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Zalando: Europe's Fashion Platform Revolution
I. Introduction & Episode Roadmap
Picture Berlin in late 2008. Lehman Brothers has just collapsed. Credit markets are seizing up. The world economy is teetering on the edge of the worst recession in living memory. And somewhere in a cramped apartment on TorstraĂźe, two university friends in their mid-twenties are stuffing shoe boxes for their brand-new e-commerce venture. Their friends think they're crazy. Their investors have their doubts. But Robert Gentz and David Schneider have a hunch that might just pay off.
Today, Zalando stands as Europe's leading online multi-brand fashion destination. The company is building a pan-European ecosystem for fashion and lifestyle e-commerce, operating along two growth vectors: Business-to-Consumer (B2C) and Business-to-Business (B2B). In B2C, its two brands—Zalando and the recently acquired ABOUT YOU—provide an inspiring, high-quality multi-brand shopping experience for fashion and lifestyle products, reaching more than 61 million active customers across 29 markets.
The numbers tell a story of quiet dominance. In 2024, GMV increased by 4.5%, reaching 15.3 billion euros, while revenue grew by 4.2% to 10.6 billion euros. The company commands approximately 12% market share in European online apparel sales. With 12 fulfillment centers sprawling across the continent and partnerships with over 7,000 brands, Zalando has become the infrastructure layer for fashion e-commerce in Europe—a position that would have seemed like fantasy when those first shoe boxes were shipped from a Berlin flat.
The central question: How did two university friends selling shoes from a Berlin apartment during the 2008 financial crisis build Europe's dominant fashion ecosystem? The answer involves understanding the Rocket Internet playbook, the alchemy of blitzscaling during a recession, a pivotal transformation from retailer to platform, and now, the race against ultra-fast fashion giants from China.
This is the story of a clone that outgrew its model, a company that survived when hundreds of similar ventures failed, and an ecosystem play that positions Zalando as perhaps the only European tech company with the scale to compete against both American platforms and Asian disruptors.
II. The Rocket Internet & Samwer Brothers Context
To understand Zalando, you must first understand the machine that built it.
Rocket Internet was founded in Berlin in 2007 by three brothers: Marc, Oliver, and Alexander Samwer. The Samwer brothers grew up in Cologne, Germany in the 1970s and 80s. Their father was a successful businessman who no doubt influenced their capitalistic and competitive nature.
Their first venture established the template. In 1999, Oliver Samwer and his brothers started Alando, which was an eBay clone. His professor from university, Horst Albach, provided them the seed funding. A little over hundred days after starting Alando, eBay acquired their startup for $43 million. Samwer often cites that this quick sale was one of the biggest mistakes of his career.
After eBay, the brothers followed up with Jamba, a mobile ringtone company. In 2000, Oliver and his brothers along with Ole Brandenburg and Max Finger founded ringtone maker Jamba. Remember that song Crazy Frog that was stuck in everyone's head? Yeah, Jamba was behind it. In four years, they scaled Jamba across markets beyond Germany and eventually sold the company to Verisign for $273 million.
With two successful exits under their belts, the brothers had proven their methodology: identify successful American internet businesses, clone them for European or emerging markets, execute faster and more aggressively than anyone else, and either build market dominance or force an acquisition.
The company has been criticized for its "copycat" strategy of founding startups which replicate the business models of other established, successful companies. In response, Rocket's founders, particularly Oliver Samwer, have defended the strategy as a legitimate "fast follower" model, emphasizing that superior execution in new geographies outweighs invention. In a 2014 statement ahead of the company's IPO, Samwer argued that all successful ideas are borrowed to some degree, positioning Rocket as an efficient builder rather than a thief.
Oliver Samwer once called himself the "most aggressive guy on internet on the planet." In the same email he stated that: "I will die to win and I expect the same from you!"
This intensity created a formidable company-building machine. Rocket invested heavily in CityDeal and helped them scale quickly to 16 countries in just five months. At this point, Groupon had no choice but to acquire them for $100 million. Backed by the success, Rocket has incubated over 100 companies over the last 15 years imitating the likes of Airbnb (Wimdu), Uber (EasyTaxi), Pinterest (Pinspire), to even Square (Payleven) and Stripe (Paymill).
In 2008, Rocket Internet founded Zalando, emulating the business model of US online retailer Zappos.com.
The name itself tells the story. "Zalando" is a tribute to Alando, the eBay-clone of the Samwer brothers. The "Z" was inspired by Zappos, the model for the new venture. In those two syllables lives the entire Samwer philosophy: learn from what works, acknowledge your inspirations, then execute until you dominate.
For investors, the Rocket context matters because it explains Zalando's DNA: the relentless focus on execution, the willingness to burn cash for growth, the obsession with logistics and operations, and the understanding that in e-commerce, scale isn't just an advantage—it's the only advantage that matters.
III. Founding Story: Shoes from a Berlin Apartment (2008-2010)
The story of the rise of the business economist from Düsseldorf Robert Gentz to becoming the boss of the e-commerce success Zalando starts on a beach in Guatemala. Gentz was vacationing there at the beginning of 2007 and read in a newspaper that StudiVZ was sold to Holtzbrinck Publishers for a giant €85 million. "I found it fascinating," Gentz later recalled. He asked himself, "How can a website be so valuable? What is valuable about it?"
Gentz could not forget the deal. He wanted to found his own internet company. His situation could hardly be better: Gentz was 23 at the time with a degree from the WHU in his pocket along with internships at Boston Consulting Group and Morgan Stanley. He also had a love for Latin America, which he shared with his friend from university David Schneider. A few months later they founded their first startup in Monterrey, Mexico.
