Connected retail: the bridge between offline and online sales

Thanks to Zalando’s Connected Retail programme, more than 2,000 retailers are now connected to the platform and can generate additional income to supplement what they earn at their bricks-and-mortar store with the help of easy and fast online integration. In an interview, Dr. Carsten Keller, VP Direct to Consumer at Zalando, explains the model from which all participants can benefit – especially during the Covid-19 crisis.

Mr Keller, what is Connected Retail?

Connected Retail is our way of building a bridge that gives bricks-and-mortar stores access to online demand. Thanks to Connected Retail, retailers can accept orders from Zalando customers and ship them directly from their store.
Bricks-and-mortar stores have suffered greatly as a result of the pandemic. This year, Christmas trade, which is of vital importance to retailers, will move online to a much greater degree than ever before. Connected Retail can help retailers process their online business.

How do participants benefit?

Connected Retail is a win-win-win situation for everyone involved. Customers have access to a larger range of merchandise, which is delivered faster; retail partners generate additional sales; and Zalando benefits from a larger selection of products and increased availability.
If retailers are unable to sell anything, they won’t face any costs; we also don’t demand exclusivity so they can leave at any time if they aren’t satisfied with the service.

Why did you create Connected Retail?

We created Connected Retail more than two years ago because we saw it as a remarkable opportunity. We asked ourselves: what are the challenges we face as a platform? And what opportunities does this present? We identified four areas in which Connected Retail would play an important role:

First of all: availability. Some months we receive up to 10 million requests from customers who would like to buy an article, but are unable to because the product is not available in their size. Connected Retail will help us lower this number.
Secondly: selection. The fact that retailers are also able to sell products that we have not yet listed means that, in addition to the general availability of articles, the selection of locally relevant products increases.
Thirdly: speed. In many cases, shipments from the store around the corner reach customers faster than those coming from logistics centres.
And fourthly: sustainability. With Connected Retail, customers don’t just get their delivery faster, deliveries are made from a store in their region so it is also better for the environment.

Therefore, partnering with bricks-and-mortar stores is one of the key pillars of our platform’s strategy: becoming a starting point for fashion and helping customers find the best outfit whenever they want, as quickly and sustainably as possible.

Has the Covid-19 crisis changed your view of things?

We realised more than ever how we want to position ourselves together with bricks-and-mortar stores, where we can invest and to what extent this solution is relevant for local retailers. Especially during this difficult time when (walk-in) customers are staying at home, Connected Retail can help retailers generate additional sales by selling their products online.
Knowing that products will most likely find buyers online, retailers can also take more risks when buying merchandise. For instance, inventory turnover is significantly higher and retailers can restock shelves with new products several times during the season, which creates an incentive for customers to visit more often.

What experiences have you had in recent months?

Bricks-and-mortar stores have been hit hard by the pandemic. Almost overnight, established retailers who had run their store for generations no longer knew how they would manage to sell enough merchandise. Goods deliveries were arriving, as were invoices, but no customers. We spoke a lot with our partners during this time and thought about how we could be part of the solution. We came up with the idea of not charging any commission for Connected Retail, and more frequent payouts in order to improve retailer liquidity.

Many retailers were surprised by the number of inquiries they received through Connected Retail only a few days after registering. In some cases, retailers were even able to bring some staff back from temporary unemployment in order to package merchandise. We have received a lot of feedback about how Connected Retail has genuinely helped retailers, which made us very happy.

In order to enable customers to support local businesses intentionally, we created a filter called “Delivery from a store” and also created a page in the Zalando Fashion Store where customers could see which products are offered in their region via Connected Retail. This option has been and continues to be used widely by customers.

Are dealers distrusting of you? After all, you were viewed as the competition for a long time.

The dialogue between bricks-and-mortar stores and Zalando has changed significantly over the years. Three years ago, the kind of partnership we now have with many retailers would have been almost unthinkable. It takes time to build relationships. We now work closer than ever with bricks-and-mortar stores. As a result, we can now plan together and set goals that make sense for retailers, customers and for Zalando as a platform.
By waiving our commissions, we have attracted and continue to attract many vendors who would like to test Connected and can now do so without any costs. If you aren’t satisfied with the service, you can leave at any time.

Were you surprised by how successful Connected Retail was?

We are committed to a strong partnership with local retailers. Before the pandemic began, we tested same-day delivery in Berlin with Connected Retail. Retailers could easily and quickly hand over goods to our logistics team so that shipments could actually be delivered on the same day if the order was received before 2 pm. We look forward to exploring how we can harness the possibilities of this partnership even more effectively. At present, however, supporting our partners during the pandemic is our number-one priority.

What’s next for Connected Retail?

At the beginning of the Covid-19 crisis, we had gone live in two markets: Germany and the Netherlands. Now, there are eight: Germany, the Netherlands, Spain, Poland, Sweden, Denmark, Norway and Finland.
Next year, we want to tap into five more markets with Connected Retail: France, Belgium, Austria, Italy and Switzerland.
Currently, more than 2,000 retailers have registered on Connected Retail. We want to increase this number to 6,000 in the coming year. In order to do that, Zalando has planned an investment amounting to 50 million Euro for the expansion of its Connected Retail platform in the coming year.