The luxury sector has been slow to join the digital revolution, but this is rapidly changing as online sales gain a growing share of the luxury market.
Online sales now account for 9% of the luxury goods market. Bain & Company estimates that by 2025, they will make up 25%. Further, when luxury goods are purchased in stores, the sale is often the manifestation of a buying decision made online. This is especially the case among younger buyers. According to EY, 68% of millennials’ luxury purchases are “digitally influenced”. Hence an online presence has become essential for luxury firms.
Most recently the luxury sector’s online expansion included Switzerland-based Richemont, the world’s second-biggest luxury firm, making a bid for all remaining shares in luxury online retailer Yoox-Net-a-Porter group (YNAP). Richemont was an early investor in Net-a-Porter, which merged with e-commerce firm Yoox in 2015 to form YNAP. The Swiss conglomerate maintained a 50% stake in the combined company.
It is clear that Richemont is keen to expand online. Its sales dropped by 4% in 2016, and while they improved in 2017, online sales of personal luxury goods overall have been more robust. The strategy behind owning YNAP outright is to help Richemont learn more about the online space, according to The Economist. Last year, as part of a management restructuring which eliminated the role of CEO, Richemont appointed technology executive Dr Jean-Jacques van Oosten as Chief Technology Officer. It also appointed a new Group Human Resources Director, Sophie Guieysse, described in a press release as an advisor to Dior “on the future of luxury in a connected world”.
For YNAP, the deal should bring an infusion of investment to help it compete as more luxury firms expand online. Moët Hennessy Louis Vuitton has launched 24 Sèvres, a multi-brand ecommerce platform. Online luxury retailer Farfetch is preparing for a float. At the same time, Amazon has been striving to gain a slice of the luxury market.
There is some disagreement over whether taking over YNAP is necessary. Luca Solca of Exane BNP Paribas compared it to buying an airline to go on holiday. There are risks, such as the question of whether YNAP CEO Federico Marchetti will stay on once he has sold his 4% stake. However, Richemont founder and Chairman Johann Rupert is unperturbed. He sees full ownership of YNAP as an opportunity for Richemont to listen to its customers wherever they might be.
