MILAN — “I’ve been thinking of this merger for the past six years, because the rationale behind it is irrefutable,” Federico Marchetti said on Monday, after symbolically ringing the bell at the Stock Exchange in Milan, during a ceremony to mark the first day of trading of YNAP, the new company formed by the fusion of Yoox and Net-a-porter.
This story first appeared in the October 5, 2015 issue of WWD. Subscribe Today.
The entrepreneur said that the goal expressed in March, when the merger was revealed, for YNAP to reach 60 million euros, or $67.2 million at current exchange, in earnings before interest, taxes, depreciation and amortization and capital expenditures in three years was seen now as “conservative,” in light of the “synergic potential” of the company.
Marchetti elicited loud cheers from the audience at the exchange, which included Renzo Rosso, founder of Diesel parent OTB, and an early supporter of Yoox through his Red Circle Investments; Fiat heir and Italia Independent founder Lapo Elkann; Laudomia Pucci; Pitti Immagine ceo Raffaello Napoleone; Oscar Farinetti, founder of Eataly and the newly appointed operative president of the gastronomic chain, Andrea Guerra, as well as La Rinascente’s ceo Alberto Baldan.
In late morning trading, at 11.20 am, YNAP shares were up 4.67 percent at 29.37 euros, or $32.91.
Marchetti can at last begin to prove that one is indeed better than two and that the combination of Yoox Group and Net-a-porter Group will work, six months after the merger of the two firms was revealed. The agreement between the two companies ramps up the scale of Yoox and Net-a-porter, creating a retail brand with combined revenues of 1.3 billion euros, or $1.4 billion at current exchange, and builds on in-season and off-season fashion, and the management of online monobrand stores.
The larger group will enable the combined companies to better take on the likes of Amazon and Alibaba as they push further into fashion, not to mention the plethora of smaller competitors nipping at their heels, such as Matchesfashion.com and Mytheresa.com, which was acquired by Neiman Marcus Group last year. YNAP operates six banners – including Net-a-porter.com, Mr Porter and Thecorner.com — and ships to about 180 countries. Just under 30 percent of combined revenues come from North America, followed by Europe, the U.K., Asia-Pacific and the rest of the world.
From the moment the deal was unveiled in March, it generated buzz in the industry over the potential of the new company, its future strategies — as well as plenty of skepticism over whether the merger would actually work. Analysts and observers talked about a clash of cultures between what was seen as Net-a-porter’s luxury, editorially driven approach and what they felt was Yoox’s more bare-bones, discount-driven model — albeit one that was much more profitable. Minority shareholders in Net-a-porter complained that the merger undervalued their shares and that Net’s parent, Compagnie Financière Richemont, was selling too soon; they eventually received a valuation that was 50 percent higher than what was originally proposed. There were questions over how the founders of the two firms (which both launched in June 2000) would get along: former fashion editor Natalie Massenet, who also heads the British Fashion Council, and the more analytical Marchetti. Massenet was set to be chairman of the combined group with defined responsibilities, while Marchetti would be ceo.
Then there was the complicated nature of the deal itself: Richemont continues to own 50 percent of YNAP’s shares, but only 25 percent of the voting rights. And, with completion of the deal, YNAP has launched a capital increase. The new group also has launched a capital increase of a little more than 1.28 million euros, or $1.43 million, which Richemont has said will enable the entry of “strategic investors” into YNAP. That stirred even more puzzlement, heightened when Johann Rupert, chairman of Richemont, publicly invited his luxury rivals Bernard Arnault and François Henri-Pinault to invest in the combined company, as well as in a new platform to showcase artisanal luxury. So far, they haven’t taken him up on the offer.
But at least one complication for the company was eliminated early last month when Massenet exited Net-a-porter, severing all ties with the e-tailer she founded. So while Massenet sits on the sidelines plotting her next entrepreneurial move, Marchetti is now even more firmly in control of YNAP. In a move to further bolster his team, Marchetti on Sunday named Alison Loehnis president of Net-a-porter Group. On Friday, Yoox shares closed up 4.78 percent to 28.06 euros, or $31.33. This will be the opening price of YNAP’s shares on Monday.