That first venture, Unibicate, was a social network for Latin America. They even went to Oliver Samwer who responded to their idea with: "Ridiculous!" And Samwer was right. Programmers for Unibicate were hard to find and the money from investors became scarce. In 2008, Robert Gentz and David Schneider ended the project.
The failure left them stranded. At this point, both were living for eight months with no salary. The failed founders were so broke that they did not have enough money to buy a plane ticket back to Europe. Once again, they turned to Oliver Samwer—and this time with success. Samwer paid their return flight for them. In return, they both worked for many months at his price comparison portal tarifas24.
A short time later Gentz and Schneider were already looking for their next idea. They did not let themselves be discouraged by their failure. "It was very clear to me that we should not try to found another social network," explains Gentz. The model was "hardly predictable and difficult to scale." They began their second attempt back in Germany: an online shoe store that was modeled after Zappos in the U.S., which was later acquired by Amazon.
Zalando was founded in 2008 by Robert Gentz and David Schneider in Berlin with investment capital from the three Samwer brothers.
Their timing seemed catastrophic. In 2008, the university friends teamed up to launch the online shopping platform just days before the financial crisis hit. The global economy was imploding, credit was evaporating, and consumer spending was about to crater. What kind of madness was this?
But the founders understood something that others missed. They aimed to solve a fundamental problem: The founders' private cell phone numbers became customer hotlines, and they carried the packages to the post office themselves. By offering free delivery and up to 100-day right of return, Zalando set new standards in online retail.
This wasn't mere generosity—it was strategic genius. European consumers were hesitant to buy shoes online because they couldn't try them on first. The 50% return rate that would later make headlines wasn't a bug; it was a feature. By eliminating the risk of buying shoes sight-unseen, Zalando was essentially offering consumers a risk-free home try-on service.
The customers liked it—and the team grew rapidly and soon needed new office space. Finally, the adventure got under way and Zalando conquered its first international markets. Following its successful launch in Austria and Switzerland, The Netherlands became the first non-German-speaking market in 2010.
The first lesson emerged quickly. The TV advertising campaign "scream with joy!", which had proven a big hit in Germany, was not at all well received by Dutch audiences. Localization wasn't optional—it was essential.
Robert Gentz, David Schneider and Rubin Ritter, who joined in 2010, are still managing the company. Zalando today, however, has little in common with the startup that began in 2008.
Rubin Ritter's addition was crucial. As a third co-CEO, he brought complementary skills that allowed the founding team to divide responsibilities effectively. Gentz focused on strategy and technology, Schneider on marketing and the customer proposition, and Ritter on finance and operations. This triumvirate would guide Zalando through its growth phase and IPO.
The founding story contains key lessons for investors: the founders had relevant experience (even failure), they had learned from a master operator (Samwer), they were solving a genuine consumer problem, and they were willing to accept painful unit economics to build trust. Most importantly, they chose a countercyclical timing that would prove advantageous—when competitors were retrenching, Zalando was investing.
IV. Blitzscaling Across Europe: The Growth Years (2010-2014)
The years between 2010 and 2014 represent Zalando's blitzscaling phase—a period of relentless expansion that would transform a shoe retailer into a continental fashion powerhouse.
The company expanded its product categories beyond shoes rapidly. What started as a Zappos clone began evolving into something closer to a full-service fashion retailer. Revenue grew from €6 million in 2009 to over €1 billion by 2012—a compound growth rate that defied conventional e-commerce metrics.
The aggressive marketing was impossible to miss. Television advertisements featuring people screaming with joy upon receiving their Zalando packages became cultural touchstones in Germany. The "Schrei vor Glück" (Scream with happiness) campaign wasn't subtle, but it was effective. Marketing costs reached as high as 25% of revenues in 2010—a staggering investment that built brand awareness at unprecedented speed.
Zalando announced its return rate is about 50%. Returns are common in Germany, where many shoppers are invoiced for their online purchases, meaning they don't often pay until they receive, try and on their purchases.
This return rate horrified traditional retail analysts. A 50% return rate seemed like economic suicide. But Zalando understood something crucial: in fashion, returns aren't a failure of the sales process—they're part of the customer experience. German consumers, in particular, were accustomed to "invoice" payment methods that didn't charge until after returns were processed.
The fulfillment infrastructure grew to match the ambition. Zalando invested heavily in warehouse capacity, doubling its warehouse capacity in a single year. Each new fulfillment center brought faster delivery times, which improved customer satisfaction, which drove more sales, which justified more investment.
Zalando was accumulating losses throughout this period. The company wouldn't turn a profit until 2014—six years after founding. This wasn't accidental. The Rocket Internet philosophy prioritized growth over profitability, betting that scale would eventually convert to sustainable margins.
The decision to embrace agile principles in 2011 reflected a management team that understood they were building a technology company, not just a retailer. As the engineering organization grew, Zalando adopted practices from the tech world—autonomous teams, rapid iteration, and a culture of experimentation—that would later prove essential to the platform pivot.
By 2013, Zalando was operating in 15 European markets and had established itself as the continent's leading pure-play online fashion retailer. The company now employed over 5,000 employees and had €1.8 billion in turnover in 2013—up by more than 50%.
The growth wasn't without controversy. The aggressive expansion meant cutting corners in some areas—working conditions in fulfillment centers drew criticism, and the high-pressure culture took its toll on employees. But the strategy was working. Zalando was building something that would be very difficult for competitors to replicate: a pan-European logistics network, a trusted consumer brand, and data on millions of fashion purchases.
