CEO Talks: YNAP's Federico Marchetti Shares Long -Term Vision
by Luisa Zargani, December 17, 2019
Photography by David Needleman
“The plan is always ambitious and long-term.”
Federico Marchetti, chairman and chief executive officer of the Yoox Net-a-porter Group has no doubts, detailing the online retailer’s three-year strategic plan to WWD. “I would not have invented Yoox in 1999 if my plans were not ambitious, and I see the same with [parent company Compagnie Financière] Richemont, too. They are a long-term shareholder, with a long-term view and they expect ambitious plans from us. We are very much aligned on this.”
It’s a sunny day at the YNAP headquarters here, literally and figuratively, as Marchetti takes stock of the company’s five-day Cyber Weekend performance. From Thanksgiving to Cyber Monday, the group saw two orders every second, up from last year, with some of its sites recording up to five orders a second. “Italians, the British and Americans generally bought after lunch or at lunchtime, while the Japanese after dinner at around 10 p.m.,” Marchetti shared.
During those five days, two-thirds of orders were placed on mobile. “We saw a peak of 90 percent of orders via mobile during Cyber Weekend for certain stores,” he said.
YNAP’s active customers now total 4 million, compared with Farfetch’s most recently reported 1.9 million.
Mobile has long been pivotal to the group’s strategy. “I have been obsessed with mobile since 2006, a year before the launch of the iPhone and I put together a task force on mobile because I believed that at one point most of e-commerce would be made through portable phones — and this remains an integral part of our three-year plan,” explained Marchetti in his staple straightforward and on-point manner. “Mobile is at the center of our strategy. It’s been one of the main initiatives after the merger with Net-a-porter. Mobile first pertains to everything, from buying to merchandising.”
Marchetti is convinced the trend is structural, given that a phone is much easier to carry around for customers, who increasingly have limited spare time.
As part of the three-year plan, the group is focusing on two markets that are showing the highest growth rate: China and the Middle East. YNAP has established strategic joint ventures in each region, with Alibaba Group and Mohamed Alabbar’s Symphony Investments, respectively. “All this is consistent because they are the two markets with the highest penetration of mobile,” said Marchetti.
As reported, Yoox plans to close its China web site on Feb. 28 as parent Richemont looks to consolidate its online offer in the luxury space, via Net-a-porter and Mr Porter.
In China, the focus will be on luxury and on Feng Mao, a joint venture between Richemont and Alibaba. Net-a-porter opened its flagship on Alibaba’s business-to-consumer platform Tmall’s Luxury Pavilion on Sept. 30 with a store that marked the start of the new joint venture.
“Richemont was fundamental to closing the deal with Alibaba,” said Marchetti, explaining that it would be illogical to manage Yoox outside this joint venture. The choice was made to focus in China on the luxury category, hence the selection of the Net-a-porter and Mr Porter brands for the launch on Luxury Pavilion. “We believe this is the right path to grow with Alibaba and we want to avoid dispersing energies.”
Marchetti said he is working with Feng Mao’s ceo Yating Wu, “who is a very strong manager, and in a very short period of time has put together an incredible team of talents.” The results on Single’s Day “were absolutely encouraging and promising despite the fact that we are in a soft-launch phase. Our service was rated 4.9 on 5, a real success. And Chinese customers from all provinces made purchases, they were not just concentrated in Shanghai or Beijing, but absolutely widespread. We have great hope for the potential of China.” Handbags and shoes were the main purchases, “which is quite understandable,” said Marchetti, as these categories are seen as the first step by new customers before moving on to more sophisticated purchases.
“Thanks to Richemont, we have found the key to enter the Chinese market by the front door, which differentiates us from our competitors,” claimed Marchetti. “This has helped our luxury brands, too, answering the question how to sell luxury in China online. China has helped build the success of many luxury brands, but the online business has remained a question mark for many.”
The group is part of the Luxury Pavilion with Alibaba “with a privileged and exclusive relation as Net-a-porter and Mr Porter are the only multibrand destinations there with that kind of visibility. Other players are entirely different: there are marketplaces. I have always expressed my doubts about this business model in luxury, which works very well for the mass market, but a marketplace is by definition an oxymoron in luxury. So we are the only ones with this ecosystem, with all these dots that we are connecting through a single platform.”
The goal is to continue to remain leaders in the online luxury arena, said Marchetti, and to do so, YNAP is leveraging “a fundamental difference” compared with its competitors. “We are an ecosystem,” he said.
