Not long ago, as consumers emerged from pandemic lockdowns, it seemed the moment for luxury e-commerce had arrived. Cashed-up shoppers, now accustomed to buying almost anything online, were hunting for new outfits to parade in. Online purchases of luxury goods hit €73bn ($80bn) globally in 2022, up from €33bn in 2019, outpacing the already rapid growth of in-store luxury sales, according to Bain, a consultancy (see chart).
Since then the sparkle has dimmed. Last year growth in luxury e-commerce stalled, and its share of total luxury sales fell. Farfetch, a pricey e-emporium, was rescued from the edge of bankruptcy by Coupang, a South Korean e-commerce firm, which swooped in to acquire it for $500m—far from the $23bn valuation it reached in 2021. Matches, another luxury site, was also snapped up from the bargain bin but soon went bankrupt anyway. Richemont, a luxury conglomerate, wrote off vast sums from Yoox Net-a-Porter (YNAP), the e-commerce unit it assembled through acquisitions, which includes Net-a-Porter and Mr Porter, two high-end sites, as well as Yoox and the Outnet, two online luxury discounters. An earlier proposal to sell it to Farfetch fell through amid the would-be acquirer’s own troubles last year.
On October 7th Richemont announced it would instead offload the division to Mytheresa, a German luxury e-commerce firm, in return for a third of its shares. The consolidated business will have €3bn in annual sales plus YNAP’s €555m cash pile and a €100m revolving credit facility courtesy of Richemont. By keeping a stake in the combined venture, the Swiss giant is betting that the new owner will succeed where it and others have failed.
Mytheresa has lately outperformed other multi-brand luxury sites. Last month it was the only big one to have more visitors than it did the year before, according to figures from SimilarWeb, a data provider. As rivals rack up losses, it is forecasting gross-profit growth of 8-13% this year.
Mytheresa differentiates itself from its rivals in various ways. To appeal to rich shoppers tired of sifting through countless products, it offers a carefully curated selection of 250 brands; Net-a-Porter has over 1,000. Although it cannot offer customers the champagne treatment they enjoy in a physical store, it pampers loyal ones with picnics in Italy and boat trips on the French Riviera. And its operations are slick. Last year it opened a 55,000-square-metre distribution centre at Leipzig-Halle airport, allowing it to get late-night orders on to planes that depart first thing, so as to arrive earlier at customers’ doorsteps.
Michael Kliger, Mytheresa’s boss, says the company aims to expand sales to €4bn in the next four to five years while improving profit margins. That is ambitious. McKinsey, a consultancy, reckons growth in global luxury fashion will slow to 3-5% this year, down from 5-7% last year. Shoppers do not seem inclined to shift more of their pricey purchases online. And luxury brands, fed up with swallowing discounts from online retailers, have been investing heavily in their own digital offerings, says Claudia D’Arpizio of Bain.
Mr Kliger remains confident. He reckons costs can be cut by combining operations including logistics, payments and customer service for Mytheresa, Net-a-Porter and Mr Porter. He also plans to run the two discount sites, Yoox and the Outnet, separately, arguing that Richemont was mistaken in mixing businesses with different customers and order sizes. “They created a fridge that does heating and washing too,” he says. “And in the end the fridge was not even good.” Germany is known for making top-notch household appliances. It might just excel at selling fancy shoes and handbags, too. ■
To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter.