For investors, this period demonstrates both the opportunity and the risk of blitzscaling. Zalando consumed vast amounts of capital but emerged as the undisputed European leader. Slower competitors either failed or were relegated to niche positions. The lesson: in e-commerce, being fast enough to win matters more than being efficient enough to profit—as long as you can survive to reach scale.
V. The IPO: Going Public in Frankfurt (2014)
Zalando SE listed on the Frankfurt Stock Exchange on 1 October 2014. The timing was deliberate—exactly six years to the day after the company was founded.
Germany hadn't had a big technology IPO since 2000 and Zalando represents the country's most significant e-commerce initial share sale to date.
European online fashion retail giant Zalando has published its prospectus for its upcoming IPO and set the price range to 18 – 22.5 euros. This gives the company a valuation of roughly 5.1 billion euros ($6.6 billion) at the high end of that range.
The path to profitability came just in time. Zalando confirmed the first-half results of sales rising by 29.5 percent to 1.047 billion euros, producing a small net profit, its first ever. In the prospectus it also reported first-half earnings before interest and taxes of 3.6 million euros, compared with a loss of 74.7 million euros in the first half of 2013.
Germany-based online fashion retail giant Zalando went public at a price of 21.5 euros per share, which is close to the highest end of the range. This gave Zalando an equity value of 4.9 billion euros or approximately $6.2 billion pre-money.
The shareholder structure at IPO revealed the company's backing. All existing shareholders planned to remain fully invested, with the listing made up entirely of new, primary shares. According to the company's prospectus, Swedish investment firm Kinnevik was Zalando's biggest shareholder with a post-IPO stake of around 31.6 percent, followed by a 14.8 percent stake held by the investment vehicle of Germany's Samwer brothers.
In Germany's largest initial public offering in more than a decade, Zalando shares opened at 24.10 euros, or $30.37 at current exchange, 10.8 percent over the initial issue price of 21.50 euros. However, the market was expecting a stronger reception, and Zalando set the initial price near the top end but not at the top of its range, reportedly concerned that too high a price in a possibly overheated technology-shares market could do away with any first-day-trading pop. That pop didn't materialize.
Membership in the MDAX means Zalando will now be traded in the German Stock Exchange's second most important equity index.
The IPO was a validation of the model, even if the first day's trading was muted. Zalando had accomplished what dozens of European e-commerce startups had attempted and failed: building a profitable, scalable business that could stand as a public company.
Zalando performed particularly well in the German-speaking parts of Europe, known as the DACH region, with revenues growing by more than 21 percent to 594 million euros (roughly 57 percent of total sales). The company is only mildly profitable as a whole, but profitability in the DACH region has ballooned to 4.6 percent in H1 2014.
This geographic concentration—nearly half of revenues from DACH—would remain a feature of Zalando's business for years to come. The home market dominance provided a profitable core that subsidized expansion into less mature markets.
For investors, the IPO established Zalando as Europe's pre-eminent fashion e-commerce company. The valuation of roughly €5 billion seems modest in retrospect, given the subsequent growth trajectory. More importantly, the IPO provided capital for the next phase: the transformation from retailer to platform.
VI. The Platform Pivot: From Retailer to Ecosystem (2015-2018)
The Partner Program: First Steps Toward Platform
Following the IPO, Zalando's leadership recognized a fundamental truth: retail margins are structurally challenged, but platforms can build defensible moats. Since 2013, following examples of tech companies from the East, especially China, Zalando transitioned into a European digital platform. Emulating Chinese companies, Zalando set off into remaking itself into a digital shopping mall, allowing fashion houses and retailers to make sales via the Partner Program as well, often with limited input from Zalando.
By the end of the first quarter of 2016, Zalando had enrolled more than 150 partners, including brands like Adidas and Superdry. To strengthen its ability to digitalize this partner stock and connect it to retail channels, Zalando acquired Tradebyte Software GmbH in May 2016.
Tradebyte is among the leading European providers of marketplace supply-side integration solutions for retailers and brands, especially in the fashion and lifestyle sectors. This acquisition was strategically important: Tradebyte's technology enabled brands to connect their inventory to multiple sales channels, making it easier for partners to integrate with the Zalando platform.
The Partner Program represented a fundamental shift in Zalando's business model. Rather than buying inventory wholesale and reselling it (the traditional retail model), Zalando increasingly enabled brands to sell directly to consumers through its platform. This created several advantages: reduced inventory risk, higher margins on partner sales, and access to a broader assortment.
The Zalando Partner Program is a strategic initiative designed for brands and retailers who want to expand their business through the Zalando marketplace, maintaining full control over assortment, prices and stock. This program allows partners to sell their products directly on the platform, independently managing their offers and commercial strategies.
In June 2015, the fashion trade fair "Bread & Butter" was acquired by Zalando, with the intention to open the globally important event to a broader audience as a "fashion festival." The first edition of "Bread & Butter by Zalando" took place in 2016, hosting 20,000 visitors at Arena Berlin.
Zalando announced the discontinuation of "Bread & Butter" due to a shift in strategy two years later. In March 2017, Zalando acquired Kickz, a German company. At the time, Kickz owned 15 shops across Germany, all specializing in basketball footwear.
Connected Retail: Bridging Online and Offline
The e-tailer launched Connected Retail in October 2018, after a test in 2016 with the Adidas Originals and Performances flagships in Berlin. After Germany, the tool was successively deployed in the Netherlands, Denmark, Poland, Spain, Sweden, Norway, Finland and Austria.
Connected Retail offers independent retailers with physical stores a way to accelerate their business and enter the multi-channel era with ease. Launched by Zalando in 2018 and already deployed in 12 countries, Connected Retail arrived in France, Spain and will soon be available in Italy.
