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Similar to Zalando's perspective on Payments: Be disruptive
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Zalando's perspective on Payments: Be disruptive
- 1. BE DISRUPTIVE Z A L A N D O P A Y M E N T S A T M O N E Y 2 0 2 0 B E N J A M I N P A N N I E R 2 6 - 0 6 - 2 0 1 7
- 2. C O N S U M E R SB R A N D S E N A B L E R WE HAVE BECOME EUROPE'S LEADING ONLINE PLATFORM FOR FASHION
- 4. 4 … AND IT WAS WORTH IT. ~3.6billion € net sales 2016 >200 million visits per month >20 million active consumers >12,000 employees in Europe 15 countries >2,000 brands
- 5. 5 DEFERRED PAYMENT WAS A GAME CHANGER FOR US.
- 6. 6 … BUT ALSO FOR SOME CONSUM ERS .
- 7. 7 TODAY PAYMENT S HAS BECOME A PROFIT CENTER INSTEAD OF A COST CENTER. 22 10 payment methods deferred payment countries deferred payments >66% 120million transactions per year
- 8. 8 DISRUPTION IS NEEDED TO BRING PAYMENT S TO THE NEXT LEVEL.
- 9. B E N J AM I N P AN N I E R 2 6 - 0 6 - 2 0 1 7 Z A L A N D O P A Y M E N T S
Editor's Notes
- Zalando today is not only one of the biggest e-commerce sites for fashion but are becoming Europe’s leading online platform for fashion. As retailer we have been focusing on our consumers, but as a platform we have developed a different mind-set when we talk about our customers. As platform our customer group is very diverse: consumers, brands, partners, stylists, delivery partners, retailers etc. Our aim is to develop services and products that fit the needs and interest of all these players. The deeper we integrate into the retail industry and provide great solutions everybody is addictive to, the bigger and more sustainable our company will be. Our platform strategy is more a company commitment to seek for a broader role in fashion. The services we provide are around Payments, Logistics, Advertising and last but not least a portal with millions of consumers every day. Becoming an important player in a market is neither easy or comes for free. It needs blunt thinking, it needs taking risks – to disrupt an existing market.
- Zalando did literally everything to gain consumers trust like here where one of the founders where shipping packages in 2008 himself to make sure they arrive on time. We took a lot of risks and tried things out which rarely someone has done before. For example we were the first one in Europe who has offered free returns of your package in case you do not like it. This created a big impact. First obviously on our cost side as returning a package costs money, long term consumers were expecting this service and they were adapting their behavior which resulted in bigger basket sizes, higher retention rate, higher consumer satisfaction and last but not least in higher return. We took risks and costs without knowing if it would be successful.
- Taking a risk, doing it differently than others paid out. We are one of the biggest fashion retailers in Europe. We were are not only able to convince more than 20 mio. consumers to come and shop with us every day. We just announced that 2000 brands do trust us that with us they can sell more goods through our platform. We sell the goods of our partners in 15 countries in Europe which resulted in 3.6 billion net sales last year. Offering free retours was not the only risk we took…
- With offering free returns we were able to come closer to an in shop experience, you could try things out for free. Still you had to pay before you enter the fitting rooms, your home. We decided that we like to create the same experience like for offline shopping. Try out before you pay and send back what you do not like. We tried to find partners who can support this mission. No PSP or someone else in the payment space had an offer for us which could have worked in the size we needed it. We decided to do it on our own as we were believing in it will bring much value to the consumers. When we started the numbers picked up quickly. Revenue was growing, we were shipping more packages than ever, more packages than assumed, really many packages…
- …but we learned that the willingness to pay of some customers was limited. We learned the hard way that taking risks can hurt you, we spend quite some money to learn this back then. Even if it was painful, we were still believing in the deferred payment options and saw that customers like to try out things before they pay. They are more attracted to online shopping with deferred payment. E.g. in Germany deferred payment / pay via invoice is the option that our customer like the most. That’s why we kept on searching for possibilities to lower the risk. We were investing in a new team, building algorithms with machine learning which are able to predict if an order is fraud or not. We analyze many signals before we even show the payments page so that we can decide if we offer based on a transaction if we offer a deferred payment method or not. Today we can not only detect fraud on a level where we set new market standards but we can predict if a consumer solvent or not. We can even steer the risk dynamicly based on if we like to empty our warehouses or if we like to run some local campaigns. We can decide if we like to take more risk, to attract more customers, to ship more packages and ideally make more revenue. Our internal claim: “We sell conversion/revenue.” The difficulty is to find the sweet spot between making more money and to attract fraudsters and loose a lot Learning: blunt thinking is good, make sure you do your homework
- Payments is a dedicated organization within Zalando, we are profit center which can steer the revenue of the mothership with offering deferred payments. We support Zalando in 15 European countries, we offer not only the major payment methods like CC but also many local payment methods as this is what a consumer want. He likes to pay in a convenient way. Convenient is for everyone different, it has culture influences but as well through other habits. We try out a lot what kind of payment methods consumer likes, in the end we figured out that any payment method with an easy to use UI works. Consumers do not follow a particular brand or go even away when a certain brand does not get offered any longer, they easily convert from one to an other payment method. This works for some countries better than others. Also we can see when consumers get a deferred payment method offered they convert on these over proportional good. We started a new product end of last year in France where this country is not used to deferred payments and even there we can see that without marketing people adapt fast and it drives growth in basket size and retention rate.
- Taking that consumers do not follow a dedicated brand when it comes to payments as they do not hesitate to switch from one payment method to an other. It needs constant disruption – constant improvements to make something, what no one likes, to something what at least do not hurt. Payments is in the shopping experience something what everyone would like to avoid. Especially with PSD2 were we might increase the felt secureness of a transaction, it disrupts the user experience – not in a positive way. It will cost – any e-commerce business – together many billions and it needs disruptive ideas to compensate that. This might be a new opportunity for the PSP’s and other payment methods to survive in a business which is commodity already.