Download - Deep Dive: Luxury E-Commerce Evolution · PDF fileLuxury E-Commerce Evolution Deborah Weinswig Managing Director Fung Global Retail & Technology ... The luxury sector was slow to expand

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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

1) Wearewitnessingtheproliferationofonlinemultibrandretailersandaspirationalfashionplatforms.ThesecompaniesprovideglobalinfrastructureanddistributionforluxurybrandssuchasYooxNet-A-Porter,Matchesfashion.com,FarfetchandMytheresa.com.

2) Thestronggrowthofonlinepure-playluxuryretailershasdemonstratedthatshoppersarekeentopurchaseluxurygoodsonline.

3) Thegrowthinonlineluxuryshoppingispoisedtocontinue.Forachallengedandsluggishluxurygoodssector,e-commercehasemergedasanimportantgrowthengine.

4) MultibrandonlineretailersaretakingsharefromUSdepartmentstoressuchasNeimanMarcus,SaksFifthAvenue,Bloomingdale’sandNordstrom.

5) Theluxurygoodssectorwasslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlineluxurymarket.E-commerceisthefastest-growingdistributionchannelgloballyforluxurygoods.McKinsey&Companyforecaststhate-commercewillaccountfor18%oftotalluxurysalesin2025,upfrom8%in2016.

Deep Dive: Luxury

E-Commerce Evolution

Deborah Weinswig

Managing Director

Fung Global Retail & Technology

[email protected]

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

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ContentsExecutiveSummary..........................................................................................................................3

Introduction.....................................................................................................................................4

TheRiseofLuxuryMultibrandOnlinePurePlays..............................................................................4

MultibrandOnlineRetailerModel....................................................................................................5

OnlineBoutique/MarketplaceModel...............................................................................................6

LuxuryOnlinePurePlays’SalesAreOnFire......................................................................................6

WhyAreMultibrandOnlineLuxuryRetailersGrowingSoFast?........................................................81. EndlessProductChoice....................................................................................................................................82. Ever-ImprovingLogisticsandDeliveryServices...............................................................................................83. LuxurySectorWasSlowtoExpandintoE-Commerce.....................................................................................94. LuxuryGoodsDemocracy.................................................................................................................................95. ImmunetoAmazon…SoFar.............................................................................................................................96. DigitalServiceandMarketing........................................................................................................................107. LuxuryConsumersAreEmbracingDigital......................................................................................................118. Brick-and-MortarLuxurySectorIsStruggling................................................................................................139. BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth...................................................................1410.USDepartmentStoreWoes...........................................................................................................................15

WhatDoestheFutureHold?..........................................................................................................16

CompetitionforSliceofDigitalPie.................................................................................................16

CompetitionHeatingUpwithLVMHPortalLaunch.........................................................................16

KeyTakeaways...............................................................................................................................17

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ExecutiveSummaryInthisreport,weexaminetheriseofluxurygoodsretailerssuchasYooxNet-A-Porter,Matchesfashion.comandFarfetchthatoperateasmultibrandonlinepureplays.Milan-basedYooxNet-A-Porter,inparticular,hasbeenatrailblazerinthespace.Thecompanyoperatesmultibrandin-seasonandoff-priceoutletstoresthroughfourwebsitesaswellasmonobrandstorewebsitesfor41luxurygoodsbrands.

Salesandotherkeyperformanceindicatorsforonlinepure-playluxurygoodsretailershavebeengrowingrobustly.YooxNet-A-Porterreportedthatitsfiscalyear2016organicsalesincreasedby18%yearoveryear,to€1.9billion.Thecompanyexpectsitsfiscal2017revenuestoincreaseby17%–20%yearoveryear.London-basedMatchesfashion.comreportedthatitssalesincreasedby61%yearoveryearinitslatestfiscalyear.

