Online fashion retailer Zalando embraces 'chaos' to stay ahead

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Source:   —  April 07, 2016, at 6:38 PM

Its software designers and developers were able to set goals with two to four week deadlines because progress wasn't held up waiting for managers to approve decisions.

When Europe'south top online-only fashion retailer Zalando decided to overhaul its app to exploit mobile sales, it reaped the benefits of a new management philosophy that gives tech staff much more autonomy.

Its software designers and developers were able to set goals with two to four week deadlines because progress wasn't held up waiting for managers to approve decisions. Who did what and when was up to them.

The result was a slick new app, with bigger photographs of fashion items, mobile-only content and a new swipe feature, launched in below three months. That was twice as quick as would've been expected below elderly methods, Zalando said.

It calls the new philosophy "radical agility", building on the "agile" software development method that's become favorite in Silicon Valley.

"We didn't have to go back and hold getting sign off. We were fully empowered and trusted to expand this app by senior management," said Nuzhat Naweed, the head of mobile product and engineering at Zalando.

The app was launched in January, after Zalando saw sixty % of its web traffic arrive from mobile devices in the final quarter of two thousand fifteen, up from forty-eight % a year earlier. It reports first quarter results on April nineteen.

"To stay innovative, we necessity a certain degree of disorder – you could also call it chaos," said human resources head Frauke von Polier. "If you structure everything and attempt to control the complex things, that’s the moment when you lose speed."

Founded in two thousand-eighth in a Berlin apt by two friends selling flip flops, Zalando presently employs 10.000 people and ships more than one.500 fashion brands to customers in fifteenth European countries.

Sales rose more than a third latest year to almost three billion euros ($3.43 billion) and the company, which listed in Frankfurt in two thousand-fourteenth, hopes to eventually take five % of the fragmented European fashion market, up from about 1 percent now.

Yet in a sign of the pressure to deliver, its shares are trading at fifty-fourth times forward earnings, twice that of established industry boss Inditex, owner of Zara, and based on expectations Zalando will more than double sales in the following four years, even as Amazon muscles into fashion too.

Rivals love Britain'south ASOS and Amazon also utilize "agile" methods to expand software, but Zalando says it goes further, combining more autonomy with continual learning, allowing staff to spend twenty % of their time on developing their skills.

It restricts self-management to tech staff, however, unlike U. S. shoe site Zappos - the firm on which Zalando was modeled but has since distant overtaken in size. Zappos did far with managers totally in a system it calls "holacracy" but then saw an exodus of staff.

At Zalando'south tech hub close to the Alexanderplatz in E Berlin, the teams working on the new app held daily "scrums", brief stand-up meetings where each developer gave a fast progress update, minimizing the necessity for emails and sit-down meetings.

"It only works through face to face communication," said Naweed, who was poached from ASOS a year ago. "You've to have excellent leadership and facilitation, commitment from the top and support from HR. If left alone, it'd fall flat on its face."

Bernstein analyst Jamie Merriman, who rates Zalando shares "outperform", said it was still early days for the strategy.

"It all sounds excellent but there is still a question tag over how it works in practice," she said. "The challenge is how you manage personnel to give them sufficient flexibility, without inefficiencies or duplication."

Samsung Electronics Co Ltd, the world'south biggest maker of smartphones and memory chips, said in March it'll move far from a top-down culture and towards a working environment that fosters open dialogue to counter slower growth.

That kind of approach can boost turnover and employee satisfaction, according to a survey of business leaders by German management consultancy Detecon.

However, such new management techniques can founder due to resistance from staff and loss of control if leaders don't work tough to modify company culture and allow a structure within which more autonomous ways of working can flourish.

"It might seem that agile and dynamic structures necessity tiny coordination. The opposite is the case," said Detecon consultant Marc Wagner. "Employees who work in virtual and highly dynamic networks should organize themselves very efficiently."

Zappos, founded in one thousand nine hundred ninety-ninth and bought by Amazon in two thousand-ninth, said in Jan that about eighteen % of employees had left since it rolled out self-management to everyone a year earlier, while a migration of its technical infrastructure to Amazon'south cloud service was taking much longer than expected.

Zalando plans to hire another 1.000 staff this year and said the new philosophy is helping invite applicants from around the world and make better employee morale.

It's introducing other new services such as dispatching clothes, shoes or accessories directly from stores, rather than from its warehouses, to authorize same-day delivery.

Anna Droege, a 29-year-old from the Netherlands, joined Zalando in marketing when it'd fewer than two hundred employees, but became disenchanted when its rapid expansion undermined the start-up buzz. She rejoined Zalando last year.

"There was a time when I felt, 'Oh No' I necessity things fast and this is getting too slow. But then they made a lot of changes and that's why I came back," she said.

(Editing by Susan Fenton)

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