Zalando. The Starting Point for Fashion - Capital Markets Day 2019 - Zalando Corporate
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Zalando. The Starting Point for
Fashion.
David Schneider
Capital Markets Day 2019
Robert Gentz
1
Rubin Ritter February 28, 2019
Agenda Our Vision: The Starting Point for Fashion Platform as Key Lever To Become the Starting Point Our Business Model of the Future
“Most people overestimate
what they can do in one year
and underestimate what
they can do in ten years.”
Bill Gates
4
Active Customers
(in # m) NPS 2016-2019
2.0x 26.4
+ 9
to All-Time High1
13.1
2013 2018
5 (1) As of January 2019.
Revenues
(in # bn EUR)
3.1x 5.4
1.7
2013 2018
6
Our Vision:
Zalando.
The Starting Point
for Fashion
What Are Successful Starting Points?
Music Movies &
Series
Fashion
8
Customers Clearly Want One Multi-Brand Fashion Aggregator,
Serving Them Head to Toe
45% 13
of orders different brands
contain more bought per year by
than one brand female customers
9
We See Clear Progress on Our Journey to Build the Starting Point for Fashion
Most Visited Fashion
Unaided Brand Awareness Site Visits
(relative to following competitor1)
Destination in Europe
(average # of monthly unique visitors in Europe 20182)
1.4x 2.5x Zalando
Nordics
Inditex
H&M
#1
in Europe
2.5x
2.3x DACH
~70% ~90%
Asos
Other
Adidas
1.8x (in # m)
Nike
Southern Europe
2014 ’15 ’16 ’17 2018
DIRECT TRAFFIC
(1) Brand Monitor Q4/18; simple average of relative positions across markets
10 (2) Comscore data as of Dec 2018App Users Engage More Actively With Us
Customers Gravitate Towards App… …and Increase Engagement1
App order share in %
App users visit more often:
8.8x vs 3.5x on desktop
~2x …spend more time:
104 vs 23 products seen
44%
… shop more2:
+31% GMV
21%
… and are happier3:
NPS +8
2016 2018
(1) Data from December 2018, if not stated otherwise
(2) Existing customers who uses the App compared to existing user without App usage (period: 6 months 2017-2018)
11 (3) App vs Desktop customer (Jan-May 2018)THE STARTING POINT
FOR FASHION
12Agenda Our Vision: The Starting Point for Fashion Platform as Key Lever To Become the Starting Point Our Business Model of the Future
The Platform Strategy Is One Key Lever
Towards Being the Starting Point
• Direct access to European
digital consumer
Starting Point • Leverage Zalando capabilities
(tech, data, logistics)
Platform
Strategy
• Offer desirable and • Platform adds scale to Zalando
comprehensive assortment
• Less inventory risk – while
• High availability improving customer offering
(50% of PP volume incremental)
14In 2018, We Achieved a Number of Important Milestones…
PP scale ZFS ZMS
>€ 600 m 25 % >60 %
GMV, representing 10% of our of items revenue growth yoy
Fashion Store business
15…but More Importantly, We Solve Three Major Scaling Challenges
1 2 3
Scaling Customer experience PP has lower PP growth reduces
in PP worse than in WS profitability than profitability of WS
Issue WS orders
Solution Stricter performance ZFS “adds back” partner
Uplift through attractive
Going management of partners program items to wholesale
B2B services
Forward and ZFS scaling basket
Resolution of key scaling issues gives us confidence
in future pp growth
16ZFS Leveraging Our European Logistic Network to Enable PP Success
6. STOCKHOLM
1. ERFURT
Start in 2012 Start in 2018
Create the capacity for future growth:
11 warehouses allow > 12bn GMV
2. BRIESELANG 6 7. SZCZECIN (Gryfino)
Start in 2011 Start in 2017
Get closer to our customers:
We will deliver 30% of orders
3. MÖNCHENGLADBACH 8. OLSZTYNEK
Start in 2013 Start in 2019 on the next day by 20201
7 8
2
9
3
4. LAHR 1 9. LODZ (Gluchow) Scale a differentiating asset which
Start in 2016 Start in 2019
4
we can open up to brand partners
5
5. PARIS 11 10 10. VERONA (Nogarole Rocca)
(Moissy-Cramayel) Start in 2020
Start in 2016
11. MILANO (Stradella)
Start in 2016
17 (1) 3pm cutoff timeConnecting Brands to Consumers with Zalando Marketing Services
Brands Zalando Marketing Services Consumers
Influencer Products (Collabary)
Consumer Insights
Media Products
No. of campaigns
>37m female unique visitors
>750 m visits per quarter
>26 m active customers
2016 2017 2018
18Agenda Our Vision: The Starting Point for Fashion Platform as Key Lever To Become the Starting Point Our Business Model of the Future
Facing an Immense Market Opportunity, Our Number One Priority Is to
Capture Market Share
We are targeting a massive opportunity …with low online share compared to other
in 5-10 years1… categories
Total Consumer
fashion
Fashion
40% Electronics2
>450bn
30%
Online
>25% fashion
20%
>5% 10%
15% 20% 36% 45%
0%
2018 2023 2018 2023
(1) Source: Company estimates and Euromonitor International, February 2019. Values based on actuals and estimates; fixed exchange rates.
