Zalando has announced the layoff of hundreds of workers through a "program that will eliminate several hundred general functions in many of our teams," according to the letter released today by its co-CEOs and founders, Robert Gentz and David Schneider.
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While further details and the percentage of staff to be laid off are not yet known (negotiations with employee representatives began yesterday), Zalando has assured that certain key departments will not be affected: front-line operations functions in logistics centers, customer service, and outlet stores, as well as operational functions in our Zalando Studios.
The company, headquartered in Berlin since its founding in 2008, currently employs more than 17,000 people. Zalando has over 50 million active customers in 25 markets, including Spain.
"Backed by a general consumer shift to online shopping and strong tailwinds from the pandemic in 2020 and 2021, Zalando has generated exceptional growth in recent years," Gentz and Schneider's letter notes. However, since 2022, Zalando acknowledges entering a phase of stagnation, further spurred by the financial instability unleashed by the war in Ukraine.
"This change has highlighted the increased complexity of our company and our speed of reaction. Instead of a large company with a large company structure and mentality, we must be a large company with a small company structure and mentality. An entrepreneurial company that embraces simplicity, pragmatism, and frugality. These principles will drive innovation and equip us to invest in our strategic priorities and shape the future of European e-commerce," they say in the statement.
In the latest results reported by the company, during Q3 2022, Zalando's GMV grew by 7.1% to €3.28 billion, and sales rose by 2.9% to €2.35 billion. Adjusted earnings before interest and taxes (adjusted EBIT) rose to €13.5 million from €9.8 million in the same quarter of the previous year.
For the full year, Zalando expects GMV to grow by 3% to 7% to €14.8 billion to €15.3 billion, while revenue would grow by 0% to 3%, or €10.4 billion to €10.7 billion, with adjusted EBIT of €180 million to €260 million. The company now expects to reach the lower end of these ranges.
One of the things that concern the most about Zalando's recent decision is the fact that to be honest; the e-commerce fashion sector remains in good health.
In fact, according to Shopify, sales of apparel, footwear, and accessories continue to rise, hitting $204.9 billion in the US alone.
That's tipped to grow by 13% this year, with consumers set to spend $204.9 billion on fashion items online.
The same situation is happening in Europe, where revenue in the e-commerce market is projected to reach US$730.30bn in 2023 and is expected to show an annual growth rate (CAGR 2023-2027) of 9.97%, resulting in a projected market volume of US$1,068.00bn by 2027.
Most of which is from the Fashion sector of e-commerce, the largest one in sales, accumulating well over 230 billion dollars in projected sales for 2023.
That’s why Zalando's situation seems, at least odd, and many experts believe, is not indicative of an underlying problem in the e-commerce fashion industry.
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