Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?

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The German online retailer Zalando, which has satisfied shoppers from all over Scandinavia, expect recession in Europe for 2023, particularly for its key DACH market. Will this effect the consumer prices for the present year? Will the chase for higher profit lead to prices on the rise from the popular e-commerce retailer in Scandinavia?

Retailers in general expected slow performance for Black Friday 2022, but retailers and marketplaces around the world proved once again how well a shopping event like Black Friday works –  even in the face of record-breaking inflation, energy and food costs. Results in the US showed a 2.3% increase in online sales compared to 2021. In the Netherlands, data from credit card translations and online sales showed a 12% increase in purchases while spending increased overall by 30% in the week leading up to Black Friday.

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Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?, text follows below image….

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?
Zalando headquarters in Berlin. Photo: Wikipedia

Zalando has seen a fast price rise over the last quarter. Its financials have shown some improvement too, but that doesn’t appear to justify its P/E. The P/E is at vertigo-inducing 2,852x, driven more by its fast-shrinking earnings than its performance. With the company not entirely sure of future profits, a correction looks due.

The most successful retailers and online marketplaces like Zalando have learned how to get the most out of consumers and their vendors using competitive pricing strategies, and we’ve taken a look at how Zalando, one of Europe’s biggest online marketplaces, managed its  pricing before, on and after Black Friday 2022.

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?
Zalando partners

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In November, the company released its third-quarter results, which showed some turnaround in performance. In the second quarter (Q2 2022, April-June, 2022), it reported a 4% year-on-year (YoY) drop in revenue. For the first half of the year (H1 2022), its performance was weak too, with a fall in revenue of 2.9%. But come the third quarter (Q3 2022) and its sales rose again. At 2.9%, it wasn’t a substantial increase, but nevertheless it was an increase.

10,000 product prices on Zalando have been analyzed across multiple vendors within various categories, with a specific date range surrounding Black Friday, which took place on 25 November.

Zalando’s prices increased by 8% in the three weeks leading up to Black Friday, starting on 25 October. Then, there is a significant price drop by 18% on the 17th, signaling the start of Black Friday week. The decrease in prices reached its highest amount with a drop to an average price level of 85.5 % on Sunday, 27 November. This means that prices have fallen by 23% (compared to a pre-Black Friday level of 108%) in just one week. After Cyber Monday, prices returned to pre-Black Friday numbers which were still higher than prices in October.

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?, text follows below image….

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?
Zalando Tauentzienstrasse, Berlin

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But Zalando has done a good job of keeping costs down. For Q3 2022 its cost of sales is up by just 2.4% and the number is even lower for the nine months at sub-2%. If inflation starts declining meaningfully in the next few months, its numbers could look better.

However, Zalando is introducing a base rate for third-party sellers and brands starting July 1st. Partners will have to pay a monthly 40 euros. In addition, the fashion retailer will increase commissions per sold item for certain products.

Until now, the German marketplace only charges a commission for successful sales by partners.

Selling through Zalando will thus become more expensive starting July 1st. The ecommerce giant will introduce a flat subscription fee for partner sellers. Merchants participating in the Connected Retail and partner program will pay 480 euros per year. This will take the form of a monthly 40 euros.

Retailers will pay a commission up to 22 percent.

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia?
Zalando homepage in Norway

German DZ Bank has downgraded Zalando from “buy” to “hold” after a strong start to the year in terms of share price, although the fair value was raised from 39 to 43 euros. Analyst Thomas Maul does expect the online retailer to reach its reduced targets in 2022, according to a report available Monday. However, he expects only moderate growth in 2023. Accordingly, targets are likely to be restrained due to dampened consumer confidence and an increased focus on profitability. He views the stock’s further upside potential as limited after its good run.

Higher retail prices from the popular e-commerce giant might be expected.

Prices on the Rise from Popular E-Commerce Retailer in Scandinavia? compiled by Tor Kjolberg

Feature image (on top): Photo © Zalando – Facebook

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Journalist, PR and marketing consultant Tor Kjolberg has several degrees in marketing management. He started out as a marketing manager in Scandinavian companies and his last engagement before going solo was as director in one of Norway’s largest corporations. Tor realized early on that writing engaging stories was more efficient and far cheaper than paying for ads. He wrote hundreds of articles on products and services offered by the companies he worked for. Thus, he was attuned to the fact that storytelling was his passion.

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