In this episode of eCommerce Talks, we talk with Felix Kreyer, the founder of Digital Spike and ex. VP Markets Zalando, on the impact of innovations in today’s fashion eCommerce market.
Along with our host, Marcos Bravo C., we ask about the role of technology and innovations in the growth of fashion brands, like Zalando or Marc O’Polo, and discuss the journey from a small platform to market behemoth. What is the winning approach that the founders should take? Who are the people that should be hired first? Can these business models be successfully copied in other companies? And can rising brands compete with giants like Amazon?
Watch the full episode or dive into our transcription of the talk.
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Marcos Bravo C.: Felix, thank you for having you here.
Felix Kreyer: Thank you to be here.
– It’s an honor. First of all, because I’ve been reading through your experience and, as a marketer, there are tons of things I would love to ask you. We’re going to try to organize it pretty well and start with a little introduction from yourself. If you can tell us more about the last 10 years of your life, and how they looked.
– Sure. Good to be here. I’m Felix Kreyer, I’m a German and have been in eCommerce, mostly fashion eCommerce, for about nine years now. Originally I started my career with McKinsey, as a consultant in Berlin, and I’ve been working with a couple of startups. Then I spent over two years with Zalando and, I mean there’s never been a non-heavy growth phase, but that was really a heavy growth phase from 2012 to 2014 when I was there. Then I was a managing director with Marc O’Polo, a German fashion brand, where I was taking care of all the digital parts of the business, own e-commerce, wholesale eCommerce, multi-channel, loyalty, and then I founded my own company Digital Spike, last summer, which is sort of a consulting company, with a bunch of people with heavy experience from the industry, eCommerce professionals trying to help mostly brands, also some retailers, and accelerating their digital business.
– I have to do my job and ask you about Zalando. It is one of the most recognizable fashion brands for online shopping. The way they grew, from a small platform to behemoth right now, it’s amazing. You were there through the whole transformation, the whole growth. What do you think played a key part in this growth, what actually made it happen?
– Zalando is amazing, it is still amazing today that after all those years, they still manage to be quite fast and agile, and still grow at a very heavy pace. The time I joined Zalando, around 2012, the company was around four years old back then, it was like a steady flow of new faces from all over Europe, building up IKEA tables and chairs every week. They had a fantastic track [record] of hiring talent and good people into the company. I think it was one of the first companies where you could actually work and live in Berlin without speaking a word of German, which was really great.
I think there are a few factors that Zalando benefited from. One thing is management. Really big KUDOS to the founders, Robert Gentz, and David Schneider, and also to the third managing director. They really put up pretty bold targets, all the time, and they managed to achieve and overachieve them. They really believed in it. I think also time was right, to be honest. It was perfect timing. In 2008, it was not a crystal clear that fashion would become the next big vertical in eCommerce. Everybody was very skeptic about return rates and everything, and Zalando did the opposite. I mean, actually the free shipping and free return were one of the main UPS’s of Zalando. They actually for some extent took away the fear of many first-time fashion eCommerce buyers. Then I think, also the time was right in terms of the approach to marketing. Zalando was one of the really first startups that went for TV advertising big time. They had very loud, and very different TV campaigns which really helped to boost the awareness for the brand, and in no time in Germany and also in other markets. I think that’s something, if you do today or even just five years later, no way, you wouldn’t have been able to create such a buzz and awareness with TV advertising. So yes, I think there are a few factors, but it’s certainly a very unique case in Europe.
– For sure! Something that calls my attention a lot is: I was in Berlin last year, and I remember joining a Zalando meetup. There was like five or six data scientists from Zalando. For me it was very like: why do you have so many data scientists? So, what is the role that tech is playing in the innovation of Zalando?
– You know, I think the interesting part is that Zalando never really started as a fashion company, and I think that’s the reason why it was so successful. It was also really disrupting the industry. It was in the beginning, in the early days, it was a performance marketing machine and it was a tech company. I think those were the two core competencies that Zalando really had.
No logistics, no fashion know-how, that was something that was built up over time. Also the first people that worked for Zalando, they had no clue in fashion, really, but it’s more about that they had an idea of internet business models, they had an idea of how you work with data, how you acquire customers on the performance marketing side, and then also how important it is to have technical know-how in the company to really grow and scale the business. Zalando is very famous today for trying to do, not everything but pretty much everything, themselves. They’ve also started up tech hubs in Finland, Portugal, and other markets. I think that’s really the core belief – that tech as the driver of the business, and it’s almost like a fashion tech company. That’s a term that was used quite often.
– So, there’s almost like tech was beyond the actual product.
