Germany Emerges as Europe’s New Capital of Fashion E-commerce

Until a few years ago, Britain was the undisputed capital of fashion e-commerce, the home of first movers Net-a-porter, Farfetch, Matches and Asos, which were building tech empires and competing with one another on breadth of offer, speed of delivery and international reach.

But the landscape shifted quickly, and those companies fell far behind competitors in the U.S., China, South Korea and Germany, which has emerged as Europe’s new fashion e-commerce powerhouse.

Late last year, in the space of just two months, the Munich-based Mytheresa agreed to buy Yoox Net-a-porter, creating a potential 4-billion-euro juggernaut in the luxury fashion space. Meanwhile, Zalando is set to purchase its German rival About You, with plans to grab more European market share and collaborate in areas such as business-to-business, logistics and payments.

Although Germany has never been a major runway fashion or retail player compared with France, Italy and the U.K., it remains Europe’s largest economy. Its fashion retail sector is the second biggest in Europe after the U.K., worth around 70 billion euros annually.

Germany is also a manufacturing powerhouse, with a broad stable of big brand names including BMW, Mercedes, Adidas and Hugo Boss. Now, after years of being a minor fashion and luxury player, Germany is set to become a center of e-commerce thanks to its logistics and manufacturing muscle and its ambitious and strategic business leaders.

Retail Wunderkinds

Ida Petersson, cofounder of brand and talent agency Good Eggs and a veteran of Net-a-porter, Harvey Nichols and Browns, said that while Mytheresa and Zalando play in different areas of the market, they have one thing in common.

“They’re efficient, not only logistically but also with regard to their internal and external processes,” said Petersson.

She said that, from a retail point of view, Mytheresa has always had a very clear strategy of offering a wide assortment but a narrow brand count. “Alongside this, they also concentrate on customer excellence, from how the orders are prepared to being best in class when it comes to catering to their private clients.”

Petersson said the steady stream of exclusive capsules and launches — over the past few months alone Mytheresa has worked with Victoria Beckham, Tod’s, Miu Miu, Moncler and Loro Piana — “are keeping the best shoppers activated and engaged. They make sure the experiences and collaborations continue to evolve to keep clients hooked.”

Veronika Heilbrunner, a German influencer and fashion director at the new 10 Magazine Deutsch, believes Germany’s fashion e-commerce businesses have also benefited from the country’s geography and population distribution.

“Germany is a big decentralized country, and many wealthy people live outside of big cities. And the big cities — Berlin, Hamburg, Frankfurt, Düsseldorf, Munich and Stuttgart — rarely have all the designer brands in one place, which is why online shopping works extremely well,” she said.

It’s no wonder that online apparel sales in Germany have been growing for years, with around 40 percent of all fashion and accessories purchases now made with a keystroke.

Heilbrunner added that Mytheresa was successful from the start because of geography, but also because of its chief executive officer Michael Kliger, a Berlin native and former eBay executive.

“It’s a very smooth, streamlined, ego-free operation,” she said.

Zalando, meanwhile, has been working at another end of the market, supporting emerging, sustainability minded designers, and sticking with contemporary brands at a time when luxury names have been hiking their prices.  

Petersson said Zalando, which is set to have revenues of more than 10 billion euros in 2024, “was not afraid to take risks. In a period when most high end e-tailers were focusing on the top tier of clients only, and dropping contemporary and mid-level brands, Zalando continued to push these brands.

“By doing so, they could corner the part of the market that has had the most commercial success in a year which saw the luxury consumer getting frustrated with increased price hikes from the top tier. It’s telling that most of their competitors are now returning to a strategy of contemporary growth,” said Petersson.

What’s in Store at Mytheresa

Mytheresa’s agreement to purchase 100 percent of YNAP from Richemont is set to close in the first half and Kliger has already spoken at length about his strategy and integration plans.

He’s said the aim is to create a “pre-eminent, multibrand, digital luxury group” that will generate “significant” value for shareholders, brand partners and customers.

Kliger said that while Mytheresa, Net-a-porter and Mr Porter all play in the luxury space, there would be little overlap in terms of offer. Net and Mytheresa will appeal to different parts of the luxury market, much like London department stores Harrods and Selfridges do.

“We are not ‘absorbing’ Net-a-porter and Mr Porter because to do that would kill the very assets we are keen to get. We are trying to bring the back end together, but the banners, the storefronts, will continue to be separate,” he said.

Kliger described Mytheresa as “much more ultra luxe, much more curated” than Net.

