Germany’s Shuttered Retailers Turn to Online Rival for Help

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For most high-street retailers, the hard lockdowns across Europe mean they’re missing out on the lucrative holiday shopping period. That’s unless they team up with the enemy.

Kaufhaus Ganz, a department store near Frankfurt that sells clothing, toys and stationaries, is doing just that. Even as it has been losing customers to online rivals, the business this year turned toZalando SE to sell wares on the Internet giant’s websites. The move helps keep revenue flowing now that its physical shop had to close, said Managing Director Tatjana Steinbrenner.

“This is a realistic chance to make it through the pandemic,“ Steinbrenner said in an interview. “Running such a business is a gigantic challenge as consumer behavior has dramatically changed.”

Germany this week imposed ahard lockdown, closing most retailers until at least Jan. 10 and asking companies to send their workers home. The measures in Europe’s biggest economy mean stores affected will lose a fifth of their revenue this year, according to the HDE retail lobby. Countries including the Netherlands and France adopted similar restrictions, devastating retail spending that usually peaks in the weeks before Christmas.

Kaufhaus Ganz has signed up for Zalando’s Connected Retail program, which allows brick-and-mortar stores without an adequate online offering to sell their merchandise on the firm’s websites. Zalando waived commission for the service through the end of March, with participating retailers only having to pay for last-mile deliveries.

Some 2,400 stores have signed up for Connected Retail and are generating more than 40,000 orders a day, said Carsten Keller, who is responsible for the program at Zalando. Business has boomed amid the latest lockdown, from an average 20 shipments a day per store to as many as 150, he said in an interview.

Zalando says all store-owners need is an enterprise resource planning system, an Internet-connected device and a printer. The service is available in eight countries including Spain, Poland and Sweden, with Zalando planning to add five more countries next year.

While Zalando is tight-lipped about financial details, UBS analyst Olivia Townsend estimates that each participating store will ship 86,000 euros ($105,000) worth of wares this year, adding more than 160 million euros to Zalando’s gross merchandise volume.

“New opportunities have arisen as a result of Covid-19, and Connected Retail is one of these opportunities,” Townsend said. The highly fragmented fashion market, with lots of small stores, can benefit from the program, she said.

Profit Push

For Zalando, Connected Retail is part of a larger push to become more profitable by shifting away from wholesale toward a platform for all things fashion.

Adding wares from physical stores to its sites means a greater selection of merchandise, raising the chance that visitors will actually buy something. It can also speed up deliveries as city-center stores double as fulfillment centers. In the future, customers may be able to chose shipments from shops closest to them, fostering local buying.

Keller said Zalando studied Chinese companies including Alibaba Group Holding Ltd., Tmall Inc. for clues how to better link up offline inventories before introducing the service in 2016. Zalando is currently working to speed up on-boarding of new stores from two weeks to an almost instantaneous process, he said.

Steinbrenner, of Kaufhaus Ganz, said she’s impressed that Zalando has been paying her swiftly after sales. While she said the service is lacking an option allowing shoppers to pre-select local, smaller stores, Steinbrenner is leaning toward staying with it even once commissions — which can approach 20% for more expensive items — kick in next year.

“Zalando was our bogeyman, the evil enemy, and that has changed,” she said. “I wouldn’t go so far as to call them a friend, but they might end up a good partner for the future.”

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