Here, Marchetti talks exclusively with WWD about the merger, and what lies ahead for the new fashion e-tail giant.
WWD: What are the strategic priorities for the new group that will be publicly listed in Milan?
Federico Marchetti: The merger is a game-changer. It’s a thrilling time as we work to ensure the combined group becomes much more than the sum of its parts.
On the multibrand, we will preserve each store’s DNA, delighting their respective customers and geographies with very distinct value propositions and service levels. We will integrate the techno-logistics back-end infrastructure, but the different storefronts will maintain their images and evolve according to their individual brand strategies: Net-a-porter.com will take luxury to the next level and preserve its Anglo-Saxon character, while Yoox.com will retain its lifestyle DNA of fashion, design and art, with a strong Italian identity.
A top priority is to implement our new global stock program that will enable customers to order from a complete selection wherever they may be located. Utilizing our myriad distribution centers in Europe, the U.S. and Asia, Net-a-porter, Mr Porter and The Outnet shoppers will access a far larger assortment as a result.
By accessing editorial content to match its lifestyle positioning and the spread of its offer, Yoox will build on its success; Mr Porter will have far greater access to Italy where many of the top men’s wear brands are based; The Outnet will benefit from our long-standing relationships with leading designers and our combined augmented scale to access a greater range of major fashion brands at better sourcing conditions, all the while maintaining its positioning as a fashionable fashion outlet.
Naturally, we’ll have additional means and resources to provide our customers with services that are even more luxurious. We’ll continue to invest in the marriage between commerce and exceptional content that our consumers appreciate.
WWD: Do you expect to expand the number of monobrand stores?
F.M.: The monobrand portfolio will benefit as we can offer additional and advanced level of services to our brand partners. This could be via editorial content, cross-channel exposure to drive sales or access to the combined group’s logistic hubs around the world, which has the power to improve customer service. At the same time, we will accelerate a rationalization of our monobrand portfolio to increasingly focus on the high-potential partners within the context of the new group.
WWD: Have you thought of the possibility of listing YNAP outside of Italy?
F.M.: I would never rule out a double listing, but we are committed to Milan for the foreseeable future and we have no current plans to look at other markets.
WWD: Why do you think that the merger with NAP can be strong and relevant? What new points of strength does the new group have? How important is size in digital?
F.M.: Our mission and the opportunity that we have created through this game-changing merger is to build the world’s greatest online luxury fashion retailer and to create the future of fashion. Together both companies are much stronger than they would be as stand-alone businesses.
We’re now in a position to invest deeper in the innovation that both groups have as a vital part of their culture and which will be even more important in the future. It is really quite straightforward: If you stand still, you’re going to get left behind and with this benchmark merger, we bring together the skills of both groups’ exceptional staff with the scale and financial strength to deliver more game-changing innovation.
For example, back in 2006, I started a task force to investigate mobile commerce. Today, mobile accounts for more than half of our traffic and will likely reach 99 percent in the coming years. We need to address its impact on our offer and tailor our service and our customer proposition accordingly.
WWD: Will there be differences in image in general?
F.M.: No, as far as customers and brands are concerned, the positioning and the image of each online store will remain largely unchanged. We have exceptional relationships with our customers and brands, and there’ll be a natural evolution, of course. While behind the scenes, we’ll implement various improvements.
WWD: How do you plan to differentiate Thecorner, which some observers compare to NAP?
F.M.: We are developing a cohesive strategy for the entire store portfolio and will update you in due course.
WWD: Will YNAP allow you to increase business in any particular geographic area?
F.M.: YNAP is a truly global proposition and the geographical footprints and local market knowledge of both companies are exceptionally complementary. We’ll localize our respective propositions deeper and faster. For example, leveraging Yoox’s expertise in Italy, Japan and China we can enhance the Net-a-porter.com and Mrporter.com offerings in these key markets; while Yoox.com can expand more aggressively in the U.K. and U.S.
