By John Revill And Manuela Mesco
Italian Web-based clothier Yoox SpA is buying Net-A-Porter, the
high-end fashion site controlled by Cie. Financière Richemont SA,
in an all-stock deal as the two companies look to cement their
presence in the small-but-increasingly-competitive online market
for luxury goods.
On Tuesday Richemont said it would sell Net-A-Porter in return
for a half of the combined business, which will retain Yoox's
stock-market listing in Milan. The combined company, to be called
Yoox Net-A-Porter Group, will have yearly revenue of more than $1.4
billion.
Yoox Net-A-Porter will be valued at about EUR2.6 billion ($2.82
billion) after the two businesses combine, which is contingent on
Yoox shareholders approving the deal at a June meeting.
The deal represents a bet that the two well-known websites for
luxury clothing and accessories will fare better by pooling their
resources and expertise as the market becomes more crowded. Online
retail giants such as Amazon.com Inc. and Alibaba Group are
increasingly branching out into luxury products, while department
stores like Neiman Marcus Group and Saks Fifth Avenue are selling
more of their inventory over the Internet and offering the
convenience of returns at their physical stores.
The sale represents a turnaround for Richemont, which was an
early investor in Net-A-Porter, but will be the junior partner in
the combined company. Despite owning half of the new company,
Richemont's voting rights will be limited to 25%, a move it says is
designed to protect the independence of Yoox Net-A-Porter, and two
of its 12-14 board seats.
Since acquiring control in 2010, Richemont has struggled to
bring the fashion magazine-themed site to sustainable profitability
as the costs of new distribution centers weigh on its performance.
Last year, Net-A-Porter posted a loss of GBP10 million ($14.8
million), according to analyst estimates.
High-end luxury brands have been late to the online market,
preferring instead to cultivate an aura of exclusivity to entice
shoppers to their stores. Moët Hennessy Louis Vuitton LVMH's Celine
line of clothes and handbags that cost up to EUR15,000 has shunned
Web sales altogether. An estimated 40% of luxury brands don't sell
their bags, watches and clothing online, according to Bain &
Co., a consultancy.
Still, many luxury brands are starting to discover an online
presence coupled with a network of physical stores can increase
overall sales by creating more interest in their products. Shoppers
who buy luxury products both online and in-store spend twice as
much as customers who only shop in physical boutiques, according to
Exane BNP Paribas.
In early March, Fendi, the Italian label controlled by LVMH,
launched an e-commerce site after years of hesitance over its
online presence. The website will sell only a limited selection of
the brand's products and some online-only collections as part of a
broader effort to fuel interest in the brand.
Italy's Prada has just revamped its website and is increasing
its presence on social networks, according to Stefano Cantino, its
marketing and communications chief.
Online sales of luxury items grew 165% to an estimated EUR12.2
billion last year, according to Bain. Still, the figure represents
just 5% of the EUR223 billion spent on luxury goods.
Though both are online clothing retailers, Net-A-Porter and Yoox
have different approaches.
Net-A-Porter, founded in 2000 by former journalist Natalie
Massenet, strives to present itself as part of the fashion
industry. The website is laid out like a slick glossy magazine and
filled with glamorous photos. Products are sold at retail
prices.
"It's just as much a magazine as it is a store," Ms. Massenet
told The Wall Street Journal when Richemont raised its stake in the
company. "That really has served us well, because when you're
online you lose the offline experience of walking into a
store."
Yoox, by contrast, is a more conventional online retailer,
albeit one that focuses on high-end fashion. The company sells
out-of-season shoes and clothes, often at discounts. It also runs
periodic sales, something traditional high-end brands studiously
avoid, in addition to managing websites for luxury companies, like
Valentino and Armani.
Stefania Saviolo, director of Bocconi University's fashion
department, says Yoox Net-A-Porter will occupy a niche in the
overall luxury sector because the two companies are pure online
players with limited room for growth.
"It will be interesting to see what kind of revenue model
they're looking to build," Ms. Saviolo said. She expects the
combined company to charge luxury brands for placement on the site,
creating a new revenue stream.
Luca Solca, an analyst at Exane BNP Paribas, said Yoox
Net-A-Porter would find opportunities in geographically big
countries, like the U.S. and China, where luxury companies will
find it difficult to maintain a physical presence outside of major
cities.
Write to John Revill at john.revill@wsj.com and Manuela Mesco at
manuela.mesco@wsj.com
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