– Yeah, I mean, to some extent probably yes. If you told this to the ordinary, old-fashioned fashion guy, either from brands or from fashion retailers, they would all laugh at you. In these companies fashion, as the core competencies, is so deeply embedded in the DNA of most of the companies in the industry. Zalando really had a very different approach there, and it made them ultimately so successful, I think.
– When companies, Zalando is already a massive name, but there’s still a lot of startups trying to do what Zalando did or trying to replicate the model. Where do you see that they’re actually moving forward or not moving forward? Is there something stopping them to reach this Zalando model or do you think it’s just because the market is full?
I don’t know to be honest. Probably copying the model in some other verticals, you can see that. In fashion, it’s becoming more and more difficult. Zalando is the market leader in most of the European markets and it’s going to be more and more difficult to establish the same kind of business model besides Zalando. Especially this approach of really optimizing performance marketing to the max is something that was obviously much easier some years ago, compared to today, where all brands have their own eCommerce and you have tons of different multi-band providers. They’re all bidding on Google keywords at the same time, the search is moving from Google to Amazon. I don’t see the potential to still optimize in a field where pretty much everything’s opportunist already. To that extent, it’s actually quite difficult. Fashion is being a really big vertical, to be honest, but this idea of being a specialist eCommerce company, let’s call it a niche, be it in beauty, sports or special sports categories, be it in pet food or any kind of verticals you can think of – I think this idea still works. Especially when, in a world where, from a retailer perspective, the biggest threat is obviously Amazon, which is a big-box everything store, but which is not as specialized on the customer experience in a specific category that has certain needs for all sorts of elements of the user experience.
– To me, the very key is customer experience. Amazon still looks almost the same, even though they try Prime and a bunch of different things, it still looks very similar to what it was a long time ago. Zalando on the other hand, and not only Zalando, but the experience that you had after with Marc O’Polo, it was more customer-centered, it was more about the experience.
– Yes and no. I wouldn’t say it’s more customer-centered because, to some extent, you can’t be more customer-centered. But it’s true that Amazon is more about the convenience aspect of it. If you just take the example of buying clothes on Amazon, the shopping experience is much less of a pleasant one, and you would also probably be less likely to use Amazon as the first destination for discovery, while it’s for search is great. It’s the area where Zalando can still stand out, compared to Amazon, it’s just much more fun to shop fashion on Zalando.
On the other hand, everything around convenience, be it delivery convenience, be it customer service and service levels on Amazon, also that fact that so many services create a lock-in effect . It’s not only about shopping, but it’s also about shopping in many categories: you can buy your firewood on Amazon, as well as your clothes, but also in terms of video streaming, you have Audible, you have Prime Music, you have all sorts of add-on services which create a lock-in effect. I would definitely not say it’s not customer centric, it’s very customer centric, but I agree that the frontend and the user experience on the side or in the app is much more tailored towards the specific category in companies like Zalando.
– What are the things that you could replicate into a fashion brand, like Marc O’Polo?
– It’s obviously a completely different world. On the one hand, it’s a brand versus retailer or marketplace, but more importantly, it’s also the old economy versus the new economy.
The good thing about brands, as opposed to retailers is, if you’re a retailer today with a history and a legacy, and you’ve been out there 20 – 30 years ago, most of them are having a really bad time and really hard time also finding their USP today, and just finding any aspect, any argument WHY customer should buy from them instead of Amazon, Zalando, and the other pure players. If you look at brands, it’s a different story.
Brands still have a product, a product that no one else has. The product is a brand heritage, so it’s a healthier position. What you find in legacy companies is obviously a completely different speed, completely different approach also to priorities. Thinking about the discussion we just had on tech, I mean, look at any fashion brand, and Marc O’Polo is not an exception, I would not say that tech is at the core of their skillset and of what they believe in. Neither is data, business intelligence, or simply using the data that they sit on. And brand sit on tons of data. Bringing a bit of this perspective from a pure player companies, like Zalando, is super helpful for old-economy companies and also having people on every level onboard that have experienced on the speed, agility, and approach of young startup pure play companies, and creating a bit of uproar in the organization, and make sure that the established companies also get a feel of what the speed is out there, and to what extent they need to change. That’s very helpful.
– You have accumulated a lot of experiences from Zalando from Marc O’Polo from all your previous jobs as well. You bring this to Digital Spike, I’d like to call it a full-stack consulting services, covering everything, how do you approach companies? What kind of problems or what kind of consulting do companies need nowadays? What do you see companies asking for?
