This article is excerpted from a letter by Pieter Hundersmarck, fund manager at Flagship Asset Management, based in Cape Town, South Africa.

Pieter will present his thesis on Zalando at European Investing Summit 2020.

Zalando ( is the number one online apparel & footwear retailer in Europe with c.10% online market share. It is a focused, pure-play online retailer which offers a one-stop fashion destination, including shoes, apparel and accessories, from over 2,000 global brands. Zalando’s website attracts more than 4.2 billion visits per annum and as of Q1 2020 it had nearly 32 million customers in 17 European countries.

Zalando was founded in fall 2008, just days before the start of the financial crisis. In the early days, the small 7-man team worked from a shared apartment in Berlin which became a warehouse and office. The three founders’ private cell phone numbers were the customer hotlines, and they took all the packages to the post office themselves. By offering free delivery and up to 100-day right of return, Zalando set new standards in online retail and grew quickly.

Today, Zalando is the European online leader, generating €6.5 billion in revenue and employing over 14,000 people. It is still headed by founders Robert Gentz, David Schneider and Rubin Ritter. Customer service has since been moved to a dedicated team, as has package delivery.

Rather than set its sights on becoming a large online retailer, Zalando’s vision is to become the starting point for fashion related decision-making, sourcing, goods and services. This means doing more than just buying and reselling clothes: it means being the platform through which you find inspiration, compare and contrast, search, engage and shop. The analogy is akin to the role that Spotify and Netflix play in the consumption of music and visual content respectively.

Zalando’s vision is to be a shopping platform, on which selling its clothes is the primary service supported by brands that operate their own ‘shop within a shop’ on the platform. It further seeks to provide data, marketing and order fulfilment support to these brands. In this sense its vision is akin to being an “online shopping mall” with added delivery and intel services to the shop owners, rather than, for example, to be a Zara or an H&M.

Why do we like it?

Regular readers will know that we invest in businesses that exhibit high quality. In general, we look for businesses that have the following attributes.

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