The problem with mergers is this: They paralyze the newly combined, supposedly stronger company for years. A merger means that two companies become one company that will be busy with figuring out its new self for some time.
Even more problematic is a merger that not just brings two different company cultures together but is also seen be one side as a hostile takeover – with the other side maybe even seeing it the same way?
The problem here is even more severe as the online retail market itself is a tumultous growth market, making standing still especially costly.
Luxury brands and consumers alike are rapidly embracing e-commerce and we see the luxury industry’s penetration of the online market doubling within the next five years.
This presents a big opportunity, but also a big challenge for the Yoox Net-a-Porter Group, the world’s largest luxury e-commerce platform following the merger of Yoox and Net-a-Porter in 2015. The company’s main banners may well have all bases covered, with Net-a-Porter serving the in-season, full price market and Yoox targeting the off-season side. But by now the big luxury brands have learned their lesson and are putting more and more resource and attention into developing their own online operations. At the same time, in such an attractive market, newcomers with new business models are bound to emerge. This is what we are seeing today. […]
[For Yoox] there is a risk that luxury brands decide to move away from the more visible online off-price channel and manage their own discounting. […]
But Net-a-Porter was established at a time when luxury goods brands knew little about online, were avoiding the channel and had little in the way of in-house capabilities. As a result, the early aggregators, of which Net-a-Porter was the pioneer, built a traditional wholesale business model that echoed traditional department stores, buying and pushing out merchandise to customers.
Brands on one side, which have more business opportunities online now then they did a few years ago, new online fashion companies on the other side with different approaches trying to fill different needs:
New models are emerging that potentially fit better with the strategies of luxury brands.
One such model is operated by Farfetch. Unlike established aggregator peers, Farfetch is a platform player, aggregating the inventory of its boutique partners without holding any inventory itself. Instead, Farfetch’s algorithm directs orders to boutiques that hold the inventory and are linked to a local fulfilment network. An order placed by a customer is directed to a boutique based on proximity, cost of delivery and the boutique’s fulfilment record.
The Farfetch model is certainly working: the company is growing at 60 percent per year and looks to be on course to overtake Net-a-Porter as the largest online aggregator within 24 months. Meanwhile, in a changing market and against increasingly aggressive competitors, the Yoox Net-a-Porter group is ceding market share. Indeed, at a time when the company is having to manage its challenging merger, we fear Yoox Net-a-Porter risks being left behind by the industry’s changes.
Even more than Farfetch, it is the other online fashion players that aren’t standing still and thus moving the online fashion market forward.
Zalando, which is slowly but surely building a portfolio of consumer facing brands/services to serve any need: From mobile marketplaces like Fleek and Movmnt to Zalon (personalized curation by stylists) and Zalando Lounge (shopping club) and, most likely in the not so distant future, as well a service aimed specifically at luxury fashion.
Vente-Privee, which is buying shopping clubs all over Europe:
- Privalia in Spain
- Designers & Friends in Denmark
- Eboutic in Switzerland
- Vente-Exclusive in Belgium
- Zlote Wyprzedaze in Poland
The online fashion market in Europe has emerged the one of the fastest moving and growing e-commerce markets, surprisingly.
In that environment, when a year becomes an eternity, mergers, time and energy consuming as they are, don’t seem to be the best course of action.
- Yoox Net-a-Porter Group Grows to €1.87 Billion (+12.4%) in 2016
- A “Fast Forward” Strategy for 2020 & (Still) Trouble at Yoox Net-a-Porter
- Behind The Scenes of The Merger of Net-a-Porter And Yoox
- Rent the Runway, the ‘Netflix for Dresses’, Becomes Profitable Thanks to Fashion Subscriptions
- Stock Market Star Boohoo Is Expanding With Acquisitions of PrettyLittleThing & Nasty Gal
- How The Hut Group Became the Latest British E-Commerce Star
- What Asos is Doing Technologically and in Mobile
- zLabels Are Responsible for 10-15% of Zalando’s Revenues, Will Be Available at Asos, Amazon and Others Going Forward
- How Zalando Views Machine Learning and AI Disrupting the Fashion Industry
- Zalando Breaks €1 Billion Bar in Q4, Grows to €3.6 billion (+23%) in 2016