When you say covering everything, it’s probably true to the extent that I have been very much of a generalist management person all the last years. There are certainly quite a few areas where they’re much better consultants out there in areas I wouldn’t cover. My approach to marketing is trying to bring really hands-on experience from the field to the companies, where you say: “Hey we’re not born as consultants, but we have all done it ourselves, we’ve been there and we know the issues. We also know how to solve them because we have made all the mistakes that you can possibly make”.
There’s something much better than just saying: “Yeah it saves a lot of time and money”. I work with quite a few companies that have been around before the internet, before eCommerce was a topic. It’s very important to have those two perspectives. On the one hand to understand their specific challenges, which are much different from a challenge that a pure player company or startup has. At the same time also be very honest with them and tell them: “look we understand this perspective and that’s why we might have to find sort of different approaches, but the goal and the way of doing things are pretty much the same. If you don’t go with the speed of the market, then the others will eat you”.
I think it’s very helpful to have those two perspectives on most of those companies because some of them might be struggling, might not be doing very well. I’m working with retailers and brands who have a big portfolio of bricks & mortar stores. It is quite a burden these days because they have to pay rent, and many of them losing footfall and money. Then you have a legacy IT architecture, sometimes even without a person that really has the overview, and is driving the technology as a business driver rather than a support function.
Telling these companies that you have to be there, where Zalando and others are, while today you’re here, is up is not very helpful.
You have to find ways with them to solve it and to make progress and give them their current state and set up.
– I can imagine most companies will come and say things like “we want to be the next Zalando”. What sort of plan would you set in place? What would be the first step that you recommend the companies before they go global?
I think the companies that want to be the next Zalando would probably have a hard time helping them achieve that target to be very honest. I’m also wondering if that’s always the best target for them.
The most important question to me is always what’s your USP as a brand. Why has the world been waiting for you or why can’t the world do without you, or the customers do without you. I have the experience that many companies are already struggling to answer this question. There’s obviously an idea and there’s a heritage and something around it. The internet does one thing, I think it creates a massive amount of transparency.
Maybe 10, 20 years ago, let’s say in fashion for example, it was easy to say “okay, we have a pretty commodity product and we put a logo and on it a label and then we do a bit of marketing around it. That would usually do the job, at least for some time. I think now it’s impossible to stick out if you just do a commodity job on anything. You have to be special and you have to stand for something. You really have to not only have a message but also a product that stands out.
I think is the first question before you even start thinking about technology know-how or digital sales channels, whatever the specific question is. Once you work on this with a company then I think it gets much easier also to solve all the different steps that you need to solve on the way to whatever the target is, maximizing revenue or optimizing profit.
Then you can start thinking about what are the right sales channels for you as a brand. You can think about how do I do selective distribution.
I mean it’s not that you say “everybody has to build up tech know-how, nobody knows really why but you have to build up because everybody does it.”
Then you also have to say “OK, what do you need tech capabilities for, who might be the right partner for you if you don’t have the resources to hire 20 tech people, and you will not find them anyway.” I think that is the first starting point and it’s not so much about “hey everybody does on webshop, everybody does marketplace, everybody builds an app, everybody is great on social media. Everybody needs to do it. We also have to do it, we don’t know exactly WHY, but everybody does it, so it seems to be the right thing.” And in the end, the result might be the same. They might end up with social media and with the webshop and all these kind of things, if they don’t have it anyway. I think it’s much better if you develop this really from the core and not just as a “we need to do it because everybody does it”.
You mentioned about the human talent to find the right people for the right operation or growth or whatever you have in mind as a brand. There are two ways nowadays, you can either spend a lot of time trying to find the right people and hire the right people, teaching the culture of the company. On the other hand, you can just go and try to outsource everything. You’re in the middle of there because people will come and ask you like: “what should I do, point me in the right direction of what’s my next step”. How do you see it, should companies build their own teams and spend all this time and effort to get them their own, or just try to find people with experiences and just get it done?
I think, there’s no black or white answer. It really depends. What I observe is, let’s say the lesser skills are in an organization in the required areas, the more difficult is that for companies to find the right partners. It does not help, if you have five different external partners or a team of 20 freelancers, if you have no one in the company who actually knows who the right people are, and what we want them to solve.
I mean, also an agency or freelancer is just as good as he has a clear understanding of the objective and what needs to be done. I think companies need definitely more and more to work in a sort of flexible models. Any company will not find full-time employees and every requirement they have, and they don’t have to. They will have to find ways to work with freelancers externals. What I often observe, is for example a lack of a tech know-how or right resources, then you just hire an agency or some freelancers but in the end, the first thing you should do is hire a CTO or CIO, to make sure that someone in the company has their hat on, in terms of technology, and this person can then decide about right setup, and partners, and what do we need to do ourselves, what do we need external. This is the first step, and then you can do the second step.