Wehaveidentified10keyfactorsbehindtheriseandcontinuedrobustgrowthofluxurygoodsretailersthatoperateasmultibrandonlinepureplays:

1. EndlessProductChoice

2. Ever-ImprovingLogisticsandDeliveryServices

3. LuxurySectorWasSlowtoExpandintoE-Commerce

4. LuxuryGoodsDemocracy

5. ImmunetoAmazon…SoFar

6. DigitalServiceandMarketing

7. LuxuryConsumersAreEmbracingDigital

8. Brick-and-MortarLuxurySectorIsStruggling

9. BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth

10. USDepartmentStoreWoes

Webelievethatonlineluxuryretailerswillcontinuetoseestronggrowth.McKinsey&Companyforecaststhatonlinesaleswillconstitute18%oftotalluxurysalesin2025,upfrom8%in2016.However,futurecompetitionandconsolidationactivityintheonlineluxurysectorwillonlyincrease.Scalewillbeimportant,sotherewillberoomforonlyseveralmajorplayersinthemarket.Economiesofscaleincustomeracquisitionandretention,aswellasbrandrelationshipsandlogisticsandmarketingefficiency,willbecomeincreasinglyimportant.Salesgrowthintheoverallluxurygoodssectorwillmainlybeachievedthroughmarketsharegainsandonlinesales.Pastrevenuedrivers—suchasstoreexpansion,priceincreasesandnewdeveloping-marketpenetration—willpresentonlylimitedopportunities.

Theluxurysectorwasslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlinemarket.GloballuxurygoodscompanyLVMHrecentlyannouncedthatitwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite,inMay.TheportalwillalsoofferlabelsthatarenotownedbyLVMH.Ifmoreluxuryretailersfollowthispath,andfocusontheirownplatforms,itwillcomeattheexpenseoflong-standingmultibrandpureplays.

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IntroductionInthisreport,weexaminetheriseofmultibrand,onlinepure-playluxurygoodsretailers.Weidentifykeyplayersinthespaceanddiscusstheirperformanceandbusinessmodels.Wealsoidentify10factorsthatsupportthegrowthoftheseretailersandanalyzetheimpactofgrowingcompetitionintheonlineluxurygoodsspace.Finally,weanalyzeLVMH’smovetolaunchitsownmultibrande-commerceportal.

Source:lvmh.com

TheRiseofLuxuryMultibrandOnlinePurePlaysWehavewitnessedtremendousgrowthamongonlinemultibrandretailersandfashionplatformssuchasYooxNet-A-Porter,Mytheresa.com,Matchesfashion.com,Farfetch,GarmentoryandLyst.Thesecompaniesshipgoodstomostcountriesaroundtheglobe.Weintroducetheseretailersinthetablebelow.

Figure1.SelectedLuxuryMultibrandOnlinePurePlays

Name HeadquartersYearFounded

ShippingCountries Boutiques

Designers/Brands AnnualSales Valuation

YooxNet-A-Porter Milan 2000 180 N/A N/A €1.9Bil. €2.9Bil.

Matchesfashion.com London 2000 190 N/A 450 £204Mil. £300Mil.

Mytheresa.com Munich 2006 120+ N/A 180 €129Mil.* N/A

Farfetch London 2008 190+ 500 1,600+ £302Mil.** $1.5Bil.

Garmentory Seattle 2014 N/A 300+ 2,000+ N/A N/A

Lyst London 2011 150+ 11,500 11,500 $150Mil. N/A

*AttimeofacquisitionbyNeimanMarcusinSeptember2014**Grossmerchandisevalueforfiscalyear2015,endedDecember31,2015Source:S&PCapitalIQ/companyreports/CompaniesHouse/FinancialTimes/TechCrunch.com

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MultibrandOnlineRetailerModelMultibrandonlineretailersoperateastraditionalretailersinthesensethattheypurchaseselectedpiecesfrombrandsanddesignercollectionsandresellthemontheirwebsites.AlthoughYooxNet-A-Porteroperatesvirtualmonobrandstoresfor41luxurybrands,thecompanygenerates90%ofitsrevenuesviaitsmultibrandonlinestores,which,inessence,arevirtualdepartmentstores.YooxNet-A-Porteroperatesfourproprietaryregularpriceandoff-pricemultibrandsites:Net-A-Porter,MrPorter,YooxandTheOutnet.

Figure2.YooxNet-A-Porter:FY16RevenuesbyBusinessSegment(%)

Source:Companyreports

Matchesfashion.comandMytheresa.comoperatebusinessplatformmodelsthataresimilartoYooxNet-A-Porter’s.

Source:mytheresa.com

52%37%

11%

MulnbrandIn-Season MulnbrandOff-Season OnlineFlagshipStores

YooxNet-A-Portergenerates90%ofitsrevenuesfromitsonlinemultibrandstores;theremaindercomesfromtheonlinemonobrandstoresitoperatesfor41luxurybrands.

