Federico Marchetti on revenue, rivals, personal shoppers and market share
Federico Marchetti is the reigning king of Internet luxury. Two years ago, he engineered the merger of Net-a-Porter and Yoox – the company he founded, creating a luxury behemoth, with 2016 turnover of €1.9 billion.
The success of YNAP and its considerably smaller competitors like Farfetch and ModaOperandi almost make the business look easy. Yet, the recent collapse of ecommerce site Style.com, backed by luxury media giant Condé Nast, shows how tough an industry it is. Remarkably, YNAP already controls 11% of the estimated €20 billion digital luxury market, and expects that to grow. Which is why we caught up with Marchetti for a freewheeling conversation on investment plans; personal shoppers; merging a giant empire; going fur-free; and his view of the competition.
“You know what, we had 200 million visits in the first quarter, which means we have the highest traffic in luxury commerce,” he smiles over a plate of langoustines in Milan.
He divides YNAP into two key sections: In Season and Off Season: In the first, luxury and upscale, Net-a-Porter and Mr Porter (with 50% of total turnover), in the latter Yoox and the Outlet (40%). The remaining 10% is composed of a division managing some 40 luxury brands' online sites, including seven fashion houses belonging to Kering, and stellar names as Prada, Moncler and Armani.
“The merger is going extremely well. In terms of geography, skills and culture. We are linking two cultures, which are very different but that is the beauty of the merger. The Net culture is focused on the front end –marketing, customers, communications, PR and editorial. While the Italian culture is concentrated on the back end – logistics, operations and technology,” says Marchetti, who spent six years maneuvering for the deal.
“Now, we have three million active customers, and our growth is strong. This year analysts are predicting and EBITDA of around 170 to 180 million euros, which is pretty good,” he underlines.
In YNAP’s workforce of 4,200, 61% are women, united, in his view, by “the culture of innovation. We are a technology and a luxury company. If you look at techy companies, they never have enough women. We are very different. Of the top 200 people in company, 50% are women. So, we have built a company that reflects fully our customer base. Two thirds of our customers are women. Women understand better what women want,” says Marchetti, who divides his time between his London headquarters, in Westfield, and the Navigli canal district of Milan.
In London, a new tech hub, with 500 people; like engineers and software developers. In Bologna, a balancing 500 techies. Plus, a new logistic setup in Pavia, south of Milano, with 300 staff. The center of a replenishment system, where planes will shuttle inventory to some eight global warehouses. All told, YNAP is investing half a billion euros in technology.
“YNAP is a growth story. We did not lay off anybody. It is the only merger in history were nobody was fired,” he enthuses.
However, even as he unites the back office, he has kept his core brands separate, with separate MDs for his key two divisions: Alison Loehnis and Alessandra Rossi. And he’s also enormously proud of his team. Notably Lucy Yeomans, the former Harper’s Bazaar editrix who helms Porter magazine.
“Porter is doing super well and we are super happy about the magazine,” stressing that after the merger he insisted that editorial and retailing teams work beside each other on the same floor. Over lunch he sings the praises of executives. “Currently, our team is made of superstars,” he insists; listing Mr. Porter managing director Toby Bateman; Matthew Woolsey, the new managing director of Net, Shira Suveyke at Outnet.
The merger has made Marchetti a very rich man, whose 6% stake is worth at least 200 million euros. The single largest shareholder is luxury company Richemont with 25 percent of ordinary shares; Dubai-based Mohamed Alabbar has four percent; with the remainder held by institutional investors. It’s a unique asset. So, when rumors – latter somewhat denied - exploded this week that Alibaba had bought a 1% stake in YNAP the Milan market, the stock’s capitalization soared to €3.5 billion.
“It’s a public company and someone could take over, that’s a possibility,” concedes Marchetti, while acting like he thinks that very unlikely.
Turning to his competitors, he argues: “We have a lot of competition – Matches, MyTheresa, ModaOperandi, but we are the only one that is over a billion. They are all about 200 to 300 million. I respect them all, as it shows there is a lot of growth in the industry.” Nor is he worried about competition from LVMH, which opened @24Sevres by LVMH last month. “Better late than never! It is good for us frankly speaking. As they will run the business as a proper luxury business. They won’t dump prices or do parallel or gray market. The only competition that is not a good is the one in prices. And, they will bring to the online brands that have not been online. I look forward to having Céline there. Hopefully one day it will join Net. We already sell LVMH products,” he notes.
His other big innovation this past year was to bring to bring online hard luxury – like the 125,000-euro watch by Cartier (a Richemont brand). “And, we have more to come – IWC Cartier, Buccellati and Tiffany.”
Who, one wonders, is YNAP’s consumer? “We are very different from any other brands. We have the most valuable customer out there. The 2 percent. And they make 40 % of our total revenue. We have over a score of customers who spend more than one million a year. Nice people!”
Attention to customers’ wishes remains central to his thinking, and the reason why YNAP has gone fur-free. “We did a survey among 25,000 of our biggest customers; and more than 50% said they were very, very worried about animal rights. So we dropped fur. We are not stopping people wearing fur – but we do not sell it.”
To serve them properly, YNAP has developed a team of personal shoppers, launched in London, who visit clients at home and style them. They are growing that staff in LA, and will soon have 60 personal shoppers worldwide. And, starting in September there will be Net a Porter at Home. Yoox, on the other hand, is accessible luxury. So, overall, the average order value is a very healthy 343 euros.
However, Marchetti is rather doubtful about Condé Nast’s plans to link-up with Farfetch.
“Out true asset is content with commerce. The reason why it is unique because we as retailers control the whole supply chain... There is a synergy between the two. Our buyers talk to our editors by definition. We also control the inventory and that’s why we can converge content and commerce very well. Six months in advance we know what we want to sell, and what sort of stories we are going to write and photograph. So, I think it will be very difficult for them (Condé Nast and Farfetch) in terms of content and commerce because they do not control the inventory. It’s much more complicated making content and commerce converge when you don’t know six months before what you are going to buy. You understand?”
We think we do.
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