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NOT QUITE EVERYTHING

A Swiss giant is doubling down on one business that Amazon still can’t touch

Reuters/Toby Melville
A small, Amazon-proof corner of retail.
  • Alison Griswold
By Alison Griswold

Reporter

This article is more than 2 years old.

A few businesses are still immune to Amazon: dollar stores, auto parts, home improvement, and home furnishings. Luxury is another—and Swiss luxury giant Richemont SA is doubling down.

Richemont plans to spend up to €2.69 billion ($3.3 billion) to gain total control of Yoox Net-a-Porter, the online luxury conglomerate formed by the 2015 merger of Net-a-Porter, a London-based designer fashion website, and Yoox, an Italian fashion and tech company. Richemont already owned about half of the company, having acquired a controlling stake in Net-a-Porter in 2010. The offer values Yoox Net-a-Porter Group, or YNAP, at €38 a share, a 26% premium on its previous close, and the company at about €5 billion.

Unlike other retailers that have struggled to fend off Amazon and transition from brick-and-mortar to online, Richemont has built a strong presence in online luxury. Since the merger, YNAP has blossomed into a global online powerhouse for luxury goods, with sales growth above 17% in each of the last five quarters.

It’s not every day that Amazon shows areas of weakness

YNAP’s premise is simple: Luxury transcends boundaries. “Today, we open the doors to the world’s biggest luxury fashion store,” Net-a-Porter founder Natalie Massenet said at the time of the 2015 merger. “It is a store that never closes, a store without geographical borders, a store that connects with, inspires, serves, and offers millions of style-conscious global consumers access to the finest designer labels in fashion.”

YNAP does most of its business outside the US—in Europe, and some in the Asia-Pacific region. Amazon isn’t an obvious competitor, but like any savvy corporation, Richemont has kept an eye on it. In 2015, Richemont chairman Johann Rupert invited European luxury conglomerate LVMH to join it in building a luxury marketplace that could compete with the likes of Amazon. Rupert reportedly offered LVMH and apparel maker Kering equity in exchange for a commitment to sell on the YNAP platform.

The company has also specialized in designing websites for luxury brands, and built a logistics operation that delivers good to shoppers in days. YNAP manages online flagship stores for brands including Kering, Ferrari, Armani, and Chloe. Scaling luxury online is inherently tricky, since to be prestigious these goods typically also must be expensive and scarce.

That might also explain why Amazon, the proverbial Everything Store, has struggled to break into luxury. Amazon’s customer-obsessed business is devoted to making goods more available, not less. Amazon relentlessly drives down prices and increases its own inventory. The company even has a collection of its own brands that range from clothing to handbags to cleaning products.

Amazon has tried to get into luxury, but brands so far aren’t interested. In 2016, LVMH said there was “no way” it would do business with Amazon. “We believe the business of Amazon does not fit with LVMH, full stop,” chief financial officer Jean-Jacques Guiony told investors on a conference call. German sandal maker Birkenstock cut ties with Amazon that same year, saying the company created “an environment where we experience unacceptable business practices which we believe jeopardize our brand.” Swatch Group reportedly stopped talks to sell high-end watches on Amazon last year, after the company wouldn’t commit to proactively policing its site for counterfeits and sales from unauthorized merchants.

It’s not every day that Amazon shows areas of weakness. Luxury is one of them. No wonder Richemont is doubling down.

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