Zalando is creating hubs across Europe to ensure it can get as close to the customer as possible to ensure faster logistics.
Speaking at the Metapack Delivery Conference, David Schroder, SVP of operations at Zalando said the e-tailer is trying to put itself into its customers' shoes to make sure the best delivery options are available.
"That's the key for them to come back," he said.
The fashion e-tailer, which was founded in 2008, connects 1,500 retailers with customers around Europe and is currently experiencing 20-25% year-on-year growth.
"We focus a lot on innovation and how to stand out in a competitive marketplace - you have to come up with something that's unique about you and that your customers find intriguing so they prefer your shopping destination."
Logistics network
A survey of Zalando customers found 60% want good prices, while 25% want convenient returns and 24% want fast and reliable delivery.
Meanwhile, 70% of those shoppers want the cheapest home delivery option, while he said there is increasing interest in same-day, scheduled and instant delivery, dependent on the cost.
To enable this same and next-day delivery Zalando is scaling its logistics network by opening large automated fulfilment centres in its home country of Germany, and smaller delivery hubs across Europe. Its first smaller hub opened in Milan last year, with another launching more recently in Paris and another scheduled for Sweden.
"The idea is to get closer to the customer to enable fast delivery and allow all this to happen at an efficient cost," said Schroder. "Customers expect great service and other players, like Amazon, have taught them it is available and it's now what they expect from us."
Its Milan site reduced delivery lead time for Italian customers by 1.5 times, while also increasing purchase frequency as customers benefitted from the better delivery service.
"That's how we know it was a worthwhile investment to apply the same strategy in Paris and later this year in Scandinavia," he said.
Zalando is aiming to provide next-day delivery as standard to 75% of its European customers by 2020 using this logistics network strategy.
Last mile innovation
Zalando also offers same-day delivery in five German cities, as well as Amsterdam. Customers in these regions can order until 3pm and get their item delivered that same night. "The new delivery prime time is 5-9pm the same day," he explained. "And customers respond really well to the service."
He noted how the company thought it would mostly be millennials using this service, but it recently received an order from a woman around 70 years old. "She was already asleep and we woke her up and she didn't tell us to go away, but she was so excited, she alerted her husband who was also asleep to show him what she had bought at Zalando."
Schroder said the e-tailer also has a same-day return pick-up service in Amsterdam and Rotterdam, where customers can request a courier within an hour to pick up the item they want to return. For elsewhere in the Netherlands the pick-up window is two hours.
"We've had a tremendous adoption in a few weeks with limited marketing and we want to push this not only in the Netherlands, but elsewhere with similar services in Berlin, Paris and London."
"We need strong partners to enable this fast delivery and scheduled pick up," he said. "And this requires more flexibility."
Schroder said this means Zalando's delivery partners need to be able to change their routes mid-way through a shift, rather than sticking to a schedule created at the beginning of the day.
"If you disentangle too much – have one for pick-up and another for same-day – the costs explode," he explained. "Also this way you have a chance to make it free for customers in the long term."