How did your competitors perform on Zalando, during the past 2021 winter sales?
As we turn the page on February, many retailers gather and evaluate the results of the winter sales season. A second sales season heavily influenced by local COVID-19 measures, with omnichannel brands having to close shops or restrict offline sales. Many retailers, therefore, pushed their own web stores or made more goods available on third-party marketplaces such as Zalando. The latter can be a source of insights and inspiration for your current and future pricing strategies. Here is why!
The 2021 winter sales season performance differed regionally, as a result of COVID-19 measures
If you look at how retail sales performed during January and February, it is clear all seems heavily influenced by local COVID-19 measures.
Here in Europe, the UK was confronted with a fierce third lockdown. It spurred a record-breaking January regarding online sales, happening across all categories, even the tormented clothing sector. Such did, however, result in new challenges. By the end of January, UK customers sat on more than £2.4 billion in unreturned goods or about £165 per person.
In the Netherlands, retailers remained closed except for 'click & collect' orders, a concept with limitations that did not succeed in getting customers to shop at will. Belgian retail was able to reopen more quickly, with customers having the opportunity to shop in-store. Yet, if one is, for instance, to look at fashion, 80% of retailers stated to have sold less during this year's sales season compared to last year's.
In the past year, fashion retailers flocked to Zalando.
As these regionally-influenced situations varied, one clear trend emerged. Last year, more and more fashion retailers found their way to third-party marketplaces such as Zalando.
Be it through its partnership program with retailers such as C&A or LolaLiza, or through its 'Connected Retail' program, which connects multi-brand stores, mono-brand stores, or even niche stores to the platform. The latter program will become widely available in Belgium (as of Q1 2021) & The Netherlands and allow almost any physical store to sell and ship using the Zalando platform.
What will be the impact? The platform will undoubtedly continue to gain influence, putting pressure on retailer's own web stores. Looking at the sales data from the 2020 cyber week, 30% of Zalando's revenue was generated by partners on its platform. That number is very likely to continue to increase.
Why your Zalando pricing strategy matters. A look at the 2021 winter jackets category
With many new entrants flocking the Zalando marketplace, setting appropriate prices for every single item and thoroughly thinking through inventory strategies becomes much more critical. Such is especially the case during the sales season.
That is why we took a closer look at how fashion retailers have set their prices and handled inventory during the last winter sales season. For this article's purpose, we zoom in on the insights derived from looking at data in the winter jacket category.
What end-of-season discounts did winter jacket resellers apply?
End-of-season discounts or price markdowns in the winter jackets category ranged from 0 - 65% on average. Most retailers apply a progressive approach towards markdown levels. We see an average discount of 22% in the first week of the winter sales season, which climbs to a 26% average by week three and drops to 24% by the end of the winter season.
Some have a proactive, clear-cut path from the get-go and hardly intervene; others tweak reactively to sudden inventory movements. The latter is not without danger, as some might not take the effect of demand erosion by the end of the sales season into account. We'll get back to that point.
Some brands are clearly more 'aggressive' than others to ensure they clear out stock by the end of the season. Yet, we found no structural relation between the price point of a brand and the end-of-season discounts it offered, which means that both 'expensive' & 'cheaper' brands do not hesitate to apply discounts at will.
Different strategies concerning stock levels
There is a lot to be said about how inventory rotates on a third-party platform like Zalando. For this article, we'll stick to identifying three interesting profiles with specific characteristics.
The first profile is the 'fashion outlet" profile. Retailers that start the season with a given inventory level, discount items progressively, and see a steady flow of items flying off the racks.
The second profile, the 'fashion outlet +,' goes one step further. As these brands mainly maintain the same strategy, there is, however, a significant difference. Every week of the season, they continue to add inventory to the platform. Most of them do such in relation to last week's sales performance.
The third and final profile is less creative and is focused on keeping inventory levels stable, adapting price markdowns and inventory refills to serve that target.
Are there any winners or losers?
An interesting time frame to look at is the final chapter of the winter sales season. It shows mixed results. It is clear that - across the board -, setting higher discounts does not necessarily equal generating more revenue.
Moreover, a deep-dive in the data teaches us that some brands (group One) can limit their focus on setting high discounts on items with low inventory levels during week III and especially week IV of the sales season. At that same moment, others (group Two) are - still - using those same higher discounts to clean out the stock of items with higher inventory levels.
So while the first group (group One) has worked away most of its overstock and can focus on cleaning out those typical low-inventory items (such as f.i, really small or large sizes), the second group (group Two) still has its work cut out, even to get those common sizes sold.
What does this mean for your brand?
Great question! By now, you must be wondering how your brand performed in comparison to other brands. That is precisely the point we are trying to make. Having a look at some key metrics and analyzing performance is what we believe any brand should be doing right now, given the increase of sales channels (own website, third-party marketplaces) one is selling at.
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