12 highway, the site at Bleiswijk near Rotterdam will serve customers in the Netherlands, Belgium, Luxembourg, France, Spain and the UK.

ZFS