Referring to Net-a-porter; Mr Porter; The Outnet, and Yoox, he elaborated: “They are our four multibrand storefronts that cover four types of very different customers in different geographies, and then there are the designer brands’ online flagship stores — where we are the invisible partner backstage. However, everything is connected, so that Brunello Cucinelli can work with Net-a-porter, but also with Mr Porter, with The Outnet and with Yoox. This obviously strengthens the [brand] message and means we work in a great spirit of partnership with the brand, for the long term, which has always been the leitmotif of my strategy.”
Marchetti was unfazed by WWD’s suggestion that fashion companies are increasingly bringing their online stores in-house. “Yes, it’s true. We had a contract with Kering that ended in 2019. From 2012 to 2019 we did an incredible job for their brands and, while I can’t reveal to you by what multiple we increased their online sales, it is something Kering itself admits. And this does not mean that Kering — with Gucci, Balenciaga, or Saint Laurent — is exiting Net-a-porter and Mr Porter — on the contrary.”
Marchetti trumpeted how Net-a-porter and Mr Porter “are among their best partners, surely in terms of visibility and quality, in terms of being exposed to a prestigious clientele.”
The entrepreneur explained that brands are “pushing the accelerator more and more” on Net-a-porter and Mr Porter, citing, for example, an exclusive Saint Laurent capsule collection on Net-a-porter and Mr Porter launched in May, or Alessandro Michele’s first collaboration with Net-a-porter early on as creative director of Gucci.
The last published results for 2017, before the delisting of the group, indicated that online flagships represented only around 10 percent of YNAP sales.
The focus with the brands is now on the Next Era project, first revealed with Valentino in 2017. “This is a very complex project that requires a great deal of collaboration between the two groups at all levels, because it includes processes, systems and so on, and the results are incredible. I can tell you that [Next Era] is so successful that the visibility of Valentino’s products has increased by 300 percent because it allows complete visibility on availability of the product to the final customer.”
The customer, said Marchetti, continues to be at the center of all YNAP projects. “The other data point that I can share is that a third of customers are finding products that otherwise they may not have been able to purchase. The potential of Next Era is enormous. This is real omnichannel.”
A second “very big Italian brand” YNAP works with will launch Next Era soon, said Marchetti, without disclosing additional details. “Brands are lining up to deploy Next Era but it’s important to find the right partner.” Richemont brands will also eventually leverage this tool.
Having a single platform is essential. “This means it will be easy and fast to deploy a feature on Net-a-porter to Mr Porter,” said Marchetti.
YNAP has 10 distribution centers worldwide totaling around 4.32 million square feet, “or almost 100 soccer fields in eight countries,” including the new warehouse outside Milan. The site, based in Landriano, was hit by a tornado on Aug. 12, but, wishing to see the proverbial half-full glass, Marchetti was lifted by the “enormous teamwork from our Italian and British teams, all motivated to protect the customer experience. We were transparent with customers and quickly switched to other warehouses globally, shipping from London or New York, for example, rather than from Milan. In less than two months, everything was restored at the state-of-the art location with a new roof. Looking back, it was a sign of strength.”
Discussing Brexit, YNAP is prepared. “We have the warehouse in London but also our site in Continental Europe — this will surely help us sleep better, regardless of what will happen.”
An omnistock system was another fundamental step established by Marchetti. “There were three silos — in Europe, the U.S. and Asia — serving Net-a-porter and Mr Porter before the merger, which meant that our customers in Europe could buy only from the warehouse in London, those in America only from the warehouse in America and those in Asia only from Hong Kong. In our very ambitious plan, we decided to change not only the technological platform but also the operations setup because we want to work from an omnistock system for our customers and for our brands. This means, simply, that there will be a central warehouse and peripheral ones. This way customers all over the world will have accessibility to the products, which is the same principle of the Next Era project. This is a huge change of paradigm for us.”
The group has strengthened its presence in Bologna with the opening of a new technological site in Zola Predosa, which will employ 250 young experts. With this addition, the Zola Predosa space reaches 102,600 square feet.
Asked to comment on market rumors about his possible exit now that Richemont fully controls YNAP, Marchetti said he had “absolutely no other plans at this moment.” He praised Richemont chairman Johann Rupert as “a visionary with a long-term outlook, a greatly successful entrepreneur. He built Richemont, he did not inherit it. We are two entrepreneurs, I feel inspired by him.” Marchetti believes YNAP being part of Richemont is “very positive for both, sharing a long-term vision. So, as long as I feel I add value, as long as I enjoy these complex and ambitious projects, I am here, happy to lead the company.”