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OnlineBoutique/MarketplaceModelOnlineboutiquesandmarketplacesactasaggregatingplatforms,whichallowshopperstobrowsehundredsofstylesfromthird-partystoresanddesigners.Theplatformoperatordoesnotpurchaseinventoryand,so,incursnoinventoryrisk.Themodelallowssmallerboutiquesanddesignerstoscale,therebyreachingamuchwidercustomerbaseandincreasingsales.

• TheFarfetchplatformenablesindependentlyownedboutiquesthathavesmallteamsandlimitedtechnologyresourcestoleveragee-commerceanddistributetheirproductsglobally.

• Seattle-basedGarmentoryworkswithboutiquesandsmalldesignerstohelpthemclearexcessinventorywithouttakingbigmarkdownsbysellingthatinventoryonlinetoaglobalaudience.

• Evenmediacontentprovidersaremovingintomerchandisee-commerce,inordertooffsetdwindlingsubscribernumbersandadvertisingrevenues.Forexample,VoguepublisherCondéNasthasrelauncheditsformerrunwayreviewsiteintheformofacuratedluxurymarketplacecalledStyle.com.

LuxuryOnlinePurePlays’SalesAreOnFire• YooxNet-A-Porterisatrailblazerinonlineluxury.Thecompany

operatesthreee-commercebusinesssegments:multibrandin-seasonstores(Net-A-PorterandMrPorter),multibrandoff-seasonstoresthatselloutletitems(YooxandTheOutnet)andflagshipstores.Thelatterdivisiondesignsandmanages41monobrandwebsitesforpartnerluxurygoodsbrands;theseincludeMoncler.com,Armani.com,Valentino.comandChloe.com.ThedivisionisalsoinajointventuretopowerKeringsites,includingBottegaVeneta.comandStellaMcCartney.com.YooxNet-A-Portercontinuestoaddbrandstoitsfull-priceon-andoff-seasonoffering.Thecompanyisalsoplanningtolaunchaprivate-labelbusinessinthefourthquarterof2017.

Figure3.YooxNet-A-Porter:FY16RevenuesbyBusinessSegment(EURMil.)


969

697

205

MulnbrandIn-Season MulnbrandOff-Season OnlineFlagshipStores

Farfetchenablesindependentlyownedboutiquestoleveragee-commerceanddistributetheirproductsglobally.

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YooxNet-A-Porterreportedan18%year-over-yearorganicsalesincrease,to€1.9billion,foritsfiscalyear2016,endedDecember31.Thecompanyincreaseditsmonthlyclientbaseby8%,to28.8million,andordersincreasedby18%yearoveryear,to8.4million.Thecompanyguidedfor17%–20%year-over-yearrevenuegrowthinfiscal2017.Analystshaveasimilarlybullishsalesoutlookforthecompanyforthenextfewyears.

Figure4.YooxNet-A-Porter:2016RevenueGrowthandConsensusRevenueGrowthEstimates(%)

Source:S&PCapitalIQ/companyreports

• PrivatelyownedMatchesfashion.com,whichisbasedinLondon,reportedthatitsonlinesalesincreasedby61%yearoveryear,to£204million,inthefiscalyearendedJanuary31,2017.Matchesfashiongenerates95%ofitssalesonlineand80%ofsalesaremadeoutsideoftheUKmarket.Clientaveragetransactionspendincreased14%to£511inFY16.

• TheFarfetchwebsitereceivesmorethan10millionvisitorseachmonth,andthecompanygrewgrossmerchandisevalueby70%yearoveryearinthefiscalyearendedDecember31,2015.

Webelievethattheseandotheronlineluxuryretailerswillcontinuetoseestronggrowth.

12%

17%18%

17%

8%

2016 2017E 2018E 2019E 2020E

TheFarfetchwebsitereceivesmorethan10millionvisitorseachmonth.

YooxNet-A-Porterreportedan18%year-over-yearorganicsalesincrease,to€1.9billion,forfiscal2016andguidedfor17%–20%revenuegrowthinfiscal2017.

