Competitive Analysis and Market Expansion Strategies for Zalando

This report discusses the competitive advantages and strategies of Zalando and ASOS in the online retail market. It also evaluates potential markets for Zalando to expand its business operations and the pros and cons of investing in Zalando and ASOS.

INTERNATIONAL MARKETING

Table of Contents
Introduction:...............................................................................................................................................1
Question 1:..................................................................................................................................................1
Question 2:..................................................................................................................................................4
Question 3:..................................................................................................................................................6
Conclusion:..................................................................................................................................................8
References:..................................................................................................................................................9

Introduction:
Online retailer business is the very popular business now a day. The industry is growing with
very fast pace in almost all over the world. It has been analysed that Zalando is one of those
companies that deal with serving the market with apparels through its online retail business. This
report initiates with the discussion of Zalando’s and ASOS’s competitive advantages and their
strategies in the world market to have better customers base. ASOS is considered as the closest
competitor of Zalando. The report continues with the discussion of online business situation in
different part of the world in order to analyse the three best countries that can be the potential
market for Zalando to expand its business operations. Various criteria have been discussed on
which the decision to select the new market has been based. The last part of the report is about
the pro and cons for making investment in Zalando and ASOS by Andres Holch Povlsen. The
pros and cons are discussed. The overall report gives a gist of the online retailer market and its
condition these days.
Question 1:
Zalando is the online retailer firms that deal with serving the market in about 15 countries with
its branded clothing and other materials. ASOS is considered as the closest competitors of the
company and both are giving tough competition to each other in terms of market share and
customers base along with the range of the products both are serving to the market. This can be
better evaluated by analysing the competitive advantages of the companies in different markets.
Competitive advantage of the company can be defined as the leverage or the upper hand that the
company has over the other competitors in the same industry (Carlsson and Kryger, 2017).
As far as the competitive analysis of Zalando and Asos is considered, it has been analysed that
even after being popular in the industry, the company has to face competition by other retailers
such as Sarenza, BuyVIP in premium segment. Amazon is another big name that is there in the
competition. This company focuses in attracting the customers with various offers such as free
delivery , return services etc. moreover, other manufacturers are also opening their own online

retail shop to sell their products such as Zara and H&M. this increases the competition in the
industry.
It has been analysed that there are various ways in which the company can get the competitive
advantage. Some of them are cost leadership, focus strategy, differential strategy etc.
Zalando competitive strategies:
Range of products:
Zalando is the company that provides various product ranges to the customers of about 15
countries. It has been analysed that the company started its operations in footwear and become
the largest online footwear shop in Europe. After this the company started offering international
brands. Besides footwear, Zalando also distributes men and women clothing wear, innerwear,
bags etc. in the year of 2010, it expanded its operations in children and kids wear along with
perfume brands as well. This suggests that the company serves the market with great range of
products and this also acts as the competitive advantage of the company (Kirssi, 2017).
Effective offline marketing: the company has enhanced its brand awareness making use of the
various available branding and marketing strategies. One of the strategies is of using TV as the
medium to broadcast the ads and campaign such as “scream for joy”. Another strategy that the
company uses is fashion magazines that help the company to reach up to masses with their
collection. It has released a 68 pages men’s magazine to attract the men customers towards the
brand (Childers, et al. 2001).
Own brands: the major competitive advantage of the company is that along with selling other
popular brand, the company has started selling its own brand which proves to be very beneficial
in its profits.
Investment in logistics and technological infrastructure: the company has invested around € 150
million in developing its logistics and technological infrastructure. The company also focus on
its distribution centre and try to make it effective in nature (Reinartz, et al. 2011).
ASOS competitive advantage:

Largest: It is considered as one of the market online retailer brands and focuses on serving the
customers with great market share. It has been realised that this is the company that serves the
large market with its products and brands.
Range of brands: as far as another competitive advantage is considered, it is the company that
also serves the market with variety of brands under different section such as men wear, women
were, kids wear etc. It is the brand that has many brands includes in it (Watson, 2009).
Cost leadership: it is the company that focus on attaining the cost leadership in the market. This
can be attained by selling the products with lower price as compared to others. This is what
ASOS do. It focuses on serving the market with cheap clothing and associates the same with
celebrity styling. This is the major competitive advantage of the company because cost
leadership strategy is helping the firm to attain high amount of profit as it is manufacturing the
same things in lower cost as compared to other competitors in the similar industry (Fernie and
Sparks, 2014).
Loyal customers: as ASOS is considered, it is the brand that has loyal customers. This is because
the company serving the customers with cheap products thus the loyalty of the customers remain
constant every time and it is difficult for those customers to switch to other expensive brands.
In terms of comparing the competitive advantage of both the companies, it has been analysed
that Zalando is serving the customers with the premium products while ASOS is serving the
customers with cheap products but both have some target customers who believes it brands.
Bothe has different types of competitive advantage in terms of pricing. In terms of range of
brands, ASOS has 800 brands while Zalando has 1500 brands under its store. This suggests the
level of business of both the companies (Grewal, et al. 2010).

