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Zalando Revises 2025 Outlook Amid Inventory and Growth Concerns

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Zalando, Germany’s largest online fashion marketplace, has adjusted its 2025 guidance following the acquisition of rival About You. While the updated forecast reflects higher expected sales, analysts and investors expressed concern over growing inventories, heavier discounting, and signs of weaker consumer sentiment—factors that could weigh on second-half performance.

After initially gaining, Zalando’s shares fell 5.6% to their lowest level in almost a year, bringing year-to-date losses to around 25%. Deutsche Bank analyst Adam Cochrane noted that the stock’s appeal as a revenue growth play is now in question, with less potential for earnings to exceed expectations.

The company now expects 2025 gross merchandise volume (GMV) of €17.2–€17.6 billion ($19.91–$20.38 billion), representing 12–15% growth from last year’s figures for the combined group. This is a sharp increase from its previous forecast of 4–9% growth, largely due to the inclusion of About You, acquired in July for €1.13 billion.

Second-quarter GMV rose 5% year-on-year to €4.06 billion, but gross margin slipped by 80 basis points due to increased discounting. Analysts flagged that earnings quality was weaker than hoped and pointed to a 15% year-on-year inventory rise to €1.66 billion by June 30, raising the risk of more markdowns ahead.

Co-CEO Robert Gentz acknowledged weaker consumer sentiment but remained optimistic about a strong second half. Interim CFO David Schroeder said the third quarter had started well, with mid-single-digit growth expected to continue.

Zalando is also expanding its European logistics network, opening it to partners in an effort to boost growth amid rising competition from fast-fashion rivals like Shein. The company forecasts 2025 adjusted EBIT of €550–€600 million for the combined group, up from its prior estimate of €530–€590 million excluding About You. Gentz added that while U.S. tariffs would not directly affect operations, they could dampen consumer sentiment in the long term.

EU Proposes €2 Fee on Low-Value Parcels, Posing Challenge for Shein and Temu

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The European Union is preparing to introduce a €2 ($2.27) handling fee on low-value e-commerce parcels entering the bloc, a move that could significantly impact fast-growing Chinese platforms like Shein and Temu. The measure is aimed at addressing a surge in online orders and leveling the playing field for European retailers.

In 2024, EU customs authorities processed 4.6 billion low-value parcels — double the figure from 2023 — with 91% arriving from China. The proposed fee, still pending approval by EU member states and the European Parliament, would be paid by the online retailers, not by consumers.

The European Commission said the fee would help fund compliance checks on the flood of packages, including regulations around toy safety and consumer protections. A smaller fee of €0.50 is also proposed for goods processed through EU-based warehouses, potentially favoring global firms with advanced logistics over smaller retailers.

“It’s fair to ask Alibaba, Temu, or Shein to pay their fair share,” said Bernd Lange, Chair of the European Parliament’s trade committee. He noted the burden these shipments place on customs authorities and the need for proper enforcement.

France has already voiced support for the measure, while the EU had previously announced plans to end the duty-free status of goods under €150 — but not until 2028.

Reactions from European retailers have been largely supportive. Zalando welcomed the proposal and called for fast-tracking the removal of the €150 customs exemption. Germany’s HDE retail association also endorsed the fee as a step toward curbing unfair competition.

However, concerns remain. Allegro, a leading Polish e-commerce platform, warned that the €0.50 fee for goods processed in EU warehouses might unintentionally benefit larger global players, while smaller firms would bear the full €2 cost. “The implementation details will be crucial,” said Allegro’s regulatory manager Ewelina Stepnik-Godawa.

Chinese companies have yet to respond, though China’s foreign ministry urged the EU to maintain a “fair, transparent and non-discriminatory” environment for Chinese businesses.

The proposal comes just weeks after the U.S. scrapped its own de minimis rule allowing duty-free entry for goods under $800, reflecting a broader global shift toward tighter e-commerce trade regulation.

Zalando Harnesses Generative AI to Slash Campaign Costs and Speed Up Fashion Marketing

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Zalando, the European online fashion retailer, announced it is using generative artificial intelligence (AI) to accelerate content production for its app and website, allowing it to respond quickly to viral fashion trends while cutting marketing costs by up to 90%.

According to Matthias Haase, VP of Content Solutions at Zalando, generative AI has reduced image production times from six to eight weeks down to just three to four days. The tech enables the brand to stay agile in an industry where fast reaction to fleeting trends—like “brat summer” or “mob wife”—can determine visibility and sales.

More than 70% of Zalando’s editorial campaign imagery in Q4 2024 was AI-generated, including content used in its trend recaps and seasonal promotions. The company is also developing AI-generated “digital twins” of human models, creating three-dimensional replicas for consistent visual use across product pages and campaigns without the need for repeated photo shoots.

“It’s not that AI content is better than human-created content,” Haase noted, “but it’s more timely and relevant to what customers care about now.”

Zalando joins a growing list of retailers integrating AI into their workflows. In March, H&M announced a similar initiative using digital twin technology developed with a modeling agency. The technology appeals especially to mid-tier retailers, offering an alternative to expensive, logistically intensive photo shoots favored by high-end fashion houses.

Asked about the impact of AI on creative jobs, Haase said that photographers and creatives will remain essential, but must adapt. “Creative minds now have, instead of two hands, six hands,” he said, emphasizing AI as a tool, not a replacement.