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Zalando Returns Scrutinized Ahead of IPO

Free float, free returns?
  • Why it matters

    Why it matters

    Readying its IPO, Zalando must satisfy picky customers while boosting profits.

  • Facts


    • Zalando is focusing on customer retention and efficient logistics.
    • Ikea has eliminated time limits usually associated with its returns.
    • Zalando can copy Amazon, but rival online discounters are a threat.
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Anyone worrying about the imminent initial public offering of the Berlin-based fashion mail-order company Zalando SE might quote the company’s early advertising slogan: “Shout for joy – or send it back.”

Skeptics say the online retailer threatens to be overwhelmed by the large number of packages returned. With roughly half of all products sent back, they say, sustainable profits are tough to achieve.

Yet the right to return products is not an invention of the Internet. As early as 1950, a German start-up company called Neckermann became one of biggest mail-order retailers in Europe. Advertising imagery showed a postman laden with heavy packages accompanied by the slogan, “Buy without risk! Exchange or money back.”

What the Internet has since changed is the sheer volume of mail-order retailing.  An increasing number of consumers have come to appreciate its convenience and new digital technology that makes mail-order retailing even faster and easier. These developments put pressure on high-end retailers, too, because customers expect exchange service from all retail outlets.

Ikea, the Swedish furniture retailer registered in the Netherlands, is taking the exchange policy to new heights as it releases its eye-catching new catalogue. Ikea is eliminating the time requirement for returns, allowing customers to send back products at any point in the future for no other reason than they no longer like it. Even heavily used and defective furniture, Ikea promises, will be accepted with the purchase price refunded.

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