November 29, 2022

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Online store Zalando is reportedly looking to expand to the US in 2023

  • Under the name ‘Project Kangaroo’, the web store Zalando is preparing the biggest step in the company’s history: expansion to America.
  • More than a hundred people are working on top-secret plans to enter the US market in 2023.
  • Zalando will make full use of influencers to build brand awareness in the US.
  • read more: Webshop Zalando observes that price increases cause consumer backlash

Zalando executive Jim Freeman has spent months preparing what could be the biggest move in the company’s history. The chief business and product officer, who has been shadow CEO since the departure of Rubin Ritter, is preparing the online store’s entry into the US market.

The project is so important that Freeman has made it a secret operation not only to the outside world, but also within the company. He’s calling it “Project Kangaroo,” and all members of the team have signed a non-disclosure agreement, according to insiders. All employees are already bound by a duty of confidentiality by their employment contract, but that was not enough for Freeman.

Nothing about the project may be published outside the walls of Zalando’s headquarters or outside the project team. Freeman didn’t want the ‘kangaroo’ roaming around locally.

Expansion to the US is planned for next year. According to insiders, Freeman and his project leaders are willing to invest hundreds of millions to build a US branch. Meanwhile, more than a hundred people are already working on ‘Kangaroo’ within Jalando.

Freeman initially wants to focus primarily on the US Northeast, not specifically on cities, but on the region as a whole. These include Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. These regions are home to megacities like Boston, New York and New Jersey.

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Jalando starts on the right side of America

As an American, Freeman knows the US market well. Prior to joining Zalando, he worked at Amazon for 8.5 years. Seven years at Prime Video in Seattle, then in the Alexa division. It was not for nothing that Freeman chose the Northeast to establish a foothold in the United States: people earn on average $91,887 gross per capita Maximum and consumption is $68,696 per capita.

Residents of the Northeast United States spent more than $2,000 per person on clothing and footwear in 2020, making them the national leader. The North East is considered a ‘high tech hub’ and has many logistics hubs and distribution hubs. So Jalando will find a better infrastructure and many potential customers in all metros, who will also be interested in the European brands that the web giant has in its range.

But first, Zalando needs to be known to all potential customers. According to insiders, Jalando wants to explore new avenues in the field of marketing and advertising. Until now, Europe’s market leader has relied mainly on the proven concept of TV ads and big banners in metropolitan areas, and Zalando has been investing only in influencer marketing. Freeman seems to be a fan of TV commercials.

Costly American Influencers

In the US it will be different because influencers have to ensure brand awareness there. Jalando prefers to use the most famous and most expensive stars in social networks. Influencers can ensure faster brand awareness and trust because they have been known to the general public for years. Zalando is said to have looked at its about-you competitor with admiration for years, campaigning almost exclusively with advertising and influencers – and with success.

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The problem is that the project team didn’t exactly define what Zalando’s target audience in the US should be. And more importantly, how will Zalando differentiate itself from the US competition? Zalando still benefits from being one of the first companies to offer free returns, both in its home country of Germany and in the rest of Europe.

In addition, Zalando has a very wide range of brands. But it’s not a ‘unique selling point’ in the US, as it was common before Zalando started doing it in Europe. Project team members voiced their concerns to Business Insider Deutschland about Zalando’s lack of imagination to differentiate itself in the US market.

Zalando shares fell

Additionally, the fashion giant currently has his hands full with his dire business situation. In the first quarter, sales fell 1.5 percent. The stock market value fell from 26.35 billion euros in July 2021 to 9.4 billion euros last May. A year ago, the stock was still trading at almost 100 euros, and now the price is around 25 euros.

Due to ongoing inflation and supply chain issues, Zalando has significantly lowered its growth forecast for the current year. The webshop originally had turnover growth of 12 to 19 percent, but that has now been adjusted to a maximum of three percent, from 10.4 to 10.7 billion euros.

So Freeman is now mainly focused on ways to get out of the abyss, so Project Kangaroo has been put on hold for a while. However, according to insiders, the schedule for 2023 is being retained.

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Business Insider Deutschland sent Zalando a lengthy questionnaire about the Kangaroo program, but a spokesperson did not respond to those questions. However, he said: “We have grown significantly in Europe in recent years. We are constantly looking for opportunities to improve our offer, which includes new product types and regions. We believe there are opportunities to expand in this context outside of the European continent.”

The company also confirms that the expansion plan is on hold for a while: “In the current situation, we are focused on better serving our customers and partners in the existing Zalando markets.”

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