This was a critical innovation. By opening up the Zalando platform, stores can connect their stock to the e-commerce site, take orders and ship the goods directly from their physical stores. A software enables brands to process all orders promptly and the model will support the launch of same-day or next-day deliveries. "Our partners' offline stores are often closer to the customer than a central warehouse," Keller explained.
European fashion e-tailer Zalando looked to Alibaba and its New Retail concept for inspiration with its new "Connected Retail" platform. Zalando set forth a plan to launch 600 physical stores by the end of the year, which will connect in-store inventory to the ecommerce site, allowing shoppers to order online and have purchases delivered from the store rather than a warehouse for a speedier delivery process. "Platforms such as Alibaba and JD.com have largely dissolved the boundaries between online and offline," said Zalando VP of direct-to-consumer Carsten Keller.
In 2018, Zalando launched Beauty in Germany, Poland, and Austria and opened a beauty concept store in Berlin offering a regularly changing range of beauty products. In February 2018, Zalando expanded its collaboration with physical retailers in Germany. In June 2018, Zalando expanded its operations to Ireland and Czechia.
By 2018, Zalando had completed its first major strategic transformation. The company was no longer just a retailer—it had become a platform connecting brands, retailers, and consumers. The three-pillar approach (wholesale, Partner Program, Connected Retail) gave Zalando multiple ways to monetize its customer relationships while reducing its own capital intensity.
For investors, the platform pivot answered a crucial question: could Zalando build a sustainable business model with defensible margins? The early evidence was positive, but the real test would come with the pandemic.
VII. COVID-19 Pandemic: Acceleration & Challenges (2020-2022)
Digital Acceleration Under Pressure
The pandemic that swept across Europe in early 2020 created both crisis and opportunity for Zalando. Physical retail shut down overnight. Consumers, confined to their homes, turned to online shopping with unprecedented intensity.
Since the beginning of the coronavirus crisis in Europe, Zalando has been carefully considering how it can best offer solutions. The fashion industry, and physical retailers in particular, have been heavily affected by social distancing measures and lockdowns in several countries. 87 percent of European fashion sales are made offline according to a 2019 Statista report. What this means for many physical stores is abruptly reduced footfall, increased financial distress and a situation, which for the time being, is uncertain.
Connected Retail, launched just two years earlier, suddenly became essential. With the Connected Retail program, physical retailers can connect with the Zalando platform and sell their products directly to our online customers. "Currently, more than 1,500 brick-and-mortar stores in Germany and the Netherlands are connected to our platform, where they generate a relevant share of their revenue. Due to the urgency of the situation for many, we have accelerated our efforts to help physical stores: we're waiving commission and shifting to a weekly pay-out schedule."
According to figures presented by Zalando, the number of shops connected via the tool multiplied by a factor of no less than 4.8 in 2020. Crucially, sales for the stores linked to Zalando via Connected Retail have reportedly multiplied by a factor of 12.7 between 2019 and 2020.
By the end of 2020, some 2,400 physical stores had linked up their inventory to Zalando's website via the latter's Partner Programme. Numbers burgeoned at the start of 2021, with an extra 3,400 stores joining the programme by the end of February.
The results were striking. In 2020, Zalando recorded annual sales of €7.6 billion, an increase of 25% year-on-year.
Leadership Transitions
The pandemic period also brought leadership changes. In December 2020, co-CEO Rubin Ritter announced that he would be stepping down next year, two years before the end of his contract, to allow his wife to pursue her professional ambitions.
This announcement was notable both for its personal transparency and for what it said about Zalando's culture. Ritter's departure—framed around supporting his spouse's career—was unusually candid for a European corporate setting.
In October 2020, a German works council with 31 members was elected for the first time at Zalando. The establishment of formal worker representation reflected Zalando's evolution from startup to mature European corporation.
In June 2021, the company announced that it would give all of its 14,500 workers an extra 5 days off work in August, in recognition of their work throughout the coronavirus pandemic.
In September 2021, the DAX was expanded to 40 companies, with Zalando becoming part of the DAX. This inclusion in Germany's premier stock index represented a symbolic milestone—Zalando was now considered among Germany's most important public companies.
Post-Pandemic Normalization
In 2022, Zalando generated revenue of 10.3 billion Euro, with roughly 16,000 employees.
The post-pandemic period brought challenges. Consumer behavior normalized, with some shoppers returning to physical stores. The cost-of-living crisis in Europe pressured discretionary spending. Zalando's growth rates moderated from pandemic peaks.
But the company had emerged from COVID-19 in a stronger competitive position. The platform infrastructure built during the crisis—particularly the expanded Connected Retail network—would prove durable. More importantly, physical retailers who had integrated with Zalando during lockdowns often remained on the platform even after stores reopened.
For investors, the pandemic period validated Zalando's platform strategy. The company's ability to rapidly scale Connected Retail demonstrated operational agility. The inclusion in the DAX signaled institutional recognition. But the moderation of growth rates post-pandemic also raised questions about the long-term trajectory.
VIII. The About You Acquisition: Consolidation Play (2024-2025)
The Deal
In December 2024, Zalando announced the boldest move in its history. The About You acquisition was completed in early July, valuing Zalando's smaller rival at €1.13 billion.
About You, launched in 2014 as a subsidiary of the Otto Group, had built a strong position among younger consumers with over 12 million active customers. The Hamburg-based company represented both a competitor and a natural complement to Zalando's ecosystem.
On 1 July 2025, the European Commission granted merger control clearance for the transaction. Zalando and ABOUT YOU announced that they had completed their strategic combination, allowing them to serve customers and partners across Europe better.
