TLDR: Zalando is strategically expanding its B2C and B2B operations, leveraging advanced AI to enhance customer experience, optimize content creation, and scale its logistics platform ZEOS. The company aims to capture a significant share of Europe’s €450 billion fashion market, demonstrating tangible benefits from AI in reducing returns and cutting marketing costs.
Zalando, the German e-commerce powerhouse, is aggressively pursuing a dual-pronged strategy to solidify its position in Europe’s vast €450 billion fashion and lifestyle e-commerce market. This involves a significant expansion of its Business-to-Consumer (B2C) footprint driven by artificial intelligence and the scaling of its Business-to-Business (B2B) logistics platform, ZEOS. The company’s strategic evolution from a platform-based model to a comprehensive ecosystem is designed to deepen relationships with customers and partners, ultimately aiming to cover 15% of the European fashion market in the long term.
In its B2C segment, Zalando is redefining the customer experience through extensive AI integration. A prime example is the AI-Powered Fashion Assistant, launched in 2023 and fully rolled out across all markets by 2025. This assistant allows users to ask natural language questions, such as “What should I wear for a spring wedding in Italy?”, and receive personalized recommendations. This innovation has been instrumental in reducing return rates by up to 7% among users, a critical achievement in an industry where return costs can significantly erode margins. Furthermore, Zalando has introduced an AI tool for size recommendations, enabling customers in Germany, Austria, and Switzerland to receive precise garment sizing based on body measurements captured via phone photos.
Generative AI is also playing a transformative role in Zalando’s operations. By Q4 2024, the company was leveraging generative AI to produce 70% of its editorial content and marketing imagery. This has drastically cut production times from several weeks to just a few days (specifically, from six to eight weeks down to three or four days) and achieved an impressive 90% reduction in associated costs. Matthias Haase, Vice President of Content Solutions at Zalando, highlighted that AI enables the company to be significantly more reactive to market needs and generate innovative and relevant images for its audience. The technology also facilitates the creation of digital twins for promotional campaigns, further enhancing marketing efficiency and diversity.
On the B2B front, Zalando is expanding ZEOS, its logistics infrastructure, software, and service capabilities. ZEOS is positioned as a key enabler for e-commerce transactions for brands and retailers, irrespective of whether these transactions occur on or off the Zalando platform. This B2B growth vector is projected to develop into a multi-billion-euro business in the mid-term, having already expanded to 12 markets with a valuation exceeding €900 million.
Financially, Zalando’s AI initiatives are yielding positive results. AI-powered tools contributed to 20% of recent revenue growth. For Q1 2025, the company reported €2.42 billion. Looking ahead, Zalando has set new mid-term financial targets through 2028, aiming for a compound annual growth rate of 5-10% for both Gross Merchandise Volume (GMV) and revenue. The outlook for adjusted earnings before interest and tax (EBIT) is projected to be 6-8% of revenue in 2028. Robert Gentz, co-CEO of Zalando, stated, “Our ambition is to return to strong growth and continue our margin expansion, as reflected in our new mid-term guidance.” The company also reported an 87% surge in adjusted EBIT in Q2 2023 to €144.8 million, despite a slight decline in GMV and revenue during that period. For 2024, Zalando anticipates GMV and revenue growth of 0-5% and an adjusted EBIT between €380 million and €450 million.
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Further strengthening its customer relationships, the Zalando Plus loyalty program is now active in 13 countries, achieving a 15% penetration rate in its live markets, which drives repeat purchases and deeper engagement.
