E-tailing is no longer a luxury for the luxury industry – it’s a necessity. And the sector is clearly willing to pay for it.
Last week, Richemont, the Swiss watch and jewellery group that owns Cartier, Van Cleef & Arpels and Montblanc, entered into an agreement to acquire online retailer Net-a-Porter, valuing the UK-based company at £350m.
In doing so, it became the first leading luxury conglomerate to purchase a multi-brand virtual store, taking the industry’s involvement with the web to a new level.
Richemont has in the past had a relatively low profile online and has been wary of confusing the exclusivity of its high-end jewellery brands with the more democratic and public nature of the internet.
The purchase of Net-a-Porter will raise its “e-profile” and is part of a growing trend among luxury groups to engage with the internet in non-traditional ways. Earlier this year LVMH, the French luxury group, rebranded and relaunched its former e-commerce site, eLuxury, as nowness.com, focusing on culture as opposed to product.
The Richemont deal has also elevated Natalie Massenet, Net-a-Porter’s founder, from poster girl of high-end e-tailing to virtual visionary. Richemont, which also owns the women’s fashion house Chloé and the menswear brand Dunhill, has bought into her belief that “in the future, everyone on the planet will shop online”.
According to Bain & Co, the online luxury market is worth about $4.9bn (£3.2bn) and grew by 20 per cent last year. Ms Massenet, who will stay with the company as executive chairman, is on the face of things a surprising tech entrepreneur.
A petite 44-year-old, she looks more like the fashion editor she was in her early career than the typical entrepreneur. Instead of chinos and T-shirts, she favours the products sold on her site: stiletto-heeled Jimmy Choos, metallic Proenza Schouler jackets and Bur-berry skirts.
And Ms Massenet’s “hunch” in 2000 – that time-pressed, successful women would be willing to spend serious money online in order to get the products they desired when they desired them – was regarded as apostasy by the financial and fashion communities. “When we started, e-commerce was about the lowest common denominator; there was a sense you had to be quick and efficient and cheap to succeed,” says Ms Massenet.
She adds: “And the belief in fashion was you had to create an amazing experience to convince someone to buy a luxury item, and you could not do that on the web.”
Net-a-Porter launched ten years ago with £800,000 raised from friends and family. Chief executive Mark Sebba – who joined in 2003 and is also staying with the company – says it had 2009 revenues of £120m, an almost 50 per cent increase over 2008, despite last year being one of the worst retail climates in recent memory.
It has 3.3 million unique users a month, and is growing by approximately 10,000 new customers per month in 170 countries around the world.
Shoppers buy on average £500 worth of products, though single orders have reached £20,000.
“As far as we can tell there is no ceiling to what people will spend online,” says Ms Massenet. There must be one, but we haven’t found it.”
Ms Massenet says she was not looking for outside investment when Richemont, which had been a minority investor in Net-a-Porter since 2002, proposed acquiring the company. However, she saw ownership by a global group as an opportunity to begin “the next chapter in e-commerce”.
“I think there will be an increasing convergence between content and commerce, that it will be about following consumers instead of making consumers come to you, and I am especially excited about the various platforms that will allow more and more access to customers,” says Ms Massenet.
Asked about the e-commerce potential of the iPad and other “tablet” devices, she smiled. “Anything that allows for increased interaction is like a gift for our business model.”