Boozt, Zalando, & Nordic Online Fashion | In Practise

Boozt, Zalando, & Nordic Online Fashion

Former Director at Boozt

Boozt

Why is this company interesting?

Founded in 2007 as an outsourced Nordic fashion partner to brands, Boozt pivoted to pure-play online retail in 2011. Through Boozt.com, the company sells fashion and home products and off-price items through Bootzlet.com. Over the last 7 years, revenue has grown 34% CAGR to over 500m EUR in a 40bn EUR Nordic market.

Boozt buys and owns all inventory and is positioned as a premium offering for brands relative to Zalando. Boozt’s reported AoV after returns is ~80 EUR vs Zalando’s 43 EUR and the estimated 5-year LTV / CAC is over 4x.

The competitive advantage of Boozt is a curated assortment, quick fulfilment and a scaled Nordic customer base that brands can leverage. The big challenge is how Boozt can compete with Zalando’s scale, range, and marketing power.

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Executive Bio

Former Director at Boozt

The executive has over 23 years of fashion retail experience offline and online. He enjoyed 8 years at Boozt where he was responsible for managing large supplier accounts, rolling out new categories such as Beauty and Home and finally leading Group Strategy as part of the executive team.Read more

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Interview Transcript

This interview is published anonymously at the request of the executive.

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Can you just share some context to Boozt when you joined in 2011?

I joined in May 2011 and, at that time, the company was mainly operating webshops for third party brands. I joined the team to run the marketing and the brands for a multi-brand site that was launched later in 2011. The company was running mono-brand stores for other brands and we had about three or four partners, at that time. We had a big partner leaving us that summer and we gained a new big partner and we launched, in August, with about 40 brands. I was employee number 35 and, during that summer, we grew a bit more. I think there were around 40 people there.

The original strategy was to run web stores for brands?

They hired a new CEO earlier that year and he got the idea to combine the mono-brand stores that they were running and make one platform. They originally had split fulfilment between Kolding in Jutland and Ängelholm in Sweden. The company was, and still is, located in Malmö in Sweden.

When we look at the history of Boozt, has the company ever experimented with a third-party marketplace type business model with brands?

You could say that with one of the partners we had when we started, we had split fulfilment so we had customers shopping on their site, getting products delivered from the warehouse in Ängelholm and from the partner’s warehouse in Jutland. At that time, we had also outsourced our customer service so that created a lot of challenges when people bought products that were delivered from the two different warehouses. I think that this why, over the years, they have been so reluctant to work with third-party partners.

So Boozt was running two warehouses and the brands would then send the inventory to Boozt to store in the warehouse and they would fulfil the order?

The partner had their brands and part of their stock in their warehouse, in Kolding. When you bought something from one of their brands, it could be the case that one product was shipped from Kolding and the other product from Ängelholm.

Do you think running a third-party marketplace, similar to Zalando, is an opportunity for Boozt?

I think they would be quite reluctant because of their previous experience but Zalando is managing it quite successfully and mientus is also doing it very effectively in the region. There is an opportunity, but the fulfilment from Boozt is extremely fast. I think it must be one of the fastest in the market for the Scandinavian countries. Unless you live in the barren northern part of Norway, Sweden or Finland, you will receive your products within one to three days and nobody else can do that right now.

Is that because they have consolidated their fulfilment and I believe they use AutoStore now, in one center?

Yes; they use AutoStore and they have very good deals with their forwarding partners. For the majority of Denmark and a large part of the Nordics, you can actually get your products the day after you order them. If you are working with a third-party partner then you will not be able to guarantee this kind of experience. But then, of course, you will have a limitation on the amount of products. The reason that Zalando is doing it is to increase the number of products from each partner. Often, the partner program with Zalando is a combination of Zalando buying what they really know they can sell and then the partners have the opportunity to add extra styles to the assortment on Zalando and that is often what they carry with the third parties.

Why doesn’t Boozt do this as well?

Because Zalando have split their fulfilment centers over Germany and, even when they didn’t have these agreements, their customers didn’t experience the same speed in fulfilment after they had placed an order. I think this extremely speedy delivery is one of the strong reasons to shop on Boozt. You didn’t see it on Zalando when they bought most of the product themselves and I don’t believe that you see it now when they have the third-party partners.

But it does increase the range, so there is a trade off? You get broader range and, potentially, higher conversion, but maybe slower delivery. Do you not think it makes sense for Boozt to do a bit of both? Buy in some inventory that they know they can sell and ship very quickly, but also have the option for brands to ship directly to customers via a third-party marketplace style?

I think it’s a possibility but I think they will wait a while to do that. They are just increasing their capacity in AutoStore and building on their warehouse. Maybe when they expand their market and it becomes harder to keep running the store with only one fulfilment center then it might be interesting.

Why does Boozt love owning the inventory so much?

When we started, we also had these consignment deals where the brands still owned the product but it was in the Boozt fulfilment center and, in terms of the growth rates, it was very hard to get these brands to take the risk of putting enough stock into the fulfilment center. So we actually converted nearly all of the consignment agreements to own-buy because we were willing to take the risk of increasing the orders to the amount of stock we believed we could sell. Now, with the introduction and growth of Booztlet, they have a partner that is willing to take their overbuys on products.

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