Earlier this year, luxury online retailer MyTheresa announced that a severe contraction of the global luxury market would likely mean decreased revenue for the company throughout the rest of the year.
But in its full-year earnings reported on Thursday, that wasn’t the case. MyTheresa’s revenue was up 11% in the last 12 months, above the 9% growth the company expected earlier this year. There was double-digit growth in all geographic regions, keeping MyTheresa profitable at a time when many other luxury online retailers like Farfetch and The RealReal are struggling to reach profitability.
In an interview with Glossy, MyTheresa CEO Michael Kliger said the continued profitability boiled down to the company’s focus on its most affluent consumers, rather than on the aspirational luxury shoppers who may only buy one or two luxury products a year. While there are many more customers like the latter out there, Kliger said, they are far more vulnerable to the kinds of economic turmoil that global markets have seen in the last 12 months.
“One of my mantras is: ‘It’s hard to make a customer buy more frequently, so acquire customers who already but a lot,’” Kliger said. “In other words, it’s much easier to get someone to buy their 15th pair of shoes from us than it is to get them to buy their second.”
The necessity of focusing on comfortable luxury buyers extends to balancing customer acquisition costs. Kliger said that customer acquisition costs are high enough that the company needs each customer to make an average of 80 purchases in order to make it worth it to acquire them. That means that those aspirational customers are even less appealing as customer acquisition costs increase.
MyTheresa increased its marketing spend in the last 12 months by around $5 million. That money was spent primarily on large-scale events for top shoppers, usually in partnership with brands. That included a tour of Valentino’s archives in Rome and a three-day activation with Dolce & Gabbana in Portofino to celebrate an exclusive capsule collection the brand released with MyTheresa in May. The latter was MyTheresa’s largest event of the year.
These affluent consumers can’t be lured by deals, Kliger said, so events like these are one way to bring in new customers. Kliger said the aspirational shopper will find what they like and then seek out the lowest possible price, often going to resale and secondhand shops. But the affluent shopper just buys what they want when they want it. On the flip side, they can be lured away with superior service or product availability, Kliger said.
He also said that profitability, particularly with luxury, can’t only be achieved by making spending cuts. In fact, MyTheresa has increased its spending on things like marketing and technology, fully upgrading its entire tech stack behind the scenes this year and opening a new full-size warehouse that went into operation last week.
MyTheresa expects its profitability to keep up throughout the next year.
“There are no structural barriers in our business model or market positioning to prevent us from achieving the profitability levels we experienced in the last years over the medium term,” said CFO Martin Beer.
But the affluent customer isn’t completely immune to the turmoils of the market, Kliger said. And while things are looking up for MyTheresa right now, luxury as a whole is still vulnerable to further disruption to the global financial market.
“If we have a stock market crash, all of a sudden, that would certainly impact our customer,” Kliger said. “Their source of wealth is things like the stock market and real estate prices, which are thankfully doing pretty well right now. But there’s always risk in the environment.”