Zalando acquired 91.45% of ABOUT YOU's share capital (excluding treasury shares). Zalando still has the firm intention as a next step to carry out a squeeze-out of the remaining minority shareholders of ABOUT YOU.
With the exclusion of the remaining minority shareholders and the delisting of the shares of ABOUT YOU Holding SE, Zalando and ABOUT YOU have legally completed the final step of the strategic business combination. With the registration in the commercial register of the Hamburg Local Court on 6 November 2025, the so-called merger squeeze-out became effective.
Strategic Rationale
With their complementary Business-to-Consumer and Business-to-Business offerings, the two founder-led companies will build a pan-European ecosystem for fashion and lifestyle e-commerce and cover a larger share of the European fashion and lifestyle e-commerce market.
The acquisition came amid intensifying competition. Zalando is investing heavily in its European logistics network, which it has also opened up to partners as it seeks to drive growth amid faltering consumer spending and competition from fast-fashion retailers such as Chinese rival Shein.
Zalando, including ABOUT YOU, is expected to grow GMV and revenue until 2028 at a 5-year compound annual growth rate of between 5% and 10%. The combined group expects an adjusted EBIT margin in 2028 in the corridor of 6% to 8%, yielding a significant increase in absolute profit by creating a combined group at a larger scale.
Together, Zalando and ABOUT YOU aim to cover a larger share of the 450-billion-euro European fashion market in the long term.
The Dual-Brand Strategy
The combination brings together two founder-led teams with a strong cultural fit, an entrepreneurial track record, and highly complementary capabilities.
Although the EBIT synergies from the merger are estimated at 100 million euros per year starting in 2029, both platforms will, according to Zalando, retain their own identity.
This dual-brand approach is notable. Rather than absorbing About You into Zalando, the company plans to operate both brands independently, targeting different customer segments. Zalando serves a broader, more mainstream audience, while About You focuses on younger, fashion-forward consumers.
"Zalando and ABOUT YOU are proof that Europe can produce growth companies for the digital age," said Gentz. "We are excited about teaming up for the next stage of our joint journey to deliver exciting innovation and sustainable growth at scale across Europe."
For investors, the About You acquisition represents a bet on European consolidation. In a market increasingly pressured by both American giants (Amazon) and Asian ultra-fast fashion (Shein, Temu), scale becomes essential for survival. The combined entity has the customer base, logistics infrastructure, and technology capabilities to compete at continental scale.
IX. The Modern Era: AI, B2B & The Combined Group (2025)
The Ecosystem Strategy
Zalando SE expects its growth to accelerate in 2025 after a strong 2024 financial performance, driven by the successful execution of its strategy to build the leading pan-European fashion and lifestyle e-commerce ecosystem along two growth vectors B2C and B2B. "Our ecosystem strategy is progressing well and is our exciting new North Star. It has already contributed to a strong financial performance in 2024, and we now accelerate our execution efforts and invest to capture future growth," said Robert Gentz, Zalando co-CEO.
In B2C, Zalando's two brands Zalando and ABOUT YOU provide an inspiring, high-quality multi-brand shopping experience for fashion and lifestyle products, reaching more than 61 million active customers across 29 markets. In B2B, they offer a unique e-commerce operating system with ZEOS, Tradebyte and SCAYLE, leveraging their logistics infrastructure, software, and service capabilities to support brands and retailers in managing and scaling their entire e-commerce business across Europe.
AI-Driven Discovery
The most visible innovation in 2025 has been the AI-powered discovery feed. Zalando's AI powered discovery feed will be expanded to 16 more markets, making shopping more immersive and entertaining from the moment customers open the app. Now live in 22 markets, the new feed transforms the shopping journey from the moment customers open the app, enabling them to easily scroll, swipe, and play through content personalised to them.
The AI-driven discovery feed first went live in six countries in July 2025. Following this month's expansion, the feature is now active in 22 markets. The personalized feed in the app displays clothing, brands, and content based on individual preferences and constantly adapts.
The feed offers curated lifestyle boards, personalized product recommendations, livestream shopping, inspirational campaign stories, and editorial content from Zalando, brands, and creators. "From the moment users open the Zalando app, shopping becomes more immersive and entertaining," Zalando promises about its "all-in-one, easy-to-scroll personal feed."
"With the option to share boards, we are making customers visible to one another on Zalando for the first time. In doing so, we are digitising an everyday, analogue experience: people asking each other for advice and sharing their outfit recommendations," said Anne Pascual, SVP Product Design at Zalando. This is a milestone: "We are going beyond the traditional e-commerce model and are also responding to a profound shift in shopping behaviour."
ZEOS: The B2B Operating System
Another milestone in B2B was the launch of the ZEOS Shopify application, which opens up ZEOS multi-channel fulfilment to Shopify's massive merchant base in Europe, providing them with benefits such as faster onboarding, reduced operational complexity, and cost savings. Alongside the collaboration with ABOUT YOU's SCAYLE unit, it reflects Zalando's ongoing commitment to building its software ecosystem.
Marks and Spencer has extended its partnership with Zalando through a new agreement with ZEOS, the fashion platform's B2B logistics unit, to manage its entire direct-to-consumer online operation in continental Europe. The move will cover 21 markets. ZEOS, created in 2023 within Zalando SE, provides logistics and technology tools that enable brands and retailers to manage multi-channel e-commerce operations across Europe. Its infrastructure includes 12 logistics centres, around 20 returns sites, and more than 40 local transport providers.