Fashion data incl. apparel and footwear, bags and luggage, jewelry and watches. Data for Europe (excluding Russia) inclusive of sales tax
20 (2) Source: United States online penetration, Statista, last update 2018-10Bringing Our Growth Ambition into Reality Being the starting point will help us to drive The Partner Program makes our growth through higher share of wallet business even more scalable 21
We Aim to Achieve a Scale of 20bn EUR GMV by 2023/24
Growth Ambition 2023/24 Business Model Mix 2023/24
In €bn GMV In €bn
~20
~20
Partner
program
~40%
13
~10
~8.2
6.6 Wholesale ~60%
2018 2019 2020 … 2023/24 GMV Revenue
CAGR1 +20-25% +15-20%
22 (1) 5-year CAGR (2018-2023): high end of range, 6-year CAGR (2018-2024): low end of rangeBuilding Scale Now Will Allow Us to Capture Benefits of Scale Later
Reach & Customer Acquisition Strong Partnerships
Logistics Data & Technology
23Platform Model to Drive Higher Long Term Profitability at Scale
Target Margin (growth in line with / slightly above online market)
Partner Group margin Key assumptions:
In % of revenue Wholesale1
Program impact 2
• PP share ~50% of GMV
Gross margin • ZFS share ~75% of PP items
• ZMS revenue 3-4% of GMV
Fulfillment costs
• Operating leverage and fixed cost
regression
Marketing costs
• Cash Flow: WC neutral and
CapEx slightly above D&A
Admin expense
Adj. EBIT margin 6-8% 20-25% 10-13%
(1) Wholesale includes Offprice and Private label
24 (2) Trend vs. 2018 cost linesFinancial Profile During Transition to Platform Model
Transition phase 2019 - 2021 Years following Target model
• Growth in line with / slightly
Continued high GMV growth of 20-25%
Growth above online market
for the next 5 years
• Margins between 2-4%, driven • Margins start to increase • Target margin of 10-13%
by growth investments and as platform transition
Profitability platform transition progresses (e.g. impact
of ZMS)
• Cash Flow negative • Target margin leading to a
• NWC neutral strong cash generation
Cash • Capex of 4-5% of revenue,
driven by logistics and
technology investments
25Enlarged Management Board to Drive Execution
Robert Gentz David Schneider Rubin Ritter Jim Freeman David Schröder
Co-CEO Co-CEO Co-CEO CTO CFO
• Marketing / Sales • Fashion Offer • Strategy • Product • Finance
• Human Resources (Assortment) • Technology • Operations
26Platform model drives superior financial model maximizing shareholder value
1 Our vision is to become the starting point for fashion, the destination that consumers
gravitate to for all their fashion needs.
2 The most important building block on that journey is to transition our business towards
a true platform business, with the PP, ZFS and ZMS as the most important elements.
3 Our strategy will result in an attractive financial profile, characterized by an
attractive double-digit margin profile and strong cash generation at scale.
27DISCLAIM ER Certain statements in this communication may constitute forward looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties. You should not rely on these fo rward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may diff er materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroecon omic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / conditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and changes in competition levels. 28
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