Zalora a data first, before fashion company, says CCO

• Market of US$30-50 billion by 2025, Zalora captures window shopping customers
• Offers consolidated replenishing solution for merchants – brand site, stores and Zalora.com

DATA and analytics is sexy. And it is not unusual for C-suite execs to casually describe their company as a data company first. Even Wallmart has described itself as a data first company. Closer to home, in Malaysia, we have the chief commercial officer of Zalora, Giulio Xiloyannis (pic), describing his fashion commerce company as a data business, first, before fashion.

His next comment reveals whether he is being trendy or real. On the question of who his chief data officer is, Giulio says, they have none. “If we have a chief data officer, then it means it’s not pervasive.”

But he does acknowledge that, “We are becoming more of a fashion company. But our DNA is data.”

As such, he explains that data is everywhere in Zalora’s operations with the chief technology officer’s role being to make data accessible while a director of business intelligence ensures it’s in an understandable format for all business units to use.

Elaborating on the manner in which data is integrated into the operations of Zalora, Giulio points out that “The data team is integrated with the tech team – we call it the database management and data science team.” But beyond the technicalities of data science, every team at Zalora has a business intelligence person to draw out data for easy visualisation and decision-making by the entire team.

With data certainly oiling the gears at Zalora, it may come as a surprise that its RM20 million regional e-Fulfilment hub that it launched in 2017 is not highly automated. Giulio poses a rhetorical question here: “Is the depreciation of our robotics investment less than our manpower cost?”

He points out that, “In Southeast Asia, and particularly in fashion, there is a high level of manual activity of some tasks like folding, checking and quality control versus picking up an item and putting it in a box.”

Zalora’s focus, he explains, is on increasing the efficiency of human work through software rather than hardware (robotics for example). A prime example of this is mobile picking where workers wear a “very big smartwatch in the warehouse to calculate the best path to follow while ensuring they do the least amount of walking.” This is particularly handy considering a worker may have up to 50 orders to locate and pack.

Building consumer trust and online window shopping

Without doubt, the SEA e-commerce landscape of today is thriving. And Giulio stresses that it is built upon one basic principle – consumer trust. The sentiment surrounding online shopping has evolved from apprehension to one of everyday normalcy. But it most certainly did not happen overnight. For Zalora, its market capture of 3.5 million active customers in the Asia Pacific might leave the company with much to be desired, especially since the number makes up only 0.7% of the regional population.

But it’s a feat to be proud of considering the years of marketing groundwork and consumer education the company has invested in. Giulio explained how just over half a decade ago, consumers used to question the legitimacy of the business and half of the customer service questions were about a storefront location.

Giving an indication of the market size, Giulio cites that Google Temasek reported an overall internet economy estimate of US$250 billion by 2022 with US$100 billion specifically in e-commerce which includes fashion. “In China, fashion is a huge part of e-commerce sales, accounting for up to 40%. In the US and UK, its closer to 30%. But I think we’re talking about a market that is going to be between the US$30 to 50 billion mark by 2025.”

He claims that Zalora today is one of the strongest locally in terms of brand awareness and explained how this flip happened. “That whole opinion changed when we went from having banners on Facebook to having a campaign with Media Prima,” he says, adding that appearing on TV3 made people notice them.

Beyond offering convenience and quality to customers, Zalora’s presence has also enabled local brands and designers to sell on the platform. Although a significant number of merchants are still partial to having their own individual shopping websites, Giulio believes these merchants are prone to missing out on customers that ‘window shop’.

“There’s two ways people shop. One is they shop with the intent of buying something, or in fashion and particularly female fashion, they shop a lot because they like window shopping and are captured while at it,” he explains.

Protecting branding data could be one of the reasons why some merchants opt to navigate e-commerce themselves, Giulio suggests. He says that these merchants consider listing on Zalora when they experience an unsatisfactory fiscal year. “In fashion, if your sales are below target, it means your inventory is more than what you plan to have. Immediately, they have to expand their distribution network and go to an e-commerce player. That is how the most reluctant brands come.”

Distribution as a service

Handling over 50,000 packages per day, Zalora has invested more than 40% of its general administrative costs in the in-house development of its warehouse, order and fleet management system. “This is an industry that has changed radically in the last five years. The implementation of the data systems needed to make it work has only happened in the last few years,” Giulio emphasised, before sharing that many fashion retailers have antiquated point of sale (POS) systems that do not properly track inventory.

Another aspect that Zalora facilitates is the efficiency of distribution. Typically, a large brand has five to six thousand product lines per season multiplied by the number of sizes and often has up to three types of warehouses – for Zalora inventory, own e-commerce site and another to replenish storefronts. “This is an extremely inefficient system,” comments Giulio, explaining that it affects end-consumer sales when restocking is uneven.

Ideally, there should be one major warehouse to replenish across all platforms and stores. On this front, Zalora has a solution to offer. “The best way to make inventory turn is to consolidate it. Give us the stock, we will fulfil the brand.com, the stores and Zalora.com.”

Citing statistics, Giulio boldly says: “I guarantee all of us will have higher sales, lower discounts and higher efficiency.” This offering has been in the works since a year ago and the wheels are turning as Zalora is slowly signing deals now. “It’s a long onboarding lead time because they have to close their own warehouses, move over and integrate tech but it is happening.”