The partnership, unveiled at a press conference here by Alabbar Enterprises chairman Mohamed Alabbar, will see the establishment of a distribution center in Dubai that will offer same-day delivery. On-the-ground operations are to include a local office with dedicated sales and marketing and customer care.
YNAP will hold a 60 percent stake in the joint venture while Symphony Investments will own the remaining 40 percent.
The agreement will extend across all YNAP banners including Yoox, Net-a-porter, Mr Porter and the Outnet. The company will operate across GCC countries: the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman.
YNAP chief executive Federico Marchetti said via satellite conference that the Middle East represents a significant market for the company.
“The region is one of our brightest prospects,” he said, ranking it the fifth most important region for high-end luxury. “The ground is very fertile. They have the highest Internet penetration rates and the same is true for mobile adoption rates.”
He added that Middle East customers spend 2.5 times more per year on luxury on YNAP than average customers. Their order value is 50 percent higher than the global average.
Alabbar’s relationship with YNAP began with his 100 million euro investment in the online retailer last year, yielding a 4 percent stake.
Marchetti said: “Mohamed has strong relations with luxury brands and an extensive network in the region. I have lot of admiration for what he has achieved, and he’s now leading the digital revolution of the Middle East.
“Mohammed and I closed the deal on WhatsApp, proof that it’s truly a digital joint venture.”
Alabbar, who is also chairman of Emaar Properties and Emaar Malls — the Dubai-based developer of the Burj Khalifa and The Dubai Mall — has moved aggressively into the digital space. Earlier this fall, he announced another e-commerce venture with noon.com, which will be a general e-commerce platform for the region, akin to Amazon. That platform is to go live in January next year. In order to help fulfill logistics, Alabbar led two investor groups in buying a combined 16.45 percent stake in Dubai-based logistics provider Aramex.
In a phone interview, Marchetti said the Middle East and China would be “the markets with the highest growth rate” going forward.
At YNAP, “the two regions in 2015 totaled sales of 80 million euros [$88.8 million at average exchange rates] and they are expected to grow more than fourfold in 2020. We first factored in the possibility of a joint venture in July during our [Capital] Markets’ day [in London], so we were optimistic then, and now we are realists.”
The Middle is “one of the markets showing the biggest growth in luxury, up 10 percent compared with the 2 or 3 percent in the rest of the world, with a young population of Millennials, who will be increasingly important for digital shopping, and with one of the highest mobile penetration, aligned with our own strategies. It’s the market of the future,” Marchetti added.
While the group has long-term agreements with Kering and to operate online stores for designer brands from Giorgio Armani to Ermenegildo Zegna, this is the first strategic deal with a local entrepreneur. “But don’t ask me if it will be the last,” said Marchetti with a laugh.
“These deals really make sense industrially and in terms of strategy, and they are simple in their nature, but they depend on finding the right partner. From my point of view, Alabbar is perfect, he’s built the biggest mall in the world, Dubai Mall, and he is an increasingly digital entrepreneur who has been digitally revolutionizing the Middle East. YNAP has been combining luxury with the Internet and he has been doing the same in the region. And there is only one Alabbar. He is very interested and fully committed. He will sell luxury online exclusively with us in the long-term, for an indefinite period of time,” observed Marchetti.
The joint venture is to open the local office and distribution center in Dubai by end of 2017. Yoox and The Outnet will debut in 2018, while Net-a-porter and Mr Porter are to launch in 2019, followed by select online flagship stores.
Symphony Investments will make an undisclosed “significant” cash contribution to the joint venture, to be phased over the first three years of the venture, which will support YNAP’s expansion in the Middle East and the related investments, Internet penetration and public investments in IT, e-services and telecom infrastructure.
The agreement allows Symphony Investments to exit the venture after a few years of operations, with YNAP having the right to exercise a call option on Alabbar’s stake during pre-defined time periods.
NYAP will appoint the majority of the joint venture’s board of directors, as well as the ceo and finance manager. Symphony Investments is to appoint the chairman of the board.
Marchetti spearheaded the merger between Yoox and Net-a-porter and publicly listed YNAP on the Italian Stock Exchange in 2015. As reported in November, a strong performance in all channels and global markets helped the group close the first nine months of the year with sales of 1.33 billion million euros, or $1.47 billion, up 12.8 percent compared with pro-forma revenues of 1.18 billion euros, or $1.31 billion in the same period last year. Sales accelerated in the third quarter, growing 11.7 percent to 435.4 million euros, or $483.3 million.
“I salute you for believing in the Middle East. All the other players are now going to look at the market and say, ‘We need to look at this region seriously,’” said Alabbar.
Although there has been a slowdown in luxury retail sales in the Gulf in the last year, Alabbar remains optimistic. “The market is not as rosy as previous years, but this business is built for the long-term. The digital path is one we have to open up.”