Selling luxury goods online is a marathon
by Lucy Handley, August 18, 2020
Photography by David Needleman
When Prince Charles became unwell with the coronavirus in March, Federico Marchetti, chairman and CEO of luxury fashion group Yoox Net-a-Porter, put pen to paper from his home in northern Italy. “From Lake Como, I wrote a letter to him to ask how he was,” he told CNBC.
The two had met when the prince and his wife Camilla, Duchess of Cornwall, visited the company’s London office in 2018, and mooted a collaboration. “He’s the one telling me: ‘Buy less, but buy better,’” Marchetti recalled, referring to the prince’s efforts around sustainability. “The first time I met him, he was showing me the shoes that he’s wearing (for) such a long time.”
Green issues have long been a concern for the prince (now recovered) and the coronavirus pandemic has focused both consumers’ and designers’ attention on the topic. “The quality, the longevity of the product, but also sustainability has been a big trend before Covid in the fashion industry … After Covid, there’s been an acceleration in terms of sustainability,” Marchetti said via phone.
Marchetti launched Yoox from Milan in 2000 as an online retailer selling out-of-season high-end fashion, and in 2015 it completed a merger with Net-a-Porter, the British-born luxury e-commerce site founded by Natalie Massenet, focusing on in-season stock. The deal valued the combined group at 3 billion euros ($3.55 billion). In 2018, it became part of luxury conglomerate Richemont, in a deal valuing Yoox Net-a-Porter at 5.3 billion euros.
Now, as the company turns 20, it has looked to Prince Charles’ non-profit The Prince’s Foundation to help it create a sustainable fashion collection that will see Italian students’ designs created by British graduates.
It’s an effort to help teach skills to future generations and represents a switch — Italy (as well as China) is often where luxury goods are produced, while Britain has become known for creative design from the likes of JW Anderson. “I would call it the summary of what I’ve been trying to do in 20 years, and what I believe in, in terms of the ‘DNA’ (of the group),” Marchetti stated. The collection, named The Modern Artisan, is now slated for a November launch, delayed a few months due to the coronavirus outbreak.
The collection’s creators can tap into data gleaned from the buying habits of Yoox Net-a-Porter’s 4 million customers, and it is partly this information on shoppers’ behavior that has made the group a success, Marchetti said. “We are obviously like a tech company, digital company. I’ve always thought that we are 50% technology and 50% luxury.” As well as selling fashion via its own e-commerce stores, it provides the tech platforms behind several fashion brands’ websites, such as Valentino and Saint Laurent.
Last month, Yoox Net-a-Porter signed a deal with Armani to enable customers to more easily buy from brick-and-mortar outlets as well as online, using Yoox Net-a-Porter’s “next era” model. It allows shoppers to see stock availability in stores worldwide. “One of the most disappointing experiences for the customer (is) when you enter into a shop because you wanted that bag … and then the sales assistant tells you: ‘I’m sorry, but it’s sold out and let me call the shop in Shanghai to see if they have it.’ This (new model) is the end of it,” Marchetti explained. It’s an initiative that first started in 2017 in a deal with Valentino. ”(It is) revolutionary because everybody’s talking about ‘omnichannel’ but very few in luxury do it.”
Like other luxury groups, Richemont was hit hard by the pandemic, reporting a 47% fall in revenue for the quarter to the end of June, and while it does not break out figures for Yoox Net-a-Porter, online sales for Richemont as a whole were down 22%.
Yoox Net-a-Porter had to close some of its warehouses during the outbreak, and Marchetti said the recovery was likely to be U-shaped. “We have seen it also in the past in 2008 with Lehman … And it doesn’t matter how deep is the shock, because like after a couple of weeks, people wanted to shop.” Early on during lockdowns, people shopped for beauty and homeware. “And then we see, topware (sales), probably because of all the Zoom calls … people want to look good on Zoom,” he stated.
Marchetti, who did a stint as a merchant banker at Lehman Brothers early in his career, said he has always focused on the long game. In 1999, when he spent evenings in his Milan apartment working on the business plan for Yoox, his vision was clear. “It didn’t say: Yoox is a website that is selling off-season (fashion). It wasn’t the starting point. It said: Yoox is the global leader in fashion e-commerce. And so basically what I did over the 20 years was building brick after brick with a long-term perspective.” Now,
China is a particular focus — in 2018, Net-a-Porter launched on Tmall, Alibaba’s luxury platform. “We share the same vision with (Richemont chairman) Johann Rupert, of being focused on the long-term growth. We think that online luxury will be a marathon … what we’re doing is laying the foundations in China (and) protecting our people during the pandemic, establishing good values around this company.”
Sluggish sales for luxury designers means an excess of stock, so they are more willing to sell inventory via sites like Yoox and the Outnet, Net-a-Porter’s designer discount sister site. This is where the two sides of the business complement each other, Marchetti said. “We have an in-season business (Net-a-Porter), that is doing extremely well during, let’s say, good times. At the same time we also have an off-season business, which is Yoox, that is doing extremely well during like, shocks. These two engines of this aeroplane, when one is slowing down a little bit, the other one is accelerating, and vice versa.”
Originally published on CNBC.