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WhyAreMultibrandOnlineLuxuryRetailersGrowingSoFast?Wehaveidentified10keyfactorsthataresupportingtheriseandcontinuedgrowthofluxurymultibrandpureplays:

1.EndlessProductChoiceE-commerceoffersunparalleledproductchoicefromestablisheddesignernames,emergingbrandsandindependentboutiques.Somedesignersandboutiquesdistributeexclusivelythroughparticularplatformsorcreateexclusivecapsulecollectionsforcertainsites.E-commerceretailandmarketplacesitesoffer:

• Curatedandeditedproductcontent,withthebestpiecesfrombrandcollections.

• Handpickedselectionsofthebestbrandsandlooksintheworld,regardlessofplaceoforigin.

• Newnessandchoice.Forinstance,Matchesfashion.comfeatures1,400newitemsonitssiteeachweekaswellaslimited-runcapsulecollections.

Source:matchesfashion.com

2.Ever-ImprovingLogisticsandDeliveryServicesGlobalshippinganddeliveryoptionsarecontinuouslyimprovingandmultipleplayersnowprovidesame-daydeliveryinlargecities.Luxuryonlinepureplaysprovidefast,simpleandfreereturnsandexchangesforthemostpart.Luxurycustomershavehighexpectationswithregardtoe-commercedelivery;fastshipping,packagingandtrackingareconsideredparamount.

• Mytheresa.comdeliverswithin72hourstomorethan120countriesworldwide.

• Matchesfashion.comdeliverswithin90minutesinLondon.

• Farfetchofferssame-daydeliveryin10majorcitiesacrosstheglobe.

• YooxNet-A-Porterhasrolledoutpickupanddrop-offpointsinseveralEuropeancitiesandcontinuestorolloutomnichannelfunctionalitiestoitsclients’onlineflagshipstores.Theseservices

Mytheresa.comdeliverswithin72hourstomorethan120countriesandMatchesfashion.comdeliverswithin90minutesinLondon.

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includeclick-from-store,in-storepickupandreturn,andtheabilitytocheckin-storeavailabilityonline.

3.LuxurySectorWasSlowtoExpandintoE-CommerceLuxurybrandstraditionallyhavebeenwaryofe-commerceduetothelackofcontrolbrandshaveoverthesellingenvironment,pricingandqualityonthird-partyplatforms.Consequently,anumberofluxurybrandswereslowtoembracee-commerce,initiallydippingtheirtoeinthewatersbypartneringwithYooxNet-A-Porter.Thismeansthecurrent,rapidgrowthweareseeingisfromasmallbase,asluxuryretailisplayingcatch-upwithmass-marketretailine-commerce.

Source:ynap.com

4.LuxuryGoodsDemocracyMultibrandpureplaysareagreatdistributionchannelforemergingbrandsanddesigners.E-commercelevelsthecompetitiveplayingfieldbetweenindustryplayersofdifferentsizes,asitenablessmallerluxurygoodsbrandstoreachawideaudienceandenjoytheeconomiesofscalethatlargerbrandsenjoy.

5.ImmunetoAmazon…SoFarUnlikethemajorityofdiscountandmidpriceretailersandbrandsaroundtheworld,luxurymultibrandonlinepureplayshavesofarbeenlargelyinsulatedfromAmazon’sthreatinfashionretailing,whichhasallowedthemtoflourish.

• LuxurygoodsretailershavebeenquicktodismissAmazonasawholesalepartnerduetodiscountingandcounterfeitingconcerns,insteadpreferringtodistributeproductsthroughdedicatedluxurymultibrandpureplayssuchasYooxNet-A-Porter.

• LuxurygoodscompaniesalsoclaimthatAmazonisnottheappropriatedistributionchannelforexpensiveandaspirationalgoods,asluxurycompaniesmustpreservetheirproducts’scarcity

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andexclusivityinordertomaintainapricepremium;inappropriatepresentationanduncontrolleddiscountingwouldkilltheallureofluxuryitems.

• LuxurypowerhouseLVMHhasstatedthatitdoesnotbelievethebusinessofAmazonfitswithluxuryorwithLVMHbrands.Thecompanyveryrecentlyunveiledplanstolaunchitsownmultibrande-commerceplatform.

• Intime,however,Amazonmayfigureouthowtomakeitsofferingworkwiththeluxurybusiness.

6.DigitalServiceandMarketingE-commerceisbenefitingfromstrongerprecisionmarketingandpersonalizationcapabilities.Examplesofincreasedonlinepersonalizationincludethefollowing:

• Matchesfashion.comoffers24/7advicethroughMyStylist,thecompany’sdedicatedfashionconciergeteam.

