European e-commerce giant acquires competitor for 9 billion to fight against Temu and SHEIN?

According to statistics from Statista, the European online fashion industry, as the highest-earning sector in the e-commerce market, is expected to see revenue increase by $85.3 billion between 2024 and 2029, an increase of 55.99%, and reach a new high of $237.8 billion in 2029.

Against this market backdrop, European fashion e-commerce giant Zalando recently announced a major strategic adjustment.

Zalando announces acquisition of competitor About You

Last Wednesday, German fashion online giant Zalando announced that it had reached an acquisition agreement of approximately 1.2 billion euros (approximately 9.184 billion yuan) with its competitor, another German fashion e-commerce giant About You.

Data shows that Zalando's sales in 2023 will exceed 10 billion euros, and as of the end of September this year, its platform has about 15,200 employees; About You's sales last year were about 2 billion euros, and the number of employees was about 1,250. It is worth mentioning that Zalando once criticized About You because About You "robbed" many of its young users.

In this transaction, Zalando will acquire all shares of About You at a price of 6.5 euros per share. This transaction price is 12% higher than the market expectation of 5.8 euros per share and 107% higher than the average share price of About You in the past three months.

The transaction is currently subject to regulatory approval; if approved, the transaction process is expected to be completed in the summer of 2025.

Zalando, an established player founded in 2008, is now one of the largest online fashion platforms in Germany and Europe. It provides fashion and lifestyle products to more than 50 million active users in 25 markets around the world. Zalando believes that this deal will enable it to occupy a larger share of the European fashion e-commerce market.

About You is known for its young, fashion-oriented brand positioning. It was founded in 2014 and is a subsidiary of the Otto Group (a sister company of the Otto platform). About You currently has about 12 million monthly active users, and there are about 4,000 brands and about 700,000 product categories on the platform.

After the merger, About You will continue to operate as an independent brand, and the positions of the three co-founders of About You will not change; Zalando co-founder Gentz ​​also said that he is not considering layoffs for the time being.

The industry believes that the merger of Zalando and About You will shock the entire European fashion e-commerce industry; by merging with About You, Zalando will add another 12 million monthly active users and will dominate this field.

Merge to fight Temu and SHEIN?

In recent years, e-commerce platforms such as Temu and SHEIN from China have been expanding into the European market, which has put considerable pressure on local e-commerce platforms. Therefore, many reports mentioned that Zalando acquired About You to counter the pressure from Temu and SHEIN.

In response to this statement, Carsten Kortum, a professor at the University of Baden-Württemberg in Germany, said in an interview with the media: "The highly price-competitive Chinese e-commerce platforms are almost unmatched even for European fashion e-commerce giants. At the same time, Zalando has not set foot in these low-price markets and has no plans to do so in the future."

Therefore, Professor Kortum believes that this is not a cooperation against Temu and SHEIN. On the contrary, this acquisition will enhance the competitive position of Zalando and About You in the European e-commerce market, especially against European peers.

(Photo source: foreign media)

For About You's parent company Otto Group, based on its shares and the offer price of 6.5 euros per share, the group can obtain about 450 million euros in cash proceeds through this transaction. In the 2023-24 fiscal year, Otto recorded a loss of 426 million euros. Professor Kortum believes that the shares held by the Otto Group have limited impact on About You, so this shareholding method is of little significance to the group; on the contrary, in order to better obtain financing from banks, the Otto Group is now in urgent need of cash. Some industry insiders are also worried about the Otto Group: If About You is no longer part of the Otto Group, then what will the Otto Group rely on to maintain its current market position?

For Zalando, the acquisition of About You will not only reduce a strong competitor, but also strengthen its position in the market; under the dual-brand business strategy, Zalando's growth will also have new highlights.

In the B2B field, Zalando can integrate About You's service Scayle into its e-commerce operating system ZEOS. The former is called "one of the fastest growing SaaS platforms in the world and is already very profitable" and already has more than 200 customers from Europe and North America. After the merger, the two parties will also integrate logistics, payment and other aspects. This integration will save Zalando about 100 million euros per year.

However, despite Zalando's 2.4 billion euros in cash reserves, Professor Kortum believes that its profitability may still face challenges. At the same time, any acquisition will face the risk of corporate culture integration: "Whether the two companies can quickly integrate their corporate cultures will be a key issue."

However, Nils Seebach, founder of digital consulting firm Etribes, believes that to create a truly European (industry) No. 1 Zalando needs to make further acquisitions, such as its British competitor Asos. In an interview with the media, Zalando co-CEO Schröder said that the group has enough funds to continue to grow - through organic growth and acquisitions.

The European fashion e-commerce market is a battle of the gods

Fashion products have become the mainstay of the European e-commerce industry. According to the European E- commerce Report 2023 released by the European E-commerce Association and EuroCommerce, fashion products account for 68% of the European e-commerce market. At the same time, competition among fashion e-commerce platforms is becoming increasingly fierce.

Zalando : As a European fashion e-commerce giant, its performance in the third quarter of 2024 exceeded expectations, with GMV reaching 3.5 billion euros, a year-on-year increase of 7.8%; revenue increased by 5% to 2.4 billion euros; and active users returned to 50 million. This strong performance made Zalando optimistic about its full-year performance expectations and raised its full-year performance expectations.

About You : Revenue in the second quarter of the 2024-25 fiscal year increased by 2.4% year-on-year to 450.1 million euros, of which revenue in the Greater Europe ACH region increased by 8.6%. The number of active customers in the second quarter rose to 12.4 million, and the average order value increased by 5.6% to 58.8 euros.

SHEIN : Sales in Europe will reach 7.68 billion euros in 2023, a year-on-year increase of 68%. This growth has made SHEIN a leading online fashion retailer in many European countries, with impressive performance in markets such as France, Germany, the United Kingdom, and Spain.

Asos : A top-ranked fashion e-commerce platform in Europe. Although its annual revenue fell to £2.9 billion in fiscal 2024, it still has more than 23 million active users worldwide. At the same time, it has completed the transition to a new business model, and its inventory has fallen by about 50% to £520 million since fiscal 2022.

Vinted : A Lithuanian C2C e-commerce platform focusing on the second-hand fashion market, its revenue reached 59.6 billion euros in 2023, a year-on-year increase of 61%, and its GMV exceeded 9.3 billion euros, with outstanding performance in the French, British and German markets.

In addition, comprehensive e-commerce platforms such as Amazon, eBay, and Temu have also played a significant role in the European fashion e-commerce market. Through their respective platform advantages and market strategies, they have had a significant impact on the entire fashion e-commerce ecosystem.

At the same time, technological innovation is also driving the development of the European fashion e-commerce market. AR and 3D technologies have changed fashion e-commerce, improving conversion rates and customer loyalty; the rise of social e-commerce, especially the built-in shopping functions of platforms such as Facebook, Instagram and TikTok, has also become an important channel for fashion brands to reach young consumers.

In general, it is still unknown what impact Zalando's merger with About You will have on both parties, and how much impact it will have on the entire European e-commerce market is also unknown. Ennet will continue to pay attention to this.

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