Indeed, every day, Marchetti asks himself if there are ways to innovate YNAP. Although he is a businessman, he clearly has fun being creative. For example, he lights up speaking of the YooxMirror, the “playful” AI-powered virtual styling function, the first in the sector, that allows customers to create their own digital avatar by taking a selfie or uploading an image and try on the clothes virtually. The functionality, called YooxMirror Reloaded, mixes AI and Augmented Reality technologies, and was developed in-house by the company’s research and development team over nine months, he said.
“We are number one because our business model is the winning model in luxury, I am 100 percent convinced, because it is built on principles that perfectly match what a sophisticated customer wants: curation, content, service. In this we are objectively the absolute best.”
The brands want to be on Net-a-porter and Mr Porter, he contended, because they are “marketing and content machines, they add luster to a brand because everything is managed with the best quality, from packaging to content. We are super respectful precisely because we are longtime partners. And we never play with pricing in the short term as others do, sometimes. So it’s the best place to be online.”
He also touted service, because YNAP “controls everything, including the supply chain. We don’t have a fragmented service — if we do well, it’s our merit, if we don’t, it’s our fault. We take the responsibility which in the end is what a luxury customer wants.” He ticked off the “You Try, We Wait” service and said couriers are moving to a fully electric fleet of vehicles. The exchange with customers is “constant and inspirational” and often strategies are put in place with the EIP (Extremely Important Person) in mind, “the most sophisticated customers we have.”
Hard luxury (jewelry and watches), which is a fast-growing category, is seen as another area of growth. Being under the Richemont umbrella “is objectively a competitive advantage but this does not mean that we treat its brands differently from the others because independence is at the base of our partnership with Richemont. We are a neutral platform, which is another reason why I am happy to be leading Yoox Net-a-porter.”
Net-a-porter in September launched Hermès timepieces, and Marchetti admitted he was very pleased that Laurent Dordet, head of the watch division of Hermès, spoke highly of the platform, its quality and ethical standards, as reported. “EIP’s are very sophisticated, price is not a limit and we have amply surpassed 200,000 euros for an order,” said Marchetti, speaking in general of hard luxury spending.
Next year will mark YNAP’s 20th anniversary and, speaking of the upcoming initiatives, Marchetti was especially happy about the recently revealed Modern Artisan project with Prince Charles’ Foundation that supports young artisans by marrying artisanal and data-driven design.
“Being an Anglo-Italian group, I am very proud of it because it touches all our values, our DNA. I can’t think of a person better suited than Prince Charles. He is an extremely authentic person and has been a real champion of sustainability for the past 40 years.” This project links to YNAP’s coding education program of 6,000 students so far, ages 6 to 16 — another “pillar in terms of social responsibility,” said Marchetti.
The sustainable luxury collection is designed in Milan and crafted in the U.K., as Prince Charles was very keen to develop craftsmanship in England, he continued, and for the first time the collection will be available on all the group’s stores. “It’s an entirely border-less collection, working together as Brits and Italians.”
Marchetti said there were no plans to set up a brick-and-mortar store, but “I would add: Never say never. With Mr Porter we did some tests; for example, we opened a small temporary shop in London to show the Mr Porter collection developed for [the Matthew Vaughn film]’“Kingsman’ and there may be more of this type of pop-up. But will we have a permanent store in Bond Street? The answer is no.”
Asked about the rental business, such as The RealReal, Marchetti said YNAP “studies everything, to understand what our customers want or don’t want. Let’s say that at this moment we don’t see the rent or resale business as a priority because we are focused on our core business. We have many ambitions, and it makes sense to stay focused. Let’s do what we know how to do in the best possible way.”
He also underscored that the Yoox business model was “very close to circular economy and to give clothes another life.”
Regarding Amazon, Marchetti said it “remains the number-one benchmark in terms of customer service and data analysis. We aim at a better balance between human and machine. Amazon is definitely more skewed toward the machine, which is fine since they are not in the luxury sector. We sell products but we are also very attentive to the emotions of our customers, content, service and so on. But again, Amazon is not a luxury specialist.”
Touching on the subject of artificial intelligence, Marchetti said that its development is helping service the customer with personalization.
“This means that for four million customers we can have four million homepages, each personalized, so that if in your calendar you are going to the British Fashion Awards on Monday in London, our system of artificial intelligence knows that you need a tuxedo and will present in your Mr Porter app the Armani tuxedo, which was exclusive on Mr Porter, and maybe there is a video that shows you how to tie a bow tie.
“We have the key to long-term collaborations with brands, with which we have succeeded in developing exclusive collaborations. In the first half of this year alone, we’ve featured 90 exclusive capsules. Net-a-porter and Mr Porter are like an online Rolls-Royce and brands are happy to jump in.”
Originally published on WWD