• MrPorterislaunchinganAppleTVappdevotedtoitsvideocontent.Thefirst-of-its-kindshoppableappenablesuserstoshopthelookstheyseeon-screenastheywatchontheirmobiledevice.

• YooxNet-A-Porterisdevelopingamessagingtechnologytoallowcertainhigh-spendingcustomerstopurchaseproductsdirectlythroughWhatsApp.YooxNet-A-Porter’spersonalshoppersalreadycommunicatewithtopclientsviathetext-messagingservice,andthecompanywillbecomeoneofthefirstWesternretailerstouseWhatsApptoselldirectlytocustomers.Net-A-Porter’smobilecustomersplacemorethandoublethenumberofordersasitsdesktopcustomers,andthosemobilepurchases,onaverage,areabouttwiceasvaluable.

• Lystusesalgorithmstopersonalizevisitorexperiences,suggestingnewitemsforcustomersbasedontheirpriorpurchasesandshowinginventoryavailability.

Source:lyst.com

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7.LuxuryConsumersareEmbracingDigitalInitially,luxuryretailersharboredconcernsthattheirtypicalcustomerwouldnotbewillingtopurchasehigh-valuegoodsonline.However,anecdotalevidence,surveysandresearchhaverepeatedlydemonstratedthatluxurygoodsshoppers,especiallymillennials,aredigitallyinfluencedandthattheyembracee-commerce,includingmobilepurchasing.Themultibrandonlineluxuryretailershavecapitalizedonthisshiftinpurchasingbehavior,asevidencedbytheirstellarsalesgrowth.

• AccordingtotheBostonConsultingGroup(BCG),60%ofluxurysalesaredigitallyinfluenced,andin-storepurchasesoftenfollowonlineresearch.Approximately41%ofluxurycustomersresearchproductsandservicesonlineandbuyinbrick-and-mortarstores,while9%researchproductsin-storeandpurchaseonline,accordingtotheconsultancy.

Figure5.PercentageofDigitallyInfluencedLuxuryGoodsPurchases

Base:10,000respondentsin10countriesSource:BCG

TheUSandtheUKarethemostdigitallymatureluxurymarkets:morethantwo-thirdsofluxurycustomersinthetwocountrieseitherpurchasedtheirlastproductonlineorresearcheditonlinefirstbeforepurchasingitin-store,accordingtoBCG.ItalyandFrancearetheleastdigitallymatureoftheestablishedluxurymarkets.

Source:bcg.com

42% 41%

9% 8%

StoreOnly ResearchOnline,PurchasedOffline

CheckedatStore,PurchasedOnline

OnlineOnly

Approximately41%ofluxurycustomersresearchproductsonlineandbuyinbrick-and-mortarstores,while9%researchproductsin-storeandpurchaseonline.

TheUSandtheUKarethemostdigitallymatureluxurymarkets,whileItalyandFrancearetheleastdigitallymature.

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Figure6.PercentageofSurveyRespondentsWhoResearchedTheirLastLuxuryPurchaseOnlineandThenPurchasedIn-Store


Itisnotjustdigitally-savvymillennialswhoareattractedtoe-commerce,though.Babyboomersarealsointerestedinomnichannelinteractionswithluxurybrands.

Figure7.PercentageofLuxuryGoodsPurchasersReadyforOmnichannelInteractionsSuchasE-Commerce,SocialSharingandDigitalIn-StoreExperiences


47% 47% 46%

31%

US Brazil Japan France

85%

75%

Millennials BabyBoomers

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8.Brick-and-MortarLuxurySectorIsStrugglingBrick-and-mortarluxurygoodssaleshavebeenchallengedforseveralyears,and2016markedtheworstyearforthesectorsince2009,withmarketgrowthessentiallyflat,accordingtotheAltagammaFoundation,anorganizationcommittedtoincreasingthecompetitivenessofItalianluxurygoodscompanies.Severalfactorshavecontributedtosluggishsalesinluxurybrands’directlyoperatedbrick-and-mortarstoresand,consequently,havemadeonlineluxuryshoppingamoreattractiveoption:

Source:altagamma.it

• TourismspendinginEuropehasfallenfollowingterroristattacksandthestrongUSdollarhasimpactedtouristsalesintheUS.Approximately40%ofluxurygoodssalesarederivedfromtourism.Onlineplatformshavebenefitedversustouristsales.