While B2C growth is vital, Zalando's B2B segment—ZEOS—represents a transformative opportunity. This e-commerce operating system, built on 16 years of logistics and technology expertise, enables brands and retailers to manage multi-channel operations across Europe. ZEOS is already a €900 million business and is projected to become a multi-billion-euro segment by the mid-2020s.
Financial Performance
During the second quarter of 2025, gross merchandise volume increased by 5% to €4.1 billion as revenue grew by 7.3% to €2.8 billion. Adjusted EBIT was also up, increasing to €186 million from €172 million a year earlier.
Within B2C, Zalando increased its number of active customers by 6.1% to a new high of 52.9 million.
In terms of outlook, Zalando has upped its full-year guidance after adjustments following the completion of its acquisition of rival platform About You. Zalando now expects GMV of between €17.2bn and €17.6bn for the 2025 financial year, while revenue is expected to be between €12.1bn and €12.4bn. The group's adjusted EBIT is anticipated to reach between €550m and €600m.
For investors, 2025 represents the first year of the combined Zalando-About You entity. The integration challenges are real, but the strategic logic is compelling: scale to compete, diversify across customer segments, and build a B2B infrastructure business that generates recurring revenue independent of consumer cyclicality.
X. Business Model Deep Dive: The Three-Pillar Strategy
How Zalando Makes Money
Zalando's business model has evolved from simple retail to a complex ecosystem with multiple revenue streams. Understanding these mechanics is essential for assessing the company's long-term value creation potential.
There are three models Zalando offers to partners that connect them to around 50 million customers across 25 markets. They offer a curated, quality platform and a highly attractive multi-brand environment. To ensure quality and brand-safety promises, they only invite brands they know customers will love. With the Wholesale partnership model, brands leverage Zalando as a powerful distribution channel while enabling elevated experiences for customers. They work to build assortments, and as the legal stock owner, Zalando takes care of order and payment processing, logistics, and customer service.
1. Wholesale: Zalando purchases products from brands and resells them directly on its platform. This is the traditional retail model—Zalando takes inventory risk but captures the full retail margin.
2. Partner Program: Zalando is Europe's leading fashion platform with access to more than 50 million active customers across 25 European countries through its marketplace model, the Partner Program. Partners remain in the driver's seat and set their own prices, track real-time performance at any time, and retain ownership and control over assortment, branding, marketing and logistics.
3. Connected Retail: With Connected Retail, brick-and-mortar stores have access to millions of online customers and benefit from added visibility and sales. Stores set up an export of their inventory data to Zalando's system. The Connected Retail Tool prints all shipping documents automatically. Zalando processes payments, deducting commission and transferring the revenue.
Unit Economics and Margin Structure
The evolution from wholesale to platform has meaningful implications for profitability. Wholesale generates higher revenue per transaction but requires capital for inventory. Partner Program and Connected Retail generate lower revenue per transaction (commission only) but require minimal capital.
The adjusted EBIT margin rose from 3.5 percent in 2023 to 4.8 percent in 2024, supported by strong operational efficiencies and a significantly higher B2C gross margin, which saw a year-on-year increase of more than 2 percentage points to 43.5%.
The gross margin improvement reflects the ongoing shift toward partner-based models. As Partner Program and Connected Retail grow as a percentage of GMV, capital intensity decreases while margins improve.
The Logistics Moat
ZEOS Fulfillment lets companies manage their multi-channel sales using one shared stock pool, one carrier network, and one control panel. It now serves 12 fulfillment hubs and 20 returns centers, linked to over 40 carriers across 23 European markets. Whether a product is listed on Zalando, NEXT, or About You, it all runs through the same system.
This infrastructure represents billions of euros in invested capital and years of operational learning. Any competitor attempting to replicate Zalando's capabilities would need to make similar investments—a formidable barrier to entry.
The Free Returns Philosophy
Zalando offers free delivery and returns with a return policy of up to 100 days. This generous policy, while costly, serves multiple purposes: it eliminates consumer risk, builds trust, and positions Zalando as the default destination for fashion shopping.
The high return rate (approximately 50%) is managed through sophisticated logistics and, increasingly, through technology that helps customers choose the right size and style before purchase.
For investors, the key insight is that Zalando is transitioning from a capital-intensive retail model to a capital-light platform model. The Partner Program, Connected Retail, and ZEOS represent the future—businesses where Zalando captures value from infrastructure and customer relationships rather than inventory ownership.
XI. Playbook: Business & Investing Lessons
The Clone-to-Leader Strategy
Zalando demonstrates that starting as a copy is not disqualifying if execution exceeds the original. The company began as a Zappos clone but built capabilities—pan-European logistics, platform infrastructure, B2B services—that the original never developed.
The key insight: copying a business model is easy, but building operational excellence is hard. Zalando's value came not from the idea but from the execution.
Blitzscaling in a Crisis
Launching in 2008, just days before the financial crisis hit, seemed like terrible timing. Instead, it proved advantageous. Competitors were retrenching, marketing costs were lower, and talent was available. The countercyclical investment paid off.
Lesson for investors: the best time to build may be when others are retreating.
The Platform Pivot
"With their tremendous focus on the needs of customers and partners, David and Robert transformed Zalando from a startup selling flip-flops online out of a flat in Berlin into a leading European e-commerce company."
Knowing when to transform is crucial. Zalando recognized that retail margins were structurally challenged and pivoted toward platform economics before it was forced to do so. The Partner Program and Connected Retail represented proactive evolution, not reactive scrambling.
Logistics as Moat
The 12 fulfillment centers across Europe represent a moat that cannot be quickly replicated. This infrastructure enables faster delivery, lower costs, and services (like Connected Retail) that smaller competitors cannot match.
