Zalando, Europe's largest online fashion retailer, reported third-quarter revenue of €3.17 billion, up 5.1% from a year earlier, slightly ahead of analyst expectations. The company is increasingly leaning on artificial intelligence to transform its app from a simple store into a broader marketplace where shoppers can buy from other retailers without ever leaving the platform.
The results, released Thursday, showed gross merchandise value (GMV)—the total value of goods sold through its platform—climbed 7.5% to €4.54 billion. Adjusted earnings before interest and taxes (EBIT) came in at €106.5 million, a key profitability metric that strips out one-off items.
What's driving the growth?
Management pointed to faster growth in business-to-business (B2B) services, which rose almost 28% according to CFO Anna Dimitrova. These services include logistics, payments, and software that Zalando offers to other retailers and brands. The company also saw gains in its partner program, where third-party sellers use Zalando's platform, and in retail media, where brands pay for advertising space on the site.
The new Zalando Extended pilot with Westwing, a home and living e-commerce company, is part of this strategy. The pilot lets Westwing customers shop Zalando's fashion range directly through Westwing's platform, using AI agents to handle the browsing and checkout process. This is a test of how AI can turn Zalando's app into a hub where multiple retailers coexist, rather than just a single-brand store.
For everyday investors, the shift matters because it could open new revenue streams without the heavy costs of holding more inventory. When other retailers sell through Zalando's platform, Zalando earns fees and commissions rather than taking on the risk of unsold stock.
How AI agents are changing the shopping experience
Zalando has been investing heavily in AI tools that act as personal shoppers. These agents can understand a user's style preferences, suggest items from various brands, and even complete purchases across different retailers in one transaction. The idea is to make the app a one-stop shop, similar to how a shopping mall hosts many stores under one roof.
This approach is part of a broader trend in e-commerce, where companies are using AI to reduce friction and increase the time shoppers spend on their platforms. By letting customers buy from other retailers without leaving the app, Zalando hopes to increase engagement and capture more of each customer's wallet.
The Westwing pilot is an early test of this concept. If successful, it could be rolled out to other partners, potentially turning Zalando's platform into a marketplace that rivals larger players like Amazon in Europe.
What it means for investors
For investors, the key takeaway is that Zalando is diversifying its revenue beyond just selling its own inventory. The faster growth in B2B services and the expansion of its partner program suggest the company is becoming more of a platform business, which typically commands higher valuations because it scales more efficiently.
However, the company still faces challenges. The European fashion market is competitive, with pressure from fast-fashion giants like Shein and Temu, as well as traditional rivals like H&M and Inditex. Zalando's ability to differentiate through AI and marketplace features will be crucial.
The company's adjusted EBIT of €106.5 million shows it is profitable, but margins remain thin. Investors will be watching whether the AI-driven marketplace strategy can boost margins over time by increasing the share of higher-margin services like advertising and logistics.
Zalando's results come amid a mixed earnings season for European tech and retail companies. While some have struggled with weak consumer demand, Zalando's numbers suggest that its investments in technology and B2B services are paying off. The company's stock has been volatile, but the latest results could provide some support.
For those looking at the broader picture, Zalando's move is part of a wider shift in e-commerce toward AI-powered personalization and marketplace models. Similar trends are visible in other sectors, as companies like Palantir and Anthropic show the growing importance of AI in business. While Zalando is not an AI company per se, its use of AI agents could be a competitive advantage.
Investors should also note that the company's B2B growth is a bright spot, similar to how Grab has seen its fintech business become profitable. Diversifying revenue streams can reduce risk and provide more stable growth.
As always, past performance is not a guarantee of future results. Zalando's AI marketplace strategy is still in its early stages, and it remains to be seen how quickly it can scale. But for now, the company is showing that it can grow revenue while investing in the future.