• PersistentlylowcommoditypriceshaveaffectedcurrenciesanddemandfromBrazilianandRussiantourists.

• Overexpansionandstoreopeningsaturation,especiallyinAsiancities,andrisingfixedcostsduetoescalatingrealestatecostshaveaffectedthesector.Companieshavebeenclosingsomestoresandopeningsmallerones.

Severalprominentbellwetherluxurygoodscompaniesreturnedtogrowthinthefourthquarterof2016.Sectorsalesgrowthinthefuturewilllikelybemuchmoresubduedthanthedouble-digitannualincreasesseeninthe2000s.BCGforecaststhatgloballuxurygoodssaleswillgrowatjust2%–3%annuallythrough2020.

Globalluxurygoodssalesareforecasttogrowatjust2%–3%annuallythrough2020.

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9.BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth

E-commercestillrepresentsonlyasmallshareoftotalluxurygoodssales,butthechannelisakeygrowthopportunity.Furthermore,luxurygoodscompanieshaverecognizedthatmarket-sharegainsandonlinesaleswillbetheirmaingrowthdriversgoingforward,aspaststrategiesofemerging-marketpenetration,openingdirectlyoperatedstoresandhikingpricesarenolongerviable.Duetotheirlackofexperiencewithdigitalstrategies,manyluxurygoodsretailersturnedtomultibrandonlineretailerssuchasYooxNet-A-Portertogainane-commercefoothold.

• E-commerceisthefastest-growingdistributionchannelgloballyforluxurygoods.McKinsey&Companyforecaststhatonlineluxurysaleswilltotal€70billion(£60.7billion)by2025,constituting18%oftotalluxurysales,upfrom8%in2016.

• Theonlineoff-priceluxurygoodssegmentisalsooutperforming.In2016,approximately8%ofluxurygoodssalesweremadeatoutletstores,accordingtoglobalmarketingagencyPMXAgency.

• Luxurygoodssoldonlinearemoreprofitablethanthosesoldthroughanytraditionalsaleschannel,accordingtoBCG.

• Eventheluxurywatchindustryismovingonline.Swisswatchmakershavehistoricallybeenreluctanttosellonline,butarenowtargetingyoungerconsumersthroughe-commerce.AccordingtoaDeloittereport,Swisswatchmakersarepessimisticabouttheindustry’sprospects,andthishaspromptedthemtoshiftonlineinordertofindbuyers.HalfofthewatchexecutivessurveyedbyDeloitteconsiderspecialtye-commerceresellersasthemostimportantsaleschannelin2017.

• FrenchluxurygoodscompanyKeringsawitsonlinesalesgrowbymorethan20%yearoveryearinthefirsthalfofitsfiscalyear2017.Kering’slargestbrand,Gucci,sawonlinesalesjump19%yearoveryearduringtheperiod.

Source:gucci.com

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10.USDepartmentStoreWoesHigh-endbrick-and-mortardepartmentstoresintheUScontinuetostruggle,partlybecauseonlinepureplayssuchasYooxNet-A-Porteraretakingshare.Also,intheoff-pricesegment,onlineplatformsthatselloff-priceluxurygoodsaretakingsharefromoff-pricedepartmentstoreconceptssuchasSaksOff5th.

TheUSisthelargestgloballuxurymarket,accountingfor32%ofluxurygoodsrevenuesin2016.Approximately31%ofYooxNet-A-Porter’srevenuesarederivedfromtheNorthAmericanmarket,makingitthecompany’slargestgeographicmarketintermsofrevenue.

Figure8.YooxNet-A-Porter:FY16RevenuesbyGeographicSegment


Likewise,theUSisexpectedtoemergeasMatchesfashion’slargestmarketin2017.

• US-basedhigh-enddepartmentstorechainNeimanMarcus,whichistheparentcompanyofMytheresa.com,hassufferedfromdecliningsalesandlosses.NeimanMarcus’scomparablestoresalesdeclinedby7%yearoveryearinthefirsthalfofitsfiscalyear2017,endedJanuary28,2017.InMarch,thecompanyannouncedthatithadputitselfupforsale.

• SaksFifthAvenue’ssalesincreasedbyjust0.1%inthefourthquarterofitsfiscalyear2016,endedJanuary28,2017.Comparablesalesatoff-pricesegmentsSaksOff5thandGiltdecreasedby6%overtheperiod.