Free Returns as Trust Builder
The 100-day return policy seems economically irrational until you understand its strategic purpose. By eliminating risk, Zalando made online fashion shopping comfortable for hesitant consumers. The returns are a feature, not a bug.
Local First, Then Scale
Zalando performed particularly well in the German-speaking parts of Europe, known as the DACH region. Nearly half of revenues still come from Germany, Austria, and Switzerland. This geographic concentration provided a profitable base that funded expansion.
Founder Longevity
Zalando founders Robert Gentz and David Schneider will continue to lead the company as Co-Chief Executive Officers. The Supervisory Board extended their contracts for another term of four years until December 2027.
Founder-led companies often outperform because the founders have aligned incentives, deep knowledge, and long-term orientation. Zalando has maintained founder leadership for 17 years.
Growth with Discipline
2024 GMV and revenue came in both in the upper half of the guidance, with 4.5% and 4.2% growth, respectively. Adjusted EBIT reaches 511 million euros, up from 350 million euros a year earlier, and surpassing the updated guidance for 440-480 million euros.
Since the IPO in 2014, Zalando has delivered strong top-line growth at an annualized rate of 21% to reach 15.3 billion euros of GMV in 2024—whilst at the same time generating attractive levels of profitability through the cycle.
XII. Competitive Landscape & Investment Analysis
Porter's Five Forces Analysis
Threat of New Entrants: Medium While e-commerce has low technical barriers, Zalando's pan-European logistics infrastructure, brand recognition, and customer data create significant competitive advantages. New entrants can compete locally but struggle to match continental scale.
Supplier Power: Low to Medium Fashion brands need distribution, and Zalando offers access to 50+ million customers. However, large brands like Nike and Adidas have leverage and can negotiate favorable terms. The Partner Program increases brand power by letting them control pricing.
Buyer Power: High Consumers have many options for fashion purchases—both online and offline. Price transparency and easy comparison shopping empower buyers. Zalando counters this through service quality, convenience, and loyalty programs.
Threat of Substitutes: High Consumers can buy directly from brand websites, visit physical stores, shop on Amazon, or use emerging platforms like Shein. The substitution threat is real and intensifying.
Competitive Rivalry: High Zalando competes with Amazon Fashion, ASOS, Shein, Temu, H&M's online operations, and numerous local players. According to Coresight Research, Shein is the largest fast-fashion retailer worldwide with a market share of 18%, followed by Inditex (owner of Zara, Massimo Dutti, and other brands) with 17% and H&M with a 5% share.
Hamilton Helmer's Seven Powers
Scale Economies: Zalando benefits from significant scale advantages in logistics, technology, and marketing. Fixed costs are spread across €15+ billion in GMV.
Network Effects: Limited direct network effects, but the Partner Program creates a two-sided marketplace dynamic—more brands attract more customers, and more customers attract more brands.
Counter-Positioning: Zalando's platform model differs from traditional retailers who cannot easily replicate the approach without cannibalizing their wholesale business.
Switching Costs: Moderate for consumers (loyalty programs, saved preferences), higher for Partner Program brands who have integrated with Zalando's systems.
Branding: Strong brand recognition in Europe, particularly in German-speaking markets. The brand connotes convenience, selection, and fashion credibility.
Cornered Resource: The European logistics infrastructure—12 fulfillment centers, 20 returns sites, 40+ carrier partnerships—represents a cornered resource that took years and billions of euros to build.
Process Power: Sophisticated operations in logistics, returns processing, and increasingly in AI-driven personalization represent accumulated know-how that competitors cannot easily replicate.
The Shein Challenge
It's clear from the data that Shein is increasingly outgrowing its competition. While Zara's and H&M's online revenues have declined slightly since 2022, Shein continues its upward climb.
Ultra-low prices are integral to the success of the business model. Shein's average SKU price of $14 is significantly lower than H&M's $26 and Zara's $34. Turnaround times from trend capture to product availability are also condensed: Shein aims for 10 days, under half the 21-day minimum elsewhere.
Shein represents an existential competitive threat—a Chinese ultra-fast fashion player with dramatically lower costs, faster time-to-market, and aggressive social media marketing. Zalando's response combines several strategies:
- Quality differentiation: Positioning as a premium multi-brand platform rather than competing on price
- Platform services: Building B2B infrastructure that generates revenue independent of direct consumer competition
- AI-driven personalization: Creating discovery experiences that fast-fashion players cannot match
- Regulatory advantages: European players may benefit from stricter enforcement of environmental and safety regulations against foreign competitors
A dozen federations and 100 brands, including Monoprix and Promod, are joining forces in an unprecedented suit against Shein in an effort to protect domestic brands and set a precedent for European e-commerce compliance.
XIII. Bull Case vs. Bear Case
Bull Case
European Scale: Zalando is the only European e-commerce company with continental logistics infrastructure. This scale enables services that smaller competitors cannot match and creates barriers to entry.
Platform Transition: The shift from wholesale to Partner Program improves capital efficiency and margins. As platform revenue grows, profitability should improve structurally.
B2B Opportunity: ZEOS is already a €900 million business and is projected to become a multi-billion-euro segment by the mid-2020s. This represents a new profit pool independent of consumer spending cycles.
About You Synergies: EBIT synergies from the merger are estimated at 100 million euros per year starting in 2029. The dual-brand strategy allows targeting different customer segments.
AI Leadership: The AI-powered discovery feed and personalization capabilities could drive engagement, reduce returns, and improve conversion rates.
Regulatory Moat: European regulations on environmental compliance, consumer protection, and digital services may disadvantage foreign competitors operating under different rules.
