The Net-a-Porter Group has signed a merger deal with its Italian etail rival Yoox to create an online luxury fashion leader, with combined revenues of €1.3bn (£940m).
Drapers takes a look at the industry reaction as the story unfolds:
Honor Westnedge, lead analyst at Verdict Research: “This deal will make Yoox Net-a-Porter the biggest and most powerful player in online luxury fashion. Both retailers will benefit from each other’s customer base and the mix of designers. While there is quite a lot of overlap in terms of what they offer, there are also areas and brands which will be new for each retailer so the merger will give them a greater competitive advantage over their rivals.
“They are also looking to raise funds of €200m (£145m) once the deal goes through and they should be using it to invest in technology and innovation. This could be outside of the realms of their core websites – they need to set the bar and be the leaders in this field. At the moment, many of the luxury brands lag behind these retailers when it comes to shopping online.
“They could look to invest in technology to give the fit and feel of fabrics, better augmented reality and virtual fitting rooms, which haven’t really taken off, as there are still a lot of luxury shoppers who still prefer to go into stores for that experience.”
Anusha Couttigane, senior fashion consultancy at Conlumino: “It’s a really interesting development as it shows how far these luxury ecommerce players have come, to the point of being in the position to establish a digital monopoly. The main consensus regarding the merger seems to be that the two businesses would complement each other largely because Net-a-Porter specialises in current-season stock, while Yoox shifts post-season slow movers.
“I think it’s important to remember that the Outnet.com branch of the business already does this for Net-a-Porter, selling both out-of-season stock and designer diffusion labels. So, in reality, the merger would mark more of a consolidation of Richemont’s dominance in this space.
“What this prospect also demonstrates is the insular culture of the luxury world. Despite the spike of growth we have witnessed in ecommerce retailers selling cut-priced designer gear, when it comes down to protecting brand credentials and pricing policies, this is certainly a case of “better the devil you know”. Bearing in mind that Net-a-Porter and Yoox began as rivals in the same year , the two interact with similar (and, in some cases, the same) brands and design houses have confidence in them as primary destinations for luxury etailing. In some ways this makes joining forces a natural move as brands will continue to gravitate towards the merged company while the respective halves will have plenty of experience to combine. Logistically speaking, it will also enable the businesses to develop a more streamlined, profitable logistics system covering the whole of the continent, providing a model for grand-scale ecommerce in the luxury segment.”
James Doyan, managing director of multichannel consultancy Athito: “It’s a fascinating move and I think the deal is about owning the whole luxury market. Net-a-Porter has such a strong position in the very high end of the business but what Yoox brings is dominance in the discounted, premium off-season part.
“I think this is much more about Net-a-Porter wanting to broaden its offer as opposed to Yoox moving up. Yoox is very much an expert in what it does – I suspect companies like Value Retail and McArthur Glen will be feeling quite nervous now.
“The next step could be opening up a credit offer like Very Exclusive to broaden their customer base even further.
“This deal looks as though it is about getting better economies of scale for Net-a-Porter – the strength of the two businesses will allow them to buyer cheaper and in more volume.
Martin Newman, chief executive of multichannel consultancy Practicology: “Yoox and Net-a-Porter could potentially help each other by leveraging each other’s infrastructure, logistics and marketing. They have strengths in different markets and there are opportunities for further economies of scale. The other thing would be their complementary skills – Net-a-Porter has a richer content proposition than Yoox, for example. Combined they will have even greater strength to fight off existing or new rivals in this marketplace.”
Kristine Kirby, executive strategy and innovation director for retail at software firm ThoughtWorks: “I think it is a gamechanger in the luxury field because what Net-a-Porter is really good at is content curation, getting the catalogue up quickly and making the front end look great whereas I would say that Yoox excels on the fulfilment side, with a smooth, sleek experience. Net-a-Porter is good but Yoox has the cross border ability that is natural to them because of the various parts of their business, including operating brands’ sites for them.
“It is going to be really interesting to see how this plays out in detail – I think it will either throw up a lot of opportunities or close a lot of doors; it is going to be seen as Marmite. I’m almost surprised it didn’t happen earlier as it allows both of them to bring the best bits of their respective companies. I suspect that smaller luxury online retailers, such as MyTheresa could be worried.”