Kangaroo Secret Project: Zalando wants to conquer the US market from 2023

Zalando’s headquarters in Berlin.
Monika Skolimowska / picture Alliance via Getty Images

  • With the title “Project Kangaroo”, Zalando’s bosses are planning what is probably the biggest hit in the group’s young history. From 2023, the fashion giant plans to expand to the United States, Business Insider learned from several internal sources.
  • Zalando plans to invest a three-digit sum of millions. Over a hundred employees are working on Kangaroo, all of which have had to sign a confidentiality agreement. Initially, it is said that Zalando wants to focus on the Northeast United States as well as introduce new opportunities in marketing.
  • However, the group’s current poor business performance could still torpedo the project. The board now needs all the resources to get out of the present valley.

Over the past months, Jim Freeman has been planning what is arguably the biggest step in the history of the young company Zalando. The Chief Business and Product Officer, who has served as Zalando’s shadow CEO since Rubin Ritter’s departure, plans to enter the online fashion giant into the US market.

The project is so important to Freeman that it turned it into an internal covert operation. He called it “The Kangaroo Project.” Every Kangaroo member is said to have signed NDAs, i.e. non-disclosure agreements, insiders report. Remember: Employees are already bound by confidentiality through their employment contract, but that was clearly not enough for Freeman. Nothing about the design should leak, neither outside of Zalando’s bricks, nor outside of the project team. Freeman wanted to prevent Kangaroo from making internal rounds.

Shadow CEO Jim Freeman.

Shadow CEO Jim Freeman.
Zalando

Freeman and his project leaders plan to start next year. They are ready to invest at least a three-digit sum of millions in the development of American business, several insiders unanimously inform. More than 100 Zalando employees are currently working on Kangaroo. According to Freeman’s wishes, the focus should initially be on the Northeast of the country, but not specifically on the cities, but on the entire region. This includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. These regions are home to megacities such as Boston, New York and New Jersey.

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Zalando starts in a wealthy region of the USA

As an American, Freeman knows the US market well and worked at Amazon for eight and a half years before joining Zalando. Seven years at Prime Video in Seattle, then in the Alex department. Freeman chose the Northeast as a starting point for Zalando for a reason: according to the US Bureau of Labor Statistics, US citizens earn the highest earnings in the US there, at $ 91,887 pre-tax per capita, and have an average of $ 68,696 per capita in 2020. per capita allocated for consumption. Northeast US citizens spent $ 2,041 on fashion in 2020, again leading the way compared to the rest of the country. The Northeast is considered a high-tech hub and has numerous logistics and distribution centers in each region. Zalando will find there an excellent infrastructure and customers from the agglomeration, who are also interested in numerous European brands that the Internet giant has so far mainly had in its offer.

But first Zalando needs to get to know local customers. Accordingly, Zalando wants to make a breakthrough in marketing and advertising, insiders report. Until now, the industry leader in Europe has relied mainly on the proven: TV advertising and large banners in metropolitan regions. Zalando also invests in influencer marketing, but according to insiders, only without conviction. Freeman is said to be a fan of TV commercials.

Awareness through US influence

But that will change in the US, where Zalando is placing its hopes on American influencers to make the brand known to customers. They want to reach for particularly famous and therefore expensive stars in social networks. Influencer marketing in particular aims to build awareness faster and to build more trust because the person who promotes the product has been known to the public for years. Apparently, Zalando has for years looked with admiration at competitor About You, who advertises his own brand and conducts campaigns almost exclusively with influencers – with success.

The only problem is that the design team has not yet properly defined who the Zalando target group in the US should be. And more importantly: How should Zalando stand out from the American competition? In Germany and Europe, the group continues to live in the halo of being one of the first companies to offer free returns. In addition, Zalando has arguably the largest range of brands. In the States, however, this is not a unique selling point, but mainstream – long before Zalando started dealing with it. Project workers express concern at Business Insider at Zalando’s current lack of imagination.

Zalando’s share price has fallen by a third over the year

However, the fashion giant now has his hands full trying to get hold of a miserable business situation. In the first quarter of this year, sales fell by 1.5%, and market capitalization fell from EUR 26.35 billion in July 2021 to EUR 9.4 billion at the end of May this year. A year ago, the share was just under € 100, but has now fallen to around € 25.

In view of the persistent inflation and disturbed supply chains, the group significantly lowered its growth expectations for the current year. Initially, Zalando planned a sales increase of 12 to 19 percent, up from a maximum of three percent from 10.4 to 10.7 billion euros. Therefore, Freeman is currently focusing its existing resources on mastering this valley through which the Internet giant is currently treading.

This is why Project Kangaroo is currently “on hold,” but the plan for 2023 is still adhered to, insiders report.

Business Insider sent Zalando a long list of questions about the Kangaroo project, the spokeswoman left the questions unanswered but said: “We have made great strides in our growth path in Europe in recent years. We are constantly looking for ways to improve our offer, including possible new categories and regions. We believe that in this context there will also be opportunities for development outside the European continent ”.

The company also confirms that Kangaroo is now “in abeyance”: “In the current economic environment, we are focusing on the best possible service to our customers and partners in Zalando’s existing markets.”

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