Gap signs a deal to sell on major European apparel site Zalando

November 25, 2014 09:39 AM

Gap Inc., one of the largest apparel and accessories chains in the U.S., and Zalando, a web-only apparel and accessories e-retail titan in Europe, have signed a deal in which Gap will open its own online store within Zalando’s e-commerce site.

Gap will offer clothing and accessories for women, men, children and babies on Zalando beginning this summer.

“This partnership represents Gap’s first foray into multi-brand retailing in Europe,” says Stefan Laban, senior vice president, international for Gap. “Also for the first time, Gap’s collections will be styled alongside other brands available on Zalando, providing customers with new looks to combine American and European casual style.”

Gap launched its first international store in the U.K. in 1987. Since then, Gap has continued to grow its presence throughout the continent with 190 company-operated stores and 33 franchise locations. The deal with Zalando will complement Gap’s own e-commerce site, which ships to 24 countries.

“We are constantly working to ensure that we are offering our around 14 million active customers new and relevant brands from around the world,” says David Schneider, a member of Zalando’s management board. “Gap is one of the most loved brands in the U.S. and extends our assortment.”

Gap, No. 19 in the Internet Retailer 2014 Top 500 Guide raked in $2.26 billion in online sales in 2013, up 21.51% from $1.86 billion a year earlier. Those sales include e-commerce sales across its portfolio of sites, including a lower-priced online store for Old Navy and a higher-priced online shop of Banana Republic, to name a few.

Zalando is No. 9 in the Internet Retailer 2014 Europe 500 and posted a 51.7% increase in European online sales in 2013 to reach 1.76 billion euros (US $2.19 billion) in 2013, up from 1.16 billion euros (US $1.44 billion) a year earlier. Sales in Zalando’s key markets of Germany, Austria and Switzerland totaled 1.06 billion euros (US $1.32 billion) in 2013 compared with 773 million euros (US $961 million) a year earlier, an increase of 37.1%. Zalando sells in 15 European countries.

Zalando, launched in 2008, is second in web sales among Europe 500 retailers whose principal market is Germany. It falls behind only massive retail conglomerate, Otto Group, which did 6 billion euros (US $7.46 billion) in web sales in 2013.

Despite Zalando sales growing at a rapid clip, Zalando has faced some struggles of late, including a lackluster initial public offering with shares yesterday trading below its issue price of 21.50 euros (US $26.73) at 19.74 euros (US $24.54). Zalando has also struggled with the high return rate in its home market of Germany and achieving profitability. Zalando in recent public reports has disclosed its return rate is about 50%. Returns are common in Germany, where many shoppers are invoiced for their online purchases, meaning they often don’t pay until they receive and try on their purchases.

Zalando has also struggled to turn a profit, reporting a negative margin of 6.5% in 2013, according to its IPO filings. It said during its Zalando Insight Day earlier this year it is focusing on saving money by improving fulfillment and technology. That included doubling its warehouse capacity last year.

Gap meanwhile has been shaking up top-level executives—moves the company says are orchestrated in part by incoming CEO Art Peck, who takes over on Feb. 1 from long-time CEO Glenn Murphy. In its Q3 earnings announced last week, Gap said Jeff Kirwin, who has been president of Gap Greater China, will take over as global president of the Gap unit in December, succeeding Stephen Sunnucks, who will leave the company Dec. 19 after a decade of leading the Gap brand. In addition Andi Owen, head of the Gap Outlet division, will become global president of Banana Republic. She will replace Jack Calhoun, who will leave the company Feb. 1 after eight years as chief of the Banana Republic brand.

The company noted in a release that the changes “were orchestrated by Art Peck as he prepares to take on the role of chief executive officer of Gap Inc. in February, with the full support of current chairman and chief executive officer Glenn Murphy.” Gap announced last month that Peck, who had led Gap’s digital initiatives, would succeed Murphy as CEO.




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