In Mondays‘ issue of the Frankfurter Allgemeine Zeitung there’s an article about the electronics distributor and retailer Conrad Electronic SE, which has 4000 employees and is run by the fourth generation of the Conrad family.
Asked about Zalando Werner Conrad said: „Zalando leads consumers to believe that every item is delivered the next day and free of shipping charges. With return rates of 50% and more the business model can’t work long-term. Even if Zalando fails the damage of having conditioned consumers to limitless order and return behaviour will remain. That is dramatic!“
Even though Zalando has 13 million customers the company is generating high losses and has little chance of every being profitable, should they not change the shipping and return policy, Werner Conrad believes.
I have read that Zalando is in the black in its core market in Germany, Switzerland and Austria, and that they have priced the shipping into their sales prices. There’s reason to believe that once they have the strong brand and loyality, consumers will pay a premium to use their shopping channel, reflected by higher price tags of sold products.
Greater Fool Theory states that any price (no matter how unrealistic) can be justified if a buyer believes that there is another buyer who will pay an even-higher price for the same item. That’s what Zalandos‘ current owners may believe currently.