VOGUE BUSINESS | MAGHAN MCDOWELL
As consumers turn in droves to online shopping, multi-brand online retailers sense their time has truly come.
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After a year of turbulence and unpredictability in global luxury retail, one trend is crystal clear: online is the place to be.
Both brands and investors have taken note. The news that German luxury e-commerce platform Mytheresa has filed for an initial public offering in the US, announced on 23 November, highlights the growing confidence in the sector, especially as behemoths like Amazon and Instagram are still proving how strong they can be in the luxury space, and China’s Tmall and JD.com are hoping they become essential to European luxury houses.
Competing e-commerce players are bolstering their positioning: LVMH, in a shake-up of digital management, revealed e-commerce now accounts for more than 10 per cent of its €53.7 billion revenues in an internal memo, as it plans to pivot to a more common framework across all its brands and focus on China’s fast-moving ecosystem. Yoox Net-a-Porter just appointed Geoffroy Lefebvre as its new CEO; he is currently group digital distribution director at parent company Richemont. MatchesFashion just poached Elizabeth von der Goltz, formerly global buying director at YNAP, for the newly created role of chief commercial officer. Amazon, not to be outdone, hired Vogue’s former creative director Sally Singer as head of fashion direction and launched its invitation-only Luxury Stores app in September.
Online channels are expected to contribute to 20 per cent of total luxury sales by 2022, according to a recent BCG study, and brands are rushing to invest. Some 36 per cent of consumers say they expect to buy more online than offline going forward. Besides Mytheresa, Poshmark and Thredup have also filed to go public this year. Farfetch has received $1.15 billion in investment from Alibaba, Richemont and Kering’s controlling shareholder, Artemis. Analysts expect more activity in the months ahead.
Mytheresa’s IPO is a confidential filing, so we don’t know the details yet about Mytheresa’s plan but analysts agree a valuation of up to $1.5 billion is feasible for an IPO in early 2021. Parent company MYT Netherlands Parent B.V. is currently owned by Ares Management LP and the Canada Pension Plan Investment Board, which also own Neiman Marcus Group Inc. The timing appears well judged.
“Now is a good time strategically, given the boost that Covid has given to e-commerce and especially luxury, which had been lagging so much behind,” says Felix Krueger, partner and associate director at Boston Consulting Group. “There is clearly a role for multi-brand commerce.”
There’s more to come. “I guess that the recent brilliant share price performance of Farfetch is probably giving ideas that the stock market may receive a new multi-brand digital luxury distribution platform well,” says Luca Solca, a Bernstein analyst. “Covid-19 has boosted consumer appetite for online shopping.”
Be a big player, act like a small player
Mytheresa is jostling for space in a relatively crowded market, largely dominated in the West by Farfetch and Net-a-Porter, both of which reported revenues of more than $1 billion pre-pandemic, making them both more than twice the size of Mytheresa, which reported a consolidated net revenue of €450 million for 2020, up 19 per cent.
While Farfetch offers more than 3,500 brands, Mytheresa has a tight 250. This focused number gives it a clear, strong point of view and an agile setup, according to luxury brand consultant Robert Burke. “It’s not the biggest, but it’s certainly one of the most influential.”
Other players with smaller assortments, such as MatchesFashion, may well be encouraged. “What sets Mytheresa apart is the really tight curation,” Krueger says. Many customers find a small assortment easier to navigate. Focused curation can offer a real point of difference, suggests Ana Andjelic, brand consultant and author of The Business of Aspiration. “This is going to become an even bigger challenge in the future. Consumers can find anything on Google and just go to the site with the best price.”
In pandemic lockdown conditions, customers who might usually prefer in-person in-store interactions have converted to online shopping. But they are still looking for relationships with retailers and brands that mirror the personal, physical experience. BCG’s study found that 50 per cent of respondents are more appreciative of personalised clienteling efforts and have rising expectations for personalised relationships throughout the consumer journey.
LVMH has its own multi-brand platform, 24S, though it has yet to cut through, analysts suggest. To improve its online customer experience, the owner of Louis Vuitton, Dior and Givenchy, will be focusing on data, artificial intelligence and China, and more common frameworks across LVMH’s brands, according to the internal memo. (Ian Rogers, chief digital officer, is leaving the company — aside from an advisory role — and Louis Vuitton’s digital chief Michael David will become chief omnichannel officer for the group.)
Despite this investment in customer experience by LVMH, customer service as a key differentiator may play to the advantage of smaller businesses such as Mytheresa, which already has a strong reputation. “This is part of the challenge of being a larger player: you lose your laser focus on who you are appealing to,” Burke says. “We’ve realised that bigger is not always better with companies and retailers. Going forward, we may end up finding that with online as well. The secret sauce is to be a big player and act like a small player.”
Multi-brand coexists with mono-brand
Is there any downside for multi-brand e-commerce players? It’s true that big brands, ranging from Levi’s and Nike to Kering’s family of maisons, would like to have closer control of their online presence, not least to control the customer experience and harvest data. That means reducing wholesale partnerships and switching to brand-controlled models.
But multi-brand retailers have an essential role to play in the mix, according to Boston Consulting Group’s conversations with brands worldwide. In the luxury arena, they are true playgrounds, providing inspiration and offering a journey of discovery for all-important new customers. This is where Amazon, known for being a more utilitarian e-commerce experience, has work to do.
The perceived value of this curation is likely to increase as customers turn to online channels for research. A significant 50 per cent of luxury consumers say they spend more time gathering information online now than before Covid-19, according to BCG.
Expect more as the industry stabilises
So who’s next? Interesting times are ahead, says Burke, pointing to MatchesFashion, which is of a comparable size and scale to Mytheresa and similarly serves a more niche market. Three years ago, Apax Funds acquired a majority stake in Matches at a reported $1 billion valuation, with partner Gabriele Cipparrone saying its assortment, voice and customer service made it primed for growth. Apax declined to comment.
Apps like The Yes and fashion search engine Lyst are other tech-fashion players to watch, he suggests. BCG’s Krueger anticipates more activity from Wall Street, including potential acquisitions. Once there is a more stable outlook, companies with store-based models might look to online players to add digital capabilities, he says. Companies such as Ssense, Luisaviaroma and End Clothing are all “smaller players with distinct propositions — and therefore interesting”.
Meanwhile, Andjelic predicts more investor scrutiny of larger companies like Farfetch, focusing on profitability and return on investment. She also anticipates that private equity companies may jump in and expect faster growth for their investment, putting pressure on brands to improve their e-commerce strategies.
The amped-up pace of change is a post-Covid-19 constant. “We have gone through a period with online shopping in which the pandemic has expedited anything we thought about it — it’s moving at warp speed,” Burke says. “Where it will end up with the consumer will be the real question: what really resonates in the end? I don’t know that it’s a black and white answer at this point.”
© Data: Rakuten Intelligence