WWD: The competition is high, how do you think YNAP can be winning and at the forefront?
F.M.: The YNAP group is a direct window to the high-end consumer. Brands desire a particular customer and want to be where the best customers are. The group’s brand-store portfolio is a magnet for this very discerning clientele. Online fashion is a specialist business and I don’t believe generalist retailers will find it easy to be successful at the luxury end of the market where we operate.
The market is in constant motion, so in order to maintain our position we will continue to innovate and help our brand partners to harness their creativity online, too. The future of fashion e-tail will be a seamless omnichannel offering, one that allows customers to walk into a store on Bond Street in London or Fifth Avenue in New York or on Via Montenapoleone in Milan and see the same selection integrated perfectly with the monobrand’s online offering and service. Of course, eventually they will be showcased like a concession of a big department store within Net-a-porter.com or Mrporter.com. Everything will be supported by one technology platform. Isn’t that game-changing?”
WWD: Why do you think that the market reacted well to the news of Natalie Massenet’s exit?
F.M.: I gave up trying to second-guess the market long ago!
WWD: What were her main qualities and how do you think you will compensate her departure? Do you already have a person in mind that can succeed her or do you believe you will be in charge of her role, too?
F.M.: Natalie has been smart enough to create the most storied online brand out there — a one-of-a-kind jewel where the way customers interact with fashion has been transformed. That is an amazing achievement. As a fellow entrepreneur, I know how much work, problem-solving, sacrifice, energy and creativity she must have put in over the past 15 years. This business is robust, it has been built to last, with an incredible pool of talent. Natalie and I have many complementary skills, and I’m honestly disappointed she decided to move on, but it was her personal decision and I respect that.
WWD: Some observers were perplexed and expressed doubts about the future style and exclusivity of YNAP with Massenet’s departure. How do you respond to these comments? Will Porter continue to exist?
F.M.: I really want to address the first point, because it’s a continued incorrect assumption and it’s important to get the facts straight. Almost half of the Yoox Group’s business is full-price. Half. We have a venture with the luxury group Kering that encompasses ysl.com to bottegaveneta.com and Yoox group designs and manages monobrand online stores for fashion’s heavy hitters, from armani.com to valentino.com.
At Yoox we know luxury inside out. The level of detail we manage for these core businesses and, not to mention the important digital name of these powerful brands, is expertise we’ve been nurturing for 10 years. We plan to operate Net-a-porter and Mr Porter in much the same way, simply put, to treat them as luxury brands.
Porter [Net-a-porter’s glossy magazine] is a product that got, and still has, the industry buzzing. What they’ve achieved is remarkable and I buy into their vision. There’s, of course, plenty of time to take a closer look; it’s an area that intrigues me and I want to know more.”
WWD: How have the designers you work with reacted to the merger so far? Before and after Massenet’s departure? Brunello Cucinelli, for example, has publicly supported the deal during calls with analysts.
F.M.: This merger is about growth. There’ll, of course, be much larger budgets available to invest in innovation, increased exposure to global audiences and a second-to-none customer experience. The merger takes the opportunity for our brand partners absolutely to the next level. To date I’ve received very positive feedback from many designers, senior industry figures and international editors in chief and press during the past months. It’s very encouraging when you receive a call from an entrepreneur or a ceo and they give you their support. Despite what many may assume, the industry can be very supportive, too.
To summarize, I’m certainly not new to the luxury game. I’ve been in a constant dialogue with most of the high-fashion key players the past 15 years with constant feedback, and our relationships are stronger than ever. They get the fact the company is entering a new chapter and it is one they, and our shareholders, can greatly benefit from, too.
WWD: What do you think about the comments made by Johann Rupert and his invitation to invest in YNAP?
F.M.: I echo Johann’s remarks and encourage you all to invest in YNAP.