Carsten Keller (Zalando): “Once the consumer is educated that deliveries take a day, he doesn’t expect anything else”

Carsten Keller is vice president of Partner Solutions at Zalando, the services and consulting division of the German ecommerce group for fashion companies. The manager, who holds a master’s degree in Business from the University of Münster, worked previously for twelve years as a consultant at McKinsey&Co, where he advised clients in the field of fashion and sports. Keller joined Zalando in 2016 to found the direct-to-consumer unit. In this interview, the executive talks same-day deliveries, if consumers are willing to pay for them and the necessary steps for small players to dare with ecommerce.

Which are the structural difficulties that a multibrand brick store finds when launching or operating ecommerce?

You’ll start with small, perhaps running a test through a website or an app in order to track consumers. Afterwards, you may need to run a small campaign through Google to raise consumer awareness of your store in the digital environment. Certain understanding of data is also necessary: to know which product categories work well and of course think of a logistics solution to manage returns, deliveries… As it will be missing on scale, the retailer would need a partner, a logistics provider where you can put your stock and, ultimately, if everything works out and you become a grown-up ecommerce venture, you will go into data analytics to drive your decisions much more through data. If you’re a bit more established than a single-store retailer, a partner like Zalando could be a good match.

In spite of all the difficulties previously mention, is it possible for a retailer to skip collaborating with a pure player when doing ecommerce?

As a retailer you should be worried about what your customers are. As a physical player, it may happen at some point that you realize less and less customers are entering into your store. You shouldn’t limit yourself to one platform, but rather find the right channel mix that is really talking to your audience. There’s still a reason for a dotcom presence of your brand: typically even many up-and-coming brands do operate a selling app or ecommerce platform.

How is affecting logistics the fact that clients want to get their deliveries faster and faster?

It’s a massive trend. Once you get educated as a consumer that products get delivered within a day, then you expect it that way, and if it takes two days you are unhappy. It’s like the Internet in the nineties, when you were tipping something into Google and an answer took a minute. If that will happen today, you would shut down your computer. With that in mind, it’s the same for products. Thus we invest heavily into our warehouses and we’ve increased our warehouse footprint quite a lot.

“People who live in small towns far away from the big cities are not expecting rush deliveries”

The speed in deliveries that customers are demanding implies also a change in the location of the warehouses?

There are two other aspects besides warehouses that are important in regard of speed that we’ve changed. Zalando comes from a retail business model: we’ve always bought product from the brand and then sold it at a higher price to consumers. That’s the essence of retail. But thanks to our logistics’ footprint and the width of our assortment, we really needed partners to do this. Thus we founded the Partner Program, our marketplace offering: brands connect towards our platform and if the consumer orders a product through Zalando, then the partner takes care of the delivery. This way, the density of our warehouse network just increased by adding the Partner Program. The third element to the equation is that we also connect stores through our Connected Retail. As warehouses are usually huge and far away from where consumers live, we engage stores to our network as well to make deliveries to customers faster and increase the density of our stock.

In the future, will deliveries within a few hours in big cities be something mandatory?

If you take a look the most established retail space in Europe, London, there you see that same-day delivery is the baseline to start from. Yes, it is alike that in those big cities you will have rush deliveries.

Shipping costs usually harm pure players’ profitability. Are consumers willing to pay for rush deliveries?

People who live in small towns far away from the big cities are not expecting rush deliveries. If they’re willing to pay for it is something that we don’t know. Thus the way we operate it currently is offering the service for free and it gives you an added value. Ultimately the question is if this model will work for a single store: if it’s lossmaking for them, they won’t enter the model.

“Consumers don’t want to see thousands of products and search their way through all of them, but actually someone who picks up the relevant”

But completely free deliveries will then continue to be free in a long-term perspective?

It’s a bit of a trade-off. If you connect the store, and if the shop could manage in terms of margin to deliver an order for free, then we’ll continue with that policy. But if we can’t because all the economics are negative, and it will mean that these type of service won’t be offered, we’ll need to have a discussion to see how we solve the problem.

Amazon is also offering third-party services. Is it mandatory for pure players to enter into this field in order to guarantee the profitability of their structure and operations?

We need a massive, relevant number of brands to take part in our platform. Some of them operate on really low margins, so if they need to ship the product directly to the consumers, with parcels sometimes just carrying a ten-euro product, and your logistics costs being six euros, then if you take the cost of the goods’ sourcing, you’re already making a loss. From our perspective, the whole Zalando Fullfilment Solutions serves to allow us a wider brand assortment, including labels with lower price-points.

In Spain, companies like Glovo have started to accept orders from fashion stores like Zara. If this trends goes bigger, could it be a threat for companies like Zalando?

One thing is convenience, being fast, something we are investing heavily in. But the other key factor is curation. Consumers don’t want to see one hundred thousand products and search your way through all these products, but actually someone who knows you and then picks up the relevant things for you. Algorythms help to curate the right offering for each client. So I believe that the holistic experience of having the right product and getting it delivered in the most convenient way.