LONDON — Compagnie Financière Richemont SA took a bigger step into the e-commerce arena Thursday with the purchase of the remaining 67 percent of Net-a-porter.com, the online fashion retailer. The purchase price was not disclosed, but the deal values all of Net-a-porter at 350 million pounds, or $532 million at current exchange.
Richemont, which already held a 33 percent stake in Net-a-porter and preemptive rights to purchase the remaining shares, said Thursday the site would be managed as an independent entity, just like Richemont’s other brands, which include Cartier, Van Cleef & Arpels and Dunhill.
Natalie Massenet, the founder and chairman of Net-a-porter, will remain at the company, and is looking at an estimated 50 million pound, or $76 million, windfall from the sale. A Net-a-porter spokesman declined to confirm that figure.
Johann Rupert, Richemont’s executive chairman and chief executive officer, lauded Massenet for creating a “superb, customer-oriented business in a relatively short period of time,” and promised to provide the company with “the support it requires to realize its business strategies.”
Massenet said in a telephone interview Thursday that day-to-day business at the site would continue as usual. “Nothing is changing. We’re here to stay — and there’s no intention to slow down the momentum,” she added.
Her new title is executive chairman of Net-a-porter Ltd., and she has taken a stake in the new Richemont subsidiary that was created to own the site. Mark Sebba, ceo of Net-a-porter, will remain in his post, and also has taken a stake in the new company.
Rupert was not available for further comment Thursday, and a Richemont spokesman declined to speak further about the deal. However, a source close to Richemont said it purchased Net-a-porter for a variety of reasons.
“It was time to take Net-a-porter to new markets and to the next level,” the source said. “It’s a nice, freestanding business with a capacity to grow. The purchase also gives Richemont a head start in understanding how e-commerce can be applied to luxury goods, but it’s not a turnkey solution. Richemont won’t be copying Net-a-porter, and they won’t be selling watches like the site sells dresses.”
Richemont has only begun to dip its toes into e-commerce via a new Web site for Cartier in the U.S., which launched last month. Luxury jewelers worldwide traditionally have been wary of selling — and engaging with their customers — over the Internet.
Massenet founded Net-a-porter in 2000 with $1 million in start-up money, and has built the site into a cutting-edge, consumer-focused retailer that’s changed the way brands market and sell their goods. The site pioneered the online trunk show, launched an iPhone app and regularly offers flash capsule collections from designers that can be delivered within hours.
Sebba said unaudited sales to Jan. 31 reached 120 million pounds, or $182 million. Last June, the company reported profits had more than tripled to 10.1 million pounds, or $18.3 million, in the year to Jan. 31, 2009. Sales that year rose nearly 48 percent to 81.5 million pounds, or $147.6 million. The dollar figures have been calculated at average exchange rates for the period.
Net-a-porter sells in 170 countries, and already has distribution centers in London and the U.S. Massenet and Sebba said the brand is growing rapidly in other regions of the world beyond Europe and North America. Over the next 12 months, Net-a-porter will leverage Richemont’s commercial networks in Asia with an eye to opening a distribution center there.
“We’re still in the early stages,” Sebba said. “Asia is a significant and growing market for us — it represents about 10 percent of sales — and is a very important market already for Richemont.”
In the third quarter, Asia-Pacific was the top-performing region for Richemont, with sales growth of 25 percent, thanks mostly to Mainland China and Hong Kong. The region generated 31 percent of overall sales in the three months.
Net-a-porter also plans to upgrade and expand its southeast London warehouse, installing state-of-the-art automated storage and retrieval systems, and to expand the U.S. distribution center.
Asked whether she expected Richemont to use the site to sell its own brands, Massenet said: “No discussions have taken place. We’re not talking about that, but we won’t rule out anything in the luxury space.”
Net-a-porter already carries the Richemont-owned brands Azzedine Alaïa and Chloé — and some 300 other labels, including those owned by Richemont competitors Gucci Group and LVMH Moët Hennessy Louis Vuitton.
Massenet said she and her team regularly have given advice to “all brands” that want to explore e-commerce. “We’re there to give advice to anyone,” she said.
So far, Richemont has been a hands-off shareholder, stepping in to give advice and support about legal and intellectual property issues and to advise on general business parameters.
Luca Solca, senior research analyst at Bernstein Research in London, said that on one level, Richemont’s move was savvy. “Brands are no longer able to prevent the distribution of their goods online, and a company like Richemont risks seeing Harrods and Harvey Nichols taking the lead in Internet distribution,” he said. “The move is a quick way for Richemont to establish its own functional platform.”
However, Solca said he remained skeptical about the future of the Net-a-porter/Richemont tie-up. “The current Net-a-porter format will be difficult to pursue because other brands may resent, and be concerned, that one of their competitors owns their distribution. We’ll see over the next year whether Net remains the same or becomes more focused on certain brands,” he said.
Net-a-porter currently carries all the Gucci Group brands, save for Gucci and Boucheron, as well as the LVMH-owned Givenchy, Fendi, Marc Jacobs and Marc by Marc. “We have always had a very fruitful partnership with Net-a-porter and we do not envisage this changing in the future,” said Robert Polet, president and ceo of Gucci Group.
Fabrizio Malverdi, Givenchy’s ceo, said, “Givenchy is not selling [ready-to-wear] and bags through e-commerce pure players for the moment. We are in the stage of strong development of personalized corners with department stores in Europe and the U.S. as well as franchising. We feel like protecting these relationships with our partners for now.”
Other analysts, however, were more sanguine about the deal. “It’s a good investment for Richemont — sales are growing at Net-a-porter — and it’s not a costly way for them to get into e-commerce,” said Antoine Belge, analyst at HSBC in Paris. “And Natalie needed some more financial resources to grow the business.”
Net-a-porter is one of the great success stories of its generation. The site launched two years after Boo.com, the much-hyped fashion site that was going to create a new way for consumers to shop and interact. But Boo went bust when the dot-com bubble burst, and when Massenet conceived the idea for a site selling expensive designer apparel, many brands were questioning whether the Internet would ever be for real.
“Nobody wanted to invest in e-commerce. They all wanted to invest six months before,” she told the WWD CEO Summit in November 2008.
Unlike Boo, which launched in 1998 and went into liquidation two years later, Net-a-porter started quietly and slowly — with a focus on the customer. It grew along with its brands, providing a platform for Burberry Prorsum to sell in far-flung markets such as Australia. The site took items on consignment from brands including Jimmy Choo, which launched around the same time, and every time someone did a search for Choo, they’d end up on Net-a-porter, as Choo wasn’t yet widely available online.
Today, Net-a-porter and its sister discount site, TheOutnet.com, draw 3.3 million unique visitors a month, and the company has 600 employees in London and New York. “And we’re actively recruiting and hiring,” Massenet said.
As for the future, Massenet said she wants to focus on delivering “unrivaled access and service to her customers. There is so much opportunity for growth — we have only just begun.”
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