“We only carry 250 women’s brands. The positioning of Net-a-porter is also luxury, but includes accessible luxury. Net-a-porter has about 800 to 1,000 brands, so they also attract aspirational customers. They include up-and-coming new brands which for many customers is very exciting. We don’t do this because it would go counter to our very selective approach. It’s a different positioning,” he said.

Kliger is looking to leverage Mytheresa’s proprietary tech knowhow and operational expertise to grow the Net-a-porter and Mr Porter businesses, and the three companies will share a large part of the administrative, technology, payments, customer care functions — and expertise.

He believes that strategy will lead to a business with 4 billion euros in gross merchandise value and a “high single-digit” adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin by fiscal 2029.

Currently the Mytheresa and YNAP businesses have a combined gross merchandise value of 3 billion euros.

Kliger said that profitability will come from full-price fashion sales and — crucially — the separation of YNAP’s off-price division, comprising Yoox and The Outnet. The separation, he said, will allow for a “simpler and more efficient operating model driving higher growth and profitability” for the off-price businesses.

Kliger is confident that Mytheresa’s technology and logistics will add firepower to the YNAP businesses.

“We are quite uniquely positioned to support this transformation because we have our own proprietary e-commerce stack that our teams designed and developed. It launched last April. It’s fully scalable,” Kliger said.

Mytheresa also has expanded logistics muscle in the shape of a 600,000-square-foot state-of-the-art distribution center at Halle/Leipzig Airport in Germany, which opened in late 2023.

The new center is also a short distance from the DHL international air freight hub, enabling speedier processing of incoming merchandise, outgoing orders and returns.

Mytheresa’s unique partnership with DHL means that at least 20 percent of orders are shipped a day ahead thanks to a late-night direct injection service. Also, returns can be processed faster since they are delivered directly by DHL to Mytheresa’s distribution center, without intermediary processing at DHL’s warehouse.

What’s In Store at Zalando

Like Mytheresa, Zalando is looking to become an even bigger player in the European online fashion market.

Robert Gentz, co-CEO and cofounder of Zalando, said the plan is for his Berlin-based business to coexist with About You so that both companies can continue to serve their respective customers from a B2C and B2B perspective.

Zalando’s medium-term outlook for the combined group sees gross merchandise value and revenue rising at a five-year compound annual growth rate of between 5 percent and 10 percent until 2028. 

Founded in 2014 as a subsidiary of the Otto Group, About You works with more than 27,000 content creators to combine shopping with entertainment through live events, interactive formats and social media. It launched a high-profile collaboration with American model Kendall Jenner in 2021.

About You’s audience is younger than Zalando’s, and its offer is more trend-driven and not as expensive.

It sells to more than 12 million active customers across Europe and has a mobile-first approach. It offers 2,000 brands, which include Polo Ralph Lauren, Tommy Hilfiger, Lacoste, Levi’s, Nike and Vero Moda.

By contrast, Zalando has a broader offer and demographic. Earlier in 2024 it opened a luxury, boutique-style space for designer brands including Proenza Schouler, Victoria Beckham, Ralph Lauren and Emporio Armani, on its website and app.

From a B2B perspective, Gentz believes About You’s cloud-based enterprise shop system Scayle will complement Zalando’s own e-commerce operating system Zeos. He foresees the creation of “an even more advanced e-commerce operating system that enables brands and retailers to manage their multichannel business across Europe and beyond.”

According to Pippa Stephens, senior apparel analyst at analytics company Global Data, Zalando’s acquisition of About You will supercharge its B2B services.

“The acquisition will have the greatest benefit on both companies’ business-to-business segments and backend operations. About You’s Scayle e-commerce software, which it sells to other retailers such as Harrods and Deichmann, has been extremely fast-growing, and will complement Zalando’s own B2B offering, allowing it to become a powerhouse in this area,” she said.

“With consumers increasingly looking for faster and more convenient payment and delivery options, the convergence of both companies’ expertise and technologies will help to make them more competitive in these respects as well,” Stephens added.

The tech capabilities play into Zalando’s ecosystem strategy, unveiled in March. As reported, the German e-commerce giant aims to seize 15 percent of Europe’s 450 billion euro fashion market by tweaking its B2B and B2C strategies.

The acquisition, which is set to close this summer, will also mark a deepening collaboration between Zalando and About You on the sustainability front.

In 2022, the two, together with Yoox Net-a-porter, launched the Fashion Leap for Climate platform, which supports fashion brands in measuring their own carbon footprints and setting targets that align with climate science.

In the future, Zalando and About You said they would intensify their joint efforts to empower their customers to make informed shopping decisions.