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Zalora: Growing with e-commerce

31 May 2018

Asia’s fastest-growing online fashion retailer recalibrates its mobile strategy

According to research by Forrester, one-fourth of global retail sales in 2022 will take place online, and it will be in Asia-Pacific. Of that, 80 percent of that will happen on mobile devices, reflecting a well-acknowledge trend of all things going mobile.

Online fashion retailer Zalora launched its mobile app in 2013, and by the end of 2015 had over four million installations and nearly three million active customers. Mobile app sales came in at S$2.31 million (US$1.64 million) compared to desktop sales of S$3.23 million (US$2.29 million).

Despite the undisputed necessity of having a mobile presence, Zalora’s Managing Director Tito Costa observed that the mobile app was proving insufficient to close the purchase although it was necessary to draw customers. Costa was also concerned about how to improve mobile conversion rates (number of visitors and downloaders of the app that eventually become regular customers).

The mobile e-commerce space is highly competitive, and companies woo customers with promotions, discounts and heavy advertising spend. What should Zalora do to engage customers over the long haul? How could Zalora improve the value proposition of its app to achieve incremental growth?

Apps: Growing in numbers but not in dollars?

Since the early 2000s, the retail fashion segment had been gradually moving from the traditional brick-and-mortar store format to a multichannel model, which included in-store, online, mobile and social media presence. In fact, developing and managing a multichannel or omni-channel business model had become a key challenge and a top priority among fashion retailers.

Zalora’s launch of its mobile app came with a S$15 discount voucher as an incentive to download the app. In the first month, there were over 19,000 downloads of the app across all markets, and in the first 12 months, the number of new app users grew steadily to over 120,000.

Despite the initial success and the growing number of new app users, sales growth faced headwinds from lower retention rates. On average, conversion rates fell to zero by the 11th day after installation of the app and showed no signs of recovery. Furthermore, while the numbers of new app users continued to grow, the average basket size per customer was more or less stable.

It seemed that getting customers to download the app was easy, but getting them to make a purchase through the app was difficult. Over time, data revealed that customers were still using the app to browse and get information, but were not making purchases.

“The numbers seemed to suggest two contradictory trends,” Costa explains. “On the one hand, mobile adoption was on the rise and the number of active mobile users was rapidly expanding compared to active web users. The company was also spending more on mobile ads. However, conversion rates on the web continued to be higher than that for the app. So we asked: Does the app bring in higher value customers? Are we attracting the same quality of customers on the app as on the web?”

Indeed, from March 2013 to March 2014, the number of active app users grew five-fold, generating sales of S$170,836, representing eight percent of revenue. The remaining 92 percent came from via web users despite a drop in active users from 2.66 million to 2.18 million.

Cashing in

From 2015, things changed. After the first year, the growth in Zalora’s app sales outpaced that of the web. As of December 2015, Zalora’s mobile app sales stood at S$2.31 (US$1.64) million compared to web sales of S$3.23 (US$2.29) million, raising the share of app sales to an impressive 42 percent.

“The trend was clear,” said Mervyn Chua, Zalora’s Head of Mobile Marketing, “sales from our app had picked up dramatically. Our efforts, increased ad spending, and overall push toward app sales were all showing results. What is more, customers seemed to follow similar purchase patterns on the web and the app; they were indifferent to which channel they used.”

Add to that the tipping point in October 2016 when users accessing the internet from mobile devices eclipsed those who did so on desktop for the first time, Chua’s argument that “in order to be ahead of the curve, it is vital for Zalora to focus its resources on the app” became more compelling.

For CEO Costa, there were questions to be answered and decisions to make. How were app sales holding up to the desktop sales? What had been the performance of Zalora’s investments in the mobile app, and how did it compare with the desktop investments? Should Zalora consider redistributing its resources? Is the app the best way to engage customers or is it mobile web?

The question was not whether to have a mobile app or not, it was about getting the best value from the app. How could Zalora improve and increase customer engagement, and yield, on its mobile platform? Did Zalora have the financial resources, technology and skills to execute an effective loyalty programme and incorporate new technologies to engage its app customers? What investments and incentives were needed to create a large and growing set of loyal customers who would see the Zalora as their go-to app for all their fashion needs? And, importantly, would these investments be worthwhile?


This is an adapted version of the SMU Case Writing Initiative case, “Zalora: Dressing up the mobile app to engage customers". To see the full case, please click on the following link:

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Last updated on 31 May 2018 .


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