Question 2:
Zalando’s online store is not just a place where customers search for and buy clothes, shoes and
fashion accessories. The online store developed into a fashion themed world including several
features and tools strengthening a convenient and inspirational shopping experience of fashion-
conscious people (Chen and Dibb, 2010). As Zalando is already operating its activities in around
15 countries, thus it has to look for new market now so that it can enter the same and increase its
market share in the world in order to compete with the other companies operating in the same
industry. It has been analysed that there are various factors that needs to be considered, it order
to enter the new market for online market. Some of the factors or the criteria are discussed
below:
GDP of the country: it is one of the most important criteria to select or evaluate the new market.
Online clotting and apparel business is the business of luxury and can be established I the
countries where the economic conditions of the country is strong (Quan and Williams, 2017).
Thus, it is required to analyse the GDP of the country so that the selection of the new market can
be done. GDP is the Gross Domestic Product of the country that is the best measure of country’s
economy. It is the value that is the total of all the value that is generated by the produce of the
companies in the country. As far as the data is concerned, it has been analysed that US is the
country having great GDP and Zalando has not yet started its operations here.
Potential market: potential market can be in terms of purchasing power and can be in terms of
the population. If the population of the country is more it is obvious that the number of available
customers to target by the company is more. This helps the company to target more and more
customers and also have the probability to approach masses. Populations one of the major
criteria at the time of selecting the new market as it gives volume to the market. In terms of
population China and India are the countries that seem to be highly populated and thus act as the
potential market for the companies even in online business (Srivastava, 2008).
In terms of purchasing power, China and India are the countries that have high potential to
support any business. India is the developing country and thus has great market space and
potential to be developed (Forman, Ghose and Goldfarb, 2009). Any company that enter the
developing market have the scope of being developed more and this creates a new opportunity
for the businesses like Zalando to exploit the new market having high potential.

Usage of internet and shopping on internet: the amount of population using the internet is one of
the most important criteria to be considered, this is because it is about the online business
altogether. If the country has most of the population using the internet then it helps the company
to enter the country but if the people are not even using internet in the area then there is no sense
entering such market (Fernie and Sparks, 2014). As far as the data is considered, China is the
country having great internet users. 39% of the overall population is using the internet which is
considered as the huge number because the population of the country is highest in the world. As
far as the data of India is considered 10% are using the internet and this may lead to a problem
for the online business to enter this country. However if the data of online shoppers in con9dered
in India, it is suggested to be just 0.3%. This suggests that the gap is very wide and people are
still looking for better online sites in India to shop for. This opportunity can be easily exploited
by Zalando to fill this gap. More and more internet users in India can be targeted to have the
better shopping experience through Zalando. Even in China that business of online retailing is
only 2.7% leaving a wide opportunity for Zalando to avail (Saini, Saini and Gupta, 2009).
In China, fashion and accessories have highest reach of online shoppers. Online apparel sales
have grown by 50% in China since year suggesting that the market or the industry is very
attractive in this country. In other countries like Australia and UK, the market is already being
saturated and thus the potential to grow for the companies is very limited (Niranjanamurthy et al.
2013). Countries like China and India have the potential because of their population and
emerging market conditions. US are the county that is fully developed and the purchasing power
of the people here is very high. As Zalando is the brand with premium products thus entering the
country like US is also very beneficial for Zalando.
Thus, it has been analysed that the three potential markets for Zalando are:
 US: US is found to be the place that has very attractive online retail market in apparels
after electronics. This suggests that Zalando can get the customers who can afford to buy
the premium products. Even the political scenario of the country is very favourable for
the new business to enter. The only problem that the company will ace is the tough
competition by the local players.