I have the impression that many companies do the second step before the first and then end up being unhappy with whoever they have taken on board, because there’s no clear communication of objectives and someone holding it all together.
Probably it will be better to have some sort of a link between what your company means and wants to sell towards any group of freelancers or whatever.
Yeah, I mean it’s also again around core competencies. I think in the short to mid-term, tech has to be a core competency of pretty much any company that’s producing and selling products. Is it the right approach now to say, okay we have to build a hub with 30 tech people for tomorrow, without really knowing what kind of profit we need and what we need? Of course not. If you look into those companies and the board and who’s part of the board and what capabilities they have, then you have sort of product capability, sales capability, and might have good marketing capabilities. But then tech sometimes is a support function somewhere under the CFO or wherever you want to put it, then they are the people that repair your laptop, but it’s not the people that drive innovation in the company.
– Exactly! I asked you in the beginning like the role of innovation and then that role towards the future – how do you envision the eCommerce and retail world in 10, 20, 50 years from now? I mean obviously, there’s tons of tools every day. They’re happening a lot of startups offering microservices and this and that for companies like any retail company, anyone who was selling a product. How do you envision the future, not only for these kinds of approaches but also for brick & mortars for example. How do you see we’re gonna be buying our stuff from 10, 20 years from now?
– To be honest, in 20 years, I’ve no idea. It’s too far away. The boundaries and differences between channels disappear and that’s also probably not a very bold statement because we see it happening already. It’s not about “do I buy offline or online”. Today already everything is mobile and customers don’t want to walk somewhere see, if it’s available, and if they’re lucky, and if it’s available, take it with a big paperback or whatever. There it’s clearly not going to be about channels, but it’s going to be about creating customer experience that’s, and I hate to call it “omnichannel” and “multi-channel, because the word channel is, in the end, not relevant, but it’s more about making sure that you are where the customers are – this might be on the smartphone – it doesn’t have to be in a specific location, and that you actually make it as easy as possible for the customer to run a transaction and buy your product.
It’s true. It’s a mix about getting sales, marketing, tech, everybody together to figure out how is our customer acting towards our brand and where are they buying our brand.
– Absolutely! I think it’s all about thinking from the customer side. If you can have tons of shitty multichannel examples today, and you go into a store, and the technology doesn’t work, or there’s no one who can check if something’s available online, or they might actually have the wrong incentives – they don’t want to check (because then it’s not their sales), or you can’t return something, that doesn’t work, or if it works, you don’t get your money back – you have to find a different way of reimbursement. There are tons of examples why it doesn’t work.
There’s no reason why you shouldn’t be able to do that today. Amazon does it with their stores. You should be able today to run into any store, pick a piece, maybe scan it (if needed), and then take it home. Literally, nobody is offering this because they’re all having trouble getting their shit together in terms of systems and setup.
It’s true. There are tons of companies and brands being created every day. That’s not gonna stop and even though there might be big players that already took over the market.
With the creation of new brands and all these new startups coming up with new things, if you have to recommend them something, what will be the first step? What do they need to do first before they move into putting anything out? Let’s say that I have a brand. What’s my first step into moving into eCommerce?
– I would say it again, a very similar question that I asked before: why has the world been waiting for you? What’s new? If you’re really honest, and being honest means that you listen to your consumer (that can be very painful), ask the consumer and find out if it’s really the right product – and it can be any sort of product. It’s something you should do at a very early stage. It’s all about prototyping an MVP-kind of approach, and directly testing with a consumer. Then really stop doing things where the consumer tells you at an early stage (I mean there’s no better feedback you can get) and change it. I think with the opportunities that are out there today, it’s never been easier to do this, and brands still take too little advantage of it.
– Felix, if you have to recommend a good podcast and a good book for the people who are watching, what will those be?
– I’m afraid my focus would be very German ;). The same goes for the K5 Conference which has been quite a couple of German days. Which is good and bad, it’s a great community.
My good friend Armand Farsi, he recently joined the company Fanatics, and he had a very popular podcast in Germany which was called Commerce Corner. Some of the episodes were also in English, and now he put up a new podcast which is called Fast Breyk. The first three episodes are online, you can also hear me on one of them. This is something you want to get a very diverse perspective on different eCommerce and more general digital topics and this is definitely one thing I can recommend.
– Felix, it’s been a pleasure to have you here. We definitely learned a lot from your experience and I hope that people back at home also did. We hope to have you again in the eCommerce talks show in the near future.
– Thank you very much.