It is hard to believe that the e-commerce revolution has barely touched a part of the consumer market. Yet that is the way luxury clothing is preparing for explosive growth in developed markets.
Milan – when the world’s biggest luxury fashion retailer Yoox Net – a – two component of Porter was founded in 2000, they seem to be destined to Pets.com, the hapless e-commerce startup the folly of the first Internet bubble. Now, buying expensive clothes online is no longer a strange proposition – and European companies such as oaks and net-a-porter have shown that they can do better than anyone.
Monday was the first day of trading for Yoox in milan and the london-based net-a-porter, as a single entity. The company presents a gift package on the milan stock exchange. Its shares are up about 2 per cent and capital has risen to 3.7 billion euros ($4.2 billion). One might think that this is an isolated success: although online sales account for 17% of the clothing market, about 16% of German luxury fashion as a share of about 4%, while the Yoox and Net – a – Porter has done well in this area is far broader.
That seems likely to change in the coming years. Yoox net-a-porter, in its report on merger earnings, predicts that online sales will grow to 7% by 2018, because “from generation to generation, millennials enter the highest spending year.” However, McKinsey predicted earlier this year that online stores would account for 17 per cent of the luxury fashion market by 2018. These are the reasons why American consumers buy haute couture online, says McKinsey:
Luxury shopping’s experience involves expensive fabrics, looks good, in the mirror, waiting. However, online shopping offers different therapy: comparison and discard the ability of more products, or open the web site application of instant gratification, unique find pleasure, for the fun of expert opinion (Net – a – a former reporter Porter’s founder Natalie Massenet stressed when creating the site content is the same as the commercial). And, most importantly, you don’t have to talk to the sales staff at the boutique, which sometimes seem to give customers the wrong attention.
Yoox and net-a-porter merge because they have complementary products. Italian retailers have a big store because of their relationship with the fashion store and are creating single-product and online boutiques for specific designers such as Valentino and Armani. The UK company’s niche is seasonal multi-brand sales and full price sales, thanks in large part to the introduction of its content magazine. The combined company received 51% of total price sales, 12% from monobrand and the rest from Yoox’s off-season sales.
This combination may seem natural, but it’s not the only one that works. Farfetch, a British service provider, is a “unicorn” that can buy small boutiques online, with venture investors valued at $1 billion this year. In Germany and the United States, big department stores have succeeded in selling luxury fashion online. The Munich site MyTheresa.com was developed by an expensive multi-brand boutique, when owners realized they had a knack for choosing projects that could profit on the web.
It is hard to believe that the e-commerce revolution has barely touched a part of the consumer market. Yet that is the way luxury clothing is preparing for explosive growth in developed markets. Over the next three years, McKinsey predicts an average annual growth rate of 17% in America, 19% in Italy and 21% in France.
It is also a market where European start-ups can win. Giant American companies dominate e-commerce and the Internet, but they rarely have Yoox’s Italian experts looking for a backlog of merchandise and negotiations, or net-a-porter’s London style. As fashion brands realize that they can offer different discount on the Internet, without the need for high quality retail space rental, the web is copy the big chains and expensive boutiques in Europe the United States.