7%

14%

26%31%

16%

6%

Italy UK RestofEuropeNorthAmerica AsiaPacific RestoftheWorld

Approximately31%ofYooxNet-A-Porter’srevenuescomefromNorthAmerica,makingitthecompany’slargestgeographicmarketintermsofrevenue.

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WhatDoestheFutureHold?

CompetitionforaSliceoftheDigitalPieScalewillbeimportantinonlineluxuryretail,sotherewillonlyberoomforseveralmajorplayersinthemarket.Economiesofscaleincustomeracquisitionandretention,aswellasbrandrelationshipsandlogisticsandmarketingefficiency,willbecomeincreasinglyimportant.Salesgrowthintheluxurygoodssectorwillmainlybeachievedthroughmarketsharegains,aspastrevenuedrivers—suchasstoreexpansion,priceincreasesandnewdeveloping-marketpenetration—nowpresentonlylimitedopportunity.

• Consolidationactivityhasincreasedfollowingrisingcompetition.USchainNeimanMarcusacquiredMunich-basedMytheresa.cominSeptember2014,andMilan-basedYooxmergedwithLondon-basedNet-A-PorterinMarch2015.Itwouldnotbesurprisingtoseefurtherconsolidationinthesectorgoingforward.

• Competitionfromtraditionaldepartmentstores,andespeciallycompetitionfromluxurygoodsbrands’ownonlinestores,isalsoincreasing.

Luxuryretailerswereslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlinemarket.Theluxurysectorlagsotherconsumersectorsintermsofimplementingdigitaltechnologiesandstrategies,accordingtoBCG,butitissprintingtocatchup.Wearelikelytoseesomeluxurybrandsinternalizingtheire-commerceplatformsattheexpenseofmultibrandonlinepureplays.

CompetitionHeatingUpwithLVMHPortalLaunchInMay,LVMHwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite.TheportalwillalsoofferlabelsthatarenotownedbyLVMH.Thecompanyistheworld’slargestluxurygoodsfirmbyrevenue;infiscal2016,endedDecember31,LVMH’sgroupsalesincreasedby5%,to€38billion.

• TheonlineplatformwillcompetedirectlywithNet-A-Porter,Matchesfashion.comandFarfetch,whichalreadywholesaleseveralLVMHbrands.ThemovefollowsLVMH’shiringofanAppleexecutivein2015tofillthenewlycreatedroleofChiefDigitalOfficerandleadthecompany’sonlineretailexpansion.

• Currently,LVMH’s70brandseachchoosetheirowndigitalstrategies,whichincludedistributingthroughYooxNet-A-Porterortheirownmonobrandwebsites.

• ThismarksLVMH’ssecondforayintomultibrandonlinefashionretail;thecompanyoperatedtheeLuxuryplatformbetween2000and2009.WhenLVMHshutteredthesite,itsbrandsintroducedstand-alonee-commerceoperations.

• SomeLVMHbrandsareworkingonone-daydelivery,andstoreassistantsareencouragingcustomerstoorderonlinewhilein-store.

Luxurygoodssalesgrowthwillmainlybeachievedthroughmarketsharegains,aspastrevenuedriversnowpresentonlylimitedopportunity.

InMay,LVMHwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite.

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KeyTakeaways• Wearewitnessingtheproliferationofonlinemultibrandretailers

andaspirationalfashionplatforms—suchasYooxNet-A-porter,Matchesfashion.com,FarfetchandMytheresa.com—thatprovideglobalinfrastructureanddistributionforluxurybrands.

• Onlineluxurypenetrationispoisedtogrowfrom8%in2016to18%in2025,accordingtoMcKinsey&Company.

• Luxurybrandstraditionallyhavebeenwaryofe-commerceduetothelackofcontrolbrandshaveoverthesellingenvironment,pricingandqualityonthird-partyplatforms.However,luxurybrandsarenowfullyembracingdigitalsales.Asaconsequence,weexpectsomebrandstofocusontheirowne-commerceplatformsattheexpenseofmultibrandonlinepureplays.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEvaKubickaSeniorResearchAssociate

HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017

FungGlobalRetailTech.com

Download - Deep Dive: Luxury E-Commerce Evolution · PDF fileLuxury E-Commerce Evolution Deborah Weinswig Managing Director Fung Global Retail & Technology ... The luxury sector was slow to expand

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