It’s been an eventful year for luxury e-commerce. Farfetch was sold for pennies on the dollar to Coupang in April of this year after running into profitability issues. Matches Fashion suffered a similar fate, being purchased by Frasers Group in late 2023 only to be shuttered completely in March. And Richemont’s Yoox-Net-a-Porter has remained a notorious money loser for its parent company.
The latest news on this front is that Mytheresa, one of the few luxury e-commerce platforms that has fared well in the past few years, has acquired YNAP from Richemont in a deal that also sees Richemont taking a 33% stake in Mytheresa.
On paper, it’s a win-win scenario for both companies. The deal, once it closes next year, will instantly turn Mytheresa into a $3 billion company, significantly increasing Mytheresa’s size. Mytheresa will also be taking on none of YNAP’s debt and inheriting over $600 million in cash from YNAP. Richemont, on the other hand, can finally write off YNAP, which has been a drag on its earnings for several years now.
But the real question is: Will Net-a-Porter fare any better under Mytheresa than it did under Richemont?
One of the main issues that has faced multi-brand online retailers like Farfetch and Net-a-Porter is that their profits and losses have been out of wack. Farfetch only achieved profitability intermittently starting in 2021 and upset investors with frequent spending, like a surprise $675 million takeover of New Guards Group in 2019. Similarly, Net-a-Porter cost more than it made for Richemont. In the first half of 2023, it lost $137 million.
Mytheresa, on the other hand, is a profitable enterprise. Mytheresa CEO Michael Kliger previously told Glossy in September of last year that his strategy was to focus his efforts on the most affluent and frequent purchasers. A customer has to purchase from Mytheresa around 80 times to offset the costs to acquire them, so high-value customers are the main focus.
In an interview on Monday afternoon, Kliger acknowledged that Net-a-Porter has been unprofitable and that there is work to be done to turn the business around.
“There are profitable banners, but it’s not profitable as a group,” Kliger said. “We are unique because we are profitable, we are debt-free, and we’re in a strong financial position. One important component will be to use the infrastructure that Mytheresa has in the luxury division and to streamline and simplify the business.”
But Kliger also acknowledged that “success will not come by saving costs.” That’s against the strategy taken by many businesses in the luxury space that are feeling the pressure to reach profitability. The RealReal, another luxury online seller, was unprofitable for years until a wave of cuts to its business helped to finally push it into the black in April of this year.
Instead, Kliger said true success for Net-a-Porter will come from getting “the right assortment to the right customer at the right speed.”
According to Nicole Russo, a personal stylist and former senior personal shopper at Net-a-Porter for five years, Net-a-Porter struggled because it failed to differentiate itself while trying to cater to a luxury customer who expects the highest quality of service. The decline of Net-a-Porter’s revenues has meant it pulled out of several big markets, including China and the beauty business.
“Affluent people have options,” she said. “When you take away what makes them feel special, they just pivot where they proceed to purchase.”
She said that Mytheresa is thriving because “it’s doing what NAP did when it started: curating a unique POV and experience for people who have the means to shop for whatever wherever they want.”
