Zalando’s outlet store strategy takes shape after new openings

German fashion and footwear e-tailer Zalando opened two new outlet stores this summer, in Leipzig and Hamburg, bringing the total of its German outlet stores to five, and hinting that more openings may be on the cards.

Zalando opened its first outlet store in Frankfurt, Germany, in 2014, followed by one in Cologne in 2016 and another in Berlin earlier this year. Like the Cologne and Frankfurt stores, the latest openings extend over about 1,000 m2, enough to stock between 15,000 and 20,000 items, sold at discounts up to 70%. In terms of brands, Zalando’s outlet stores host about 500 of the 1,500 brands regularly available on the website, as some of them clearly prefer to rely on their own outlet stores.

The choice of location for Zalando’s stores is based on a specific criterion: it must be a place that town-centre consumers can easily reach on foot. For the store opened in Leipzig in June, the choice fell on the very central Burgstrasse, next door to the Karstadt and Deichmann department stores, and close to a shopping street hosting Zara, H&M, Desigual and Mango. In Hamburg, the store inaugurated on August 30 is very close to Grosse Bleichen, a major commercial street home to Abercrombie & Fitch, COS, Superdry, Urban Outfitters and the main fast-fashion giants.

Given the uniformity in store size, choice of city-centre location and type of shopping district, it is worth asking whether these outlet stores are more than an isolated phenomenon, being instead the beginning of a large-scale, strategic outlet store deployment by Zalando. The answer, dependent also on Zalando’s rate of growth, seems to be yes.

“Outlet stores are a useful way of managing excess stock, and other products which cannot be sold online, like those that for example are missing a button,” said Dorothee Schönfeld, in charge of Zalando Outlets. “Though we work hard to make purchases that are suitable for our e-store, overstocking cannot be avoided in the fashion industry, as a variety of unforeseeable factors affect sales, for example the weather. The greater Zalando becomes, the more these kinds of stores become necessary. The Zalando outlet stores in Leipzig and Hamburg won’t surely be the last two we will open,” added Schönfeld.

For the financial year which ended last January, Zalando’s sales grew by 25%, reaching €4.5 billion. The heavy investments made by the German e-tailer meant instead that profits were €101.6 million, down from €120.5 million in the previous financial year. Recently, the group has showed a degree of prudence regarding its 2018 forecasts. While waiting to see whether this caution was justified, from August 31 to September 2, Zalando will stage its own edition of Bread&&Butter, the former Berlin trade show which Zalando bought and transformed into a fashion festival open to the general public.

Zalando’s outlet store strategy takes shape after new openings

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