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Yoox Looks to Grow

Yoox president Federico Marchetti said, "My goal is to make Yoox global as quickly as possible and make it vertical."

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MILAN — When Federico Marchetti set up Yoox Group in 2000 in a small workshop near Bologna, Italy, there were plenty of skeptics who said he wouldn’t be able to sell high-end clothing and accessories online.

Not anymore. After reporting revenues of nearly $150 million in 2008, the founder and chief executive officer of the fashion e-tailer plans to drive home his first mover advantage by listing on the Milan Stock Exchange before yearend, despite the fragile state of the financial markets.

“The best is yet to come,” Marchetti said in an interview at Yoox’s main logistics center a halfhour car ride northeast of Bologna. “My goal is to make Yoox global as quickly as possible and make it vertical, covering all the needs of the industry.”

What started as a small workshop is now a 215,000-square-foot logistics depot, with additional hubs on the outskirts of New York and Tokyo, and offi ces in Bologna, Milan, Madrid and Paris. The depots shipped 1.7 million units to customers in more than 50 countries last year and employ 250 people.

Yoox operates the multi-brand sites Yoox. com, which sells predominantly past season, vintage and exclusive merchandise, or as Marchetti prefers to couch it, “What you can’t find in the shops,” and TheCorner.com, which functions as an online department store. It also develops and runs 15 e-commerce sites for brands including Emporio Armani, Diesel, Dolce & Gabbana, Jil Sander, and Valentino — with others like Roberto Cavalli set to follow — and offers consultancy services, such as Web marketing, interactive design and digital experience.

While brick-and-mortar retailers have experienced some of the worst trading conditions in memory, Yoox has capitalized on the move away from conspicuous consumption, reporting a 48 percent hike in revenues in 2008 and near identical gains to 68.3 million euros, or $90.8 million, in the fi rst half of this year. Six-month earnings before interest, taxes, depreciation and amortization increased 149.8 percent to 4.2 million euros, or $5.6 million, and the growth shows no signs of slowing.

A testament to his increasing influence, Marchetti is even a fixture in the front row during Milan Fashion Week.

But on a tour of the Interporto logistics facility outside Bologna, even if he concedes he has been “very lucky.” He is applying technology to fashion and, in doing so, transforming the way brands do business.

For example, to confront a lack of standardization between manufacturers in stockkeeping — with bar codes and sizing differing by brand and market — Yoox tags each product on arrival with a radio frequency chip, or RFID, which is uploaded with key information. This allows the item to be identifi ed and located at any time, anywhere prior to shipping.

“When my mother saw the amount of stock we have here, she was worried and said, ‘My poor son! How do you manage?’ But this system reduces the margin of error to nearly zero and makes us more effi cient,” Marchetti said, predicting an industry-wide evolution from bar codes to RFID eventually. “Everything we do is regulated by numbers. It’s all about information.”

Marchetti also has his own team of programmers and technical wizards who dream up proprietary intellectual property like mobile commerce applications or an automated machine for photographing shoes and accessories. He employs 25 photographers who snap 2,000 items a day in 17 digital studios inside the depot. “We do everything in-house,” Marchetti said, admitting he is “a bit of control freak,” particularly when it comes to technology. “This is our core strategic asset.”

By being built this way, Yoox has the advantage of economies of scale, a factor likely to motivate investors in its initial public offering.

“By covering all aspects, there are some monstrous synergies,” Marchetti said. “We are the only ones to have something like this. There are other players who cover aspects of what we do, but no one has a complete model like us. After us, there is only the big mama of e-commerce, Amazon.”

Amazon has ventured into the fashion arena, acquiring or building sites including Endless.com and Zappos.com for shoes; Javari.co.uk for accessories, and multibrand etailer Shopbop.com. Amazon also operates Diane von Furstenberg’s e-commerce site, dvf.com.

“[Amazon’s] strategy is very similar [to ours], but they are generalists,” Marchetti explained. “We think it pays to be specialists.”

While Yoox’s venture capital shareholders, which include Kiwi, Balderton and Nestor, are expected to cash in some or all of their controlling stake when the company lists, Marchetti said he plans to use the capital increase to consolidate the business, accelerate growth, and invest in client and customer service as well as his employees.

“We want to give our clients an even more cutting-edge platform and our end customers a purchasing experience, which is even more sophisticated and customized to their needs,” Marchetti said. “We want to recruit and retain rising stars. We have always done that, and we want to continue to do so even more.” He also plans to expand in fast-growing luxury markets, particularly Asia.

“At the moment, we just send merchandise there, but the aim is to localize the market,” Marchetti said. Italy accounts for around 28 percent of Yoox’s sales; the rest of Europe, 50 percent; North America, 15 percent, and Japan, 6 percent. He added: “We’re ready. Everything is in place. Now it’s just a question of growing.”

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