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Why Amazon Should Worry About Zalando’s Private-Label Push

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Zalando logistics fulfillment center
European e-commerce company Zalando wants to strengthen its in-house fashion label—and sell it on rival websites.

The Berlin-based company, which started life in 2008 as an online shoe store bearing a striking similarity to the Amazon-owned Zappos, is working to turn the 17 brands that make up its private-label unit, ZLabels, into a standalone business.

“We see great potential. We want to strengthen the brands outside of Zalando,” Jan Wilmking, ZLabels chief executive, told Reuters, explaining that investors had voiced concern that less than one-fifth of the company’s sales came from its in-house brands, whereas British e-tailer Asos pulls in about half of its revenue from its own labels.

But while Asos focuses more on millennials, ZLabels reaches a broad audience.

“We are doing very good work in the value-for-money segment but we are very cautious about pushing that to the kind of limits that others do,” Wilmking added.

Amazon ruffled some retail feathers earlier this year when news broke that the Seattle-based e-tailer had launched seven of its own labels, each offering on-trend items priced under $100. What sets Zalando apart (and by association, its ZLabels unit) is the fact that it sells high-end names such as Proenza Schouler and Givenchy, whereas Amazon Fashion sells brands typically seen at any off-price outlet, like Kate Spade, Calvin Klein and Michael Kors.

Another key point of differentiation: Zalando will soon sell its shoe label Zign on Asos and several of its brands are already on Alibaba’s Tmall marketplace. But consumers can only find Amazon’s brands on Amazon. While some analysts told Reuters that selling ZLabels on other sites could give shoppers less of a reason to visit Zalando, Wilmking said the opportunity outweighs the risk of cannibalization.

For now, ZLabels is separating its logistics and technology from the company and setting up its own warehouse in northern Germany, from which it will ship its brands to Zalando distribution centers and those of other e-commerce sites.

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