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(Bloomberg) -- Never before have so many new fashion labels sprung up in Europe as online retailers try to fend off a dual threat from e-commerce giant Amazon.com Inc. and brick-and-mortar stores expanding their digital offerings.

Berlin-based Zalando SE has conjured up 17 private labels since 2010 and now generates 500 million euros ($599 million) of its 3.64 billion euros in annual sales from them, offering everything from Pier One sweaters costing less than 30 euros to Mai Piu Senza high-heeled boots at 170 euros or more. The U.K.’s Asos Plc says its own brands will soon amount to 50 percent of sales. Even Yoox Net-a-Porter SpA, a Milan-based forum for luxury goods from the likes of Prada and Gucci, is creating in-house labels like Iris & Ink and Kingsman.

“The new crop of pure-play online retailers is rapidly responding to consumers’ increasing demands for immediacy and constant newness,” said Deborah Weinswig, managing director of Fung Global Retail & Technology.

Responding to consumer whims has become more urgent for the likes of Zalando, Asos and YNAP as Amazon expands its apparel offerings with more than a dozen private labels. Meanwhile Inditex SA and Hennes & Mauritz AB are redoubling their digital expansion push, with the Spanish owner of Zara expanding online sales to markets like Turkey and India and its Swedish rival setting a goal for e-commerce sales growth of at least 25 percent a year.

Zalando’s profit margins have suffered as the company increases spending on technology and distribution to try to keep Amazon at bay. To counter that, the German company is trying to emulate smaller rival Boohoo.com Plc, the hottest stock among European online fashion retailers. The Manchester, England-based company, which sells almost nothing but its own brands, has the highest margins among the four major European online operators.

Tapping into digitally gathered data on consumer behavior and moving production closer to home allows the new breed of retailers to beat even the fastest fashion giants. Boohoo makes more than half of its products in the U.K., meaning it can get them from concept to store in just a few weeks -- rivaling Zara, renowned for its rapid turnarounds.

Zalando, Europe’s largest online fashion retailer, first turned to private labels to fill gaps in its product lineup. One of these was affordable shoes, such as a 12.95 euro ballet pump. Now its private labels have grown to a business with 500 employees, including 50 designers, churning out 20,000 pieces per year. 

Zalando’s own-branded Mai Piu Senza boots are made in Italy. The company is also seeking to move more production to locations including Portugal and Turkey to speed up its supply chain.

Some of Zalando’s brands go head-to-head with better-known rivals on its site, albeit at much lower prices. Zalando sells a dark blue sweater under its Pier One brand for less than 30 euros that’s strikingly similar to a 140 euro variant sold by PVH Corp.’s Tommy Hilfiger. Private labels boost margins because retail prices of clothes can be as much as double the wholesale cost, and the site doesn’t need to share that profit with another fashion company.

Online players may have an edge as fashion becomes ever more data-driven, said Richard Federowski, a retail consultant at Roland Berger. Eventually, new labels may be created by algorithms scanning social-media profiles and analyzing sales trends.

“Staying relevant has become difficult, and many markets are almost saturated,” Federowski said. “Whoever is not on top of their brand portfolio will fail.”

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier

©2017 Bloomberg L.P.

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