Bear Case
Shein Competition: Ultra-fast fashion from China offers dramatically lower prices and faster trend responsiveness. Younger consumers may defect to cheaper options.
Amazon Competition: Amazon Fashion continues to grow, with superior logistics and a captive Prime customer base. Amazon's willingness to operate fashion as a loss leader puts pressure on Zalando.
Consumer Weakness: European consumers face cost-of-living pressures. Discretionary spending on fashion may decline in a recession.
Return Rate Pressure: The 50% return rate represents both logistical cost and environmental concern. Regulatory or consumer pressure could force changes to the generous returns policy.
Integration Risk: The About You acquisition requires successful integration of technology, culture, and operations. Integration failures could destroy rather than create value.
Regulatory Burden: Zalando has been classified as a "very large online platform" under EU regulations, subjecting it to additional compliance requirements and potential content moderation obligations.
XIV. Key Metrics to Watch
For investors tracking Zalando's performance, three metrics deserve particular attention:
1. Partner Program GMV as % of Total GMV
This metric captures the platform transition. As Partner Program grows relative to wholesale, capital intensity decreases while margins improve. A rising share indicates successful platform execution.
Why it matters: Platform economics are fundamentally different from retail economics. Higher Partner Program share means higher return on capital and better margin trajectory.
2. Active Customer Growth
Active Customer Growth: Zalando returns to active customer growth in 2024, with the number of active customers increasing by 4.5% to an all-time high of 51.8 million.
Customer acquisition in fashion e-commerce is expensive. Growing the active customer base while maintaining acquisition costs demonstrates both brand strength and operational efficiency.
Why it matters: Customer base is the foundation of the platform. Customer growth must precede or accompany GMV growth for sustainable value creation.
3. B2B Revenue Growth (ZEOS)
On the B2B side, Zalando's technology-driven ZEOS operating system, which includes ZEOS Fulfilment and its newly launched Shopify integration, powered a 12.2 percent increase in B2B revenue to €262 million.
B2B represents the highest-quality revenue in Zalando's portfolio—recurring, technology-enabled, and independent of consumer sentiment.
Why it matters: B2B success would validate Zalando's evolution from retailer to infrastructure provider, justifying a higher valuation multiple.
XV. Material Risks & Regulatory Considerations
Regulatory Classification
Zalando faces classification as a "very large online platform" (VLOP) under the EU Digital Services Act. Europe's second-highest court on Wednesday said German online fashion retailer Zalando can be labeled as a very large online platform under EU online content rules, siding with EU tech regulators.
VLOP status imposes additional compliance requirements including independent audits, transparency reporting, and content moderation obligations. While manageable, these requirements increase costs and regulatory complexity.
Environmental Sustainability
The fashion industry faces increasing scrutiny over environmental impact. Zalando's high return rate and the associated logistics emissions create environmental concerns. The company has committed to sustainability targets but faces challenges in aligning business model incentives with environmental goals.
On the ESG and sustainable fashion front for 2023, the company is one year ahead of its schedule to reduce Scope 1 and Scope 2 emissions by 80% by 2025, reaching 78%. The target to reduce emissions from private-label products by 40% by the same deadline is also already exceeded, with reductions of 43% already achieved in 2023.
Cross-Border Competition
The regulatory environment for cross-border e-commerce remains in flux. The groups say that Shein's aggressive pricing, rapid product turnover, decentralized production model and labor practices, coupled with its noncompliance with European safety standards, has created an unlevel playing field for French fashion brands. According to coalition estimates, these practices may have cost French companies as much as 3 billion euros.
How regulators address these concerns will significantly impact the competitive landscape. Stricter enforcement against foreign platforms could benefit Zalando; continued regulatory arbitrage could favor competitors.
Integration Execution
The About You acquisition represents significant execution risk. Technology integration, cultural alignment, and organizational design all require careful management. The 100+ million euro synergy target depends on successful integration.
Conclusion
Zalando's seventeen-year journey from a Berlin apartment to Europe's dominant fashion platform offers lessons in execution, transformation, and competitive strategy.
The company began as a Zappos clone during a financial crisis and could have easily become a footnote in startup history. Instead, through relentless operational focus, strategic pivots at the right moments, and the discipline to invest through difficult periods, Zalando built something genuinely differentiated: pan-European logistics infrastructure, a trusted consumer brand, and a platform that connects brands, retailers, and consumers.
The challenges ahead are real. Ultra-fast fashion from China poses an existential competitive threat. Amazon continues its relentless expansion. European consumers face economic pressure. The About You integration requires careful execution.
But Zalando has navigated challenges before. The company that survived the 2008 financial crisis, built profitable operations while losing money for six years, and transformed from retailer to platform has demonstrated adaptability.
Zalando, including ABOUT YOU, is expected to grow GMV and revenue until 2028 at a 5-year compound annual growth rate of between 5% and 10%. The combined group expects an adjusted EBIT margin in 2028 in the corridor of 6% to 8%.
Whether that guidance proves conservative or optimistic will depend on execution, competitive dynamics, and macroeconomic conditions that no one can predict. What is clear is that Zalando has built a business with genuine competitive advantages—scale, infrastructure, brand, and increasingly, technology—that will be very difficult for competitors to replicate.
In a European tech landscape often criticized for producing also-rans rather than leaders, Zalando stands as evidence that continental champions can emerge. "Zalando and ABOUT YOU are proof that Europe can produce growth companies for the digital age."
The company that started with two university friends carrying shoe boxes to the post office now processes hundreds of millions of orders annually, employs thousands of people across Europe, and serves as infrastructure for the entire European fashion industry. That trajectory—from clone to category leader—is the story of Zalando.
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