 India: India is the country with large population and thus has great market potential.
Zalando will get the opportunity to explore the Indian market. It has been analysed that
the company has to serve the market with little bit of local touch as it will help the
company to touch the sentiments of the Indian customers. The political stability and
policies for FDI are very favourable as it is a developing country and required foreign
companies to serve in Indian market.
 China: China is the country again with high population and great market potential. In
term of politics the country is rules by autocratic rule and thus this becomes the problem
for the new business to enter the country as the policies may change as per the guidelines
of the governing body.
Question 3:
As per the case Andres Holch Povlsen is the biggest investor in both the companies that is
Zalando and ASOS. Both of these companies are biggest competitors of each other. Andres Holch
Povlsen is the owner of Danish Fashion Company and it has its stake of around 10% in Zalando
and 27.5% in ASOS. The company has invested so much in this online retailer business because
it has some of the pros to enter this business. Some of the pros of investing into an online retail
business are:
Low cost: It has been analysed that investing in the internet retailing business is cheaper than
opening the own physical store. Setting up a physical store has many cons ad it requires great
capital to invest in order to buy a new shop at the centre of the market. Selecting the place is also
a hectic decision to make. After that, reaching to the customers also requires the investors to
make high investment. Thus investing online is very cheap as compared to offline business for
selling apparels.

Tax relaxation: Tax relaxation is also act as the motivator to invest in online business. In
countries like US and UK, the companies not have to pay such big amount of taxes if their
business is running online. Thus the companies like Danish fashion enjoy a lot of tax relaxation
after investing in the companies like Zalando and ASOS. Australia also has the similar loopholes
in it tax policies or internet retailers (Salar and Salar,2014).
Technology and tools: there are various tools available online that helps the business to analyse
the market. the analytical tools helps the online retailers to have detailed estimates that how
many prepare visiting the sites, who are the prospects and who are customers who are interested
in buying etc. this is the information that cannot be available to the store based business. This is
because they can only know about the person who is entering the store. Internet helps the online
retailer to track the activities of the shopper and thus the retailer can provide better offers to that
person in order to attract him to buy the product he is wishing for.
Large market: when a businessmen pen his shop at the centre the market, it is required by hi to
invest a lot on marking the people aware about the availability of the materials and the products
on shop and its presence as well (Belew and Elad, 2017). This is not the case with online retail
market. That market of the one retail is very high and large as compared to the offline stores in
clothing section or other products. It has been analysed that online retailer can reach up to
endless customers through the facility of internet and directly contact with their customers. Even
the customers feel better when they have the opportunity to review what they buying again and
again. In store business, the business person cannot reach put such a large market in one go and
thus have to make efforts in earning the popular that can be earned by the online retailer in hours.
Along with having so much of pros, there are some cons associated with the business as well.
Some of the cons are:
High and tough competition: this is major cons for the retailers who have their business online.
Many small and big online businesses are running these days and this creating a high
competition in the industry. It is very easy to set up an online business and thus anyone can pen
the same. This is creating a mess in the online business market ad increasing the unnecessary
competition for the companies dealing in the online business. It has been realised that the
companies are facing competition even with the same businesses (Viardot and Nylund, 2017). It

is very much required by the companies to invest time and money in marketing in order to
remind the customers about the presence of the sites as they have many options available to
them.
Comparative analysis by the customers: in online business, the customers have the opportunity or
the facility to compare the prices and even the products on different sites. This makes it difficult
for the online retailer to keep high price as they have to reach the market it competitive pricing
strategies. Keeping the ice high may results in loss of customers and the customers can get the
same products in lower price from the other site.
Technological faults: online business is fully dependent on technology and any failure and fault
in the technological system of the site may rupture the whole business. It is very easy to imitate
an online business and thus it is not that much secured in terms of getting imitated (Haug, 2013).
As far as the overall pros and cons are considered, it has-been analysed that skills and
technological knowledge is required to set upon online business. Investment by Andres Holch
Povlsen in ASOS and Zalando is a very nice decision as it have stoke in both the competitor
companies. At the end, Danish fashion is getting their share and their products are siled in the
market by both of these online business.
Conclusion:
The report concludes that Zalando and ASOS are the closest competitors and competing with
each other with high pace. Zalando is the company that deals with online retailer market is
serving the customers in around 15ocuntries. The company has various competitive advantages
such as range of products, premium brand along with its own brands and its investment in
logistics and technology. ASOS also have some of the competitive advantage and one of them is
cost leadership strategy. As Zalando is serving 15 countries thus it has the opportunity to enter
the new, market as well. The countries that have been identified to have the most potential

market are US, India and China. It has been analysed that Andres Holch Povlsen is the owner of
Danish Fashion Company and it has its stake of around 10% in Zalando and 27.5% in ASOS.
This has resulted in attain many pros and cons for the same. Some of the pros are about having
larges market in less investment but the cons are related to the technological faults and the high
competition.
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