When nations around the world went into emergency lockdown mode to prevent the domestic and cross-border transmission of Covid-19 this time last year, regional fashion e-commerce player Zalora, which operates in six markets across Asia, braced to face a supply chain squeeze like no other.
“2Q2020 was really a tough quarter, especially the first four weeks. In the Philippines, our warehouse was shut for six weeks,” CEO Gunjan Soni tells The Edge Singapore in an interview.
But, as the team at Zalora soon found out, customers working from home also meant they had more privacy and time to shop from home. At the height of the Covid-19 outbreak in 2Q2020, Zalora’s app saw 2 million downloads, says Soni.
“Consumer demand was still strong, and we were still receiving orders, but we couldn’t fulfill them,” she adds. “Meanwhile, we used some very nimble ideas to manage the last-mile delivery. We onboarded new partners when needed; we also opted for charter flights to increase capacity. In some cases, when flights for a route were completely shut down, we even opted for sea routes,” adds Soni.
Zalora was so successful in managing its deliveries that their brand partners also took notice. “After the first six weeks, they saw our deliveries and said, ‘How come you’re able to deliver our orders the next day or within two days, but we are struggling to do it even in 10 days?’”
To help these brands, Zalora launched One Stock Solutions (1SS) last May as a “fulfilment as a service” solution. “For our brand partners, which are already using our warehouses, we can now support the fulfillment of their orders as well,” says Soni.
According to her, 1SS has enjoyed “very, very healthy adoption” among Zalora’s brand partners. “These are some ways in which we are trying to also help our brand partners and not purely focus on us and the consumer.”
Strongest quarter to date
Zalora is primarily focused on Southeast Asia but its parent company, London-based Global Fashion Group (GFG) operates three other e-commerce platforms: Dafiti in Latin America, Lamoda in Russia and the Commonwealth of Independent States (CIS), and The Iconic in Australia and New Zealand.
As the e-commerce boom in Southeast Asia was also seen in other parts of the world, GFG saw its strongest results to date in 3QFY2020 ended Sept 30, 2020.
During the quarter, net merchandise value (NMV) increased 34.5% y-o-y to EUR503.4 million ($808.98 million), its highest in 16 quarters.
Listed on the Deutsche Börse Xetra, GFG has seen its share price rise from EUR1 last April to as high as EUR14.90 in February. It closed at EUR10.69 on March 5, valuing the company at EUR2.26 billion.
Within the group, Zalora contributed EUR79.2 million in NMV in 3QFY2020, up 34.0% y-o-y; and revenue of EUR62.4 million, up 27.9% y-o-y. The platform also reached 3 million active customers.
“I definitely feel very good about the results,” says Soni. “I do believe that we have certainly survived the crisis, but now we are in the phase where we are actually looking for opportunities to actually thrive in this environment.”
Last week, Zalora announced another set of stellar figures for 4QFY2020. Noted as the company’s “best-performing quarter to date”, Zalora’s NMV grew 33.4% y-o-y, while revenue grew 22.5% y-o-y.
As a group, FY2020 was GFG’s first profitable year on an adjusted ebitda basis.
While orders rolled in, the team at Zalora also noticed a drastic shift in category mix. “Unsurprisingly, the occasionwear category saw a huge downward dip. This includes dresses, high heels, much of the traditional wear,” says Soni.
In its place, sales of loungewear and sportswear “picked up a lot”, she adds. Interestingly, Soni also notes a rise in luxury purchases, even as households were reportedly tightening their purse strings amid the economic uncertainty.
“Ultimately, we are dealing in lifestyle categories, and the more you feel good about life, the more you want to indulge in some of these products,” says Soni, noting the pandemic is upending luxury retail trends.
This aberration is, perhaps, testament to the shift in fashion retail towards e-commerce. “It’s definitely a favourable trend for the e-commerce world. We’re seeing it globally; it’s not unique to our situation,” says Soni, who joined Zalora in January 2019 with more than 15 years of experience in marketing, strategy and operations.
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“This crisis has really made a lot of people who were hardcore offline loyalists look to online… We’ve been nimble enough to be able to offer a wider portfolio and benefit from the shift in demand among the categories. Other players who are very narrowly focused on one or two categories have definitely suffered,” she adds.
Zeal for Zalora
“I think the pandemic has been the most defining aspect of what this year has brought us. Certainly, that has led to a changed approach on the leadership and the strategy for us here at Zalora,” says Soni.
Still, the highest on Soni’s list of priorities when the pandemic struck was ensuring the health and safety of Zalora’s 1,700 employees. “We had already switched to multi-shift systems before governments mandated it. The Singapore government has been very helpful in sharing best practices and we’ve adopted them from Day One.”
As a “largely digital business”, Zalora made a “seamless” transition to working from home and flexible work arrangements. “They benefit certain sections of employees who otherwise had constraints. Many women used to abandon their jobs because of the pressures of managing children.”
Other initiatives to bolster employee welfare include subsidies for home Wi-Fi, virtual town halls and “Covid Surveys” every fortnight to gather workers’ feedback on work arrangements and how their families are coping with the pandemic.
“It was definitely a phase of understanding and realising the shifts we needed to make in managing employee safety and well-being on one hand, while driving strong internal communications to keep people together,” says Soni.
As the world enters a new future of work, she hopes that corporations will retain the ideas forged during the pandemic. “Things like flexible work [arrangements] were not well-embraced by managers and organisations earlier. I really hope that, after the pandemic, companies will not forget the lessons they have learnt.”
