LUXLOOK.COM LAUNCH: HDP TAKES 10% STAKE IN ACCESSORIES SITE
Byline: Valerie Seckler
NEW YORK — Wondering where to find that $3,500 piece of Valentino luggage you’ve got to have, or that Versace key-holder for the college graduate in your life, at a scant $70?
LuxLook.com, a luxury goods site slated to go live in August, and funded, in part, by Holding di Partecipazioni Industriali, will offer 2,000 women’s and men’s accessories from nearly a dozen designers: Bulgari, Dolce & Gabbana, Etro; Ferre, Loro Piana, Missoni, Moschino, Paul Smith, Valentino, Versace and Vivienne Westwood.
The planned launch marks HdP’s first investment in an Internet venture, one that is aiming at a new group of luxury customers: cyber-shoppers who live far from the nearest designer boutique, as well as those on moderate budgets who can nonetheless afford certain designer accessories. (See related story, page 24.)
At the helm of the project is Roberto M. Clarelli, a 43-year-old financier from Milan, who has close ties to HdP through his links with Mediobanca, Italy’s powerful merchant bank. It was there he met Maurizio Romiti, chief executive of HdP, who was an investment banker at Mediobanca before making his first foray into the fashion world, in 1997, with industrial giant Gruppo Industriale Marzotto.
The move by HdP marks its first significant investment since it ended its pursuit of Calvin Klein earlier this year, and reflects a strategic shift at the company, which has de-emphasized fashion to sharpen its focus on its more profitable media businesses — including Rizzoli Corriere della Sera and fashion lifestyle magazines like Italian Elle — and to scout Internet ventures.
“This is a business no one could start by themselves,” said Clarelli, when asked how he successfully courted HdP’s investment in the multilingual site that is slated to bow in seven markets in Europe, Japan and the U.S. HdP, he said, has purchased “just over a 10 percent stake” in LuxLook, while the company’s management team holds a majority interest.
“You have to have the brands in demand to attract investors, and you have to have the finances to lure the brands,” Clarelli continued, in an interview at the company’s Park Avenue offices. “It’s a chicken-and-egg situation; one feeds off the other. We have a fabulous relationship with HdP. We know them from Milan’s business community, which is like a very small town.”
Clarelli added, “It is one thing to hear a story from someone; it is another thing to hear a story from someone you trust.”
Romiti, who was traveling on Friday, could not be reached for comment.
Also funding the venture are eyewear maker De Rigo, and Gruppo Zignago, an Italian holding firm controlled by the Marzotto family, as well as Com Ventures, Ciaoholding, Arca Merchant & Arca Impresa Gestioni, So.Pa.f Group, Pambianco Strategie di Impresa and Gruppo Finerup Soditic.
So far, the investors have sunk $35 million into LuxLook, including seed financing of $3 million provided by Clarelli himself.
“We didn’t want to be ‘incubated,”‘ Clarelli said, referring to the Internet incubators, aka venture capitalists, who fund startups with an eye on an eventual IPO and a hand in selecting management and board members. “We wanted to choose the best possible partners on our own,” he noted. “So I used my own funds, initially, and we engaged McKinsey & Co. to help us [find talent].”
Clarelli, founder, chairman and chief executive officer of LuxLook, and his Milan partner, Roberto Pesano, president and chief operating officer, expect the site to generate sales of roughly $25 million the first year and to turn a profit in the third year on volume of more than $100 million. At that time, they expect to be merchandising roughly 7,000 items, under 20 brands.
There are no immediate plans to add apparel or footwear to the site, because of issues ranging from fit to technology, but they could come with the proliferation of broad-band.
Joining Clarelli and Pesano on the management team are Paolo Kaiser, vice president of e-commerce; Hillary Peck, who came from Conde Net to become vice president of marketing, and former Saks executive Jennifer Holter, who’s signed on as vice president of merchandising.
The company — with headquarters in midtown Manhattan and offices in Milan, close to the source of its European financing — currently employs around 40 people, and Clarelli sees that workforce growing to about 80 this fall, with most of the new hires made in Europe and Japan.
LuxLook Ltd., incorporated in Delaware, will launch its site, LuxLook.com, in the U.K., Germany, France, Italy, Japan and the U.S., and another built for people in Spanish-speaking regions.
“Spain alone was not a big enough Internet market to justify its own destination online, so we’ve built one based on the language,” Clarelli explained. LuxLook is likely to redesign all its Web destinations based on language, rather than geography, as the Net evolves into a truly global medium. Someday, he expects LuxLook to be online in 15 markets.
“We are trying to create a Madison Avenue type of shopping experience for a new group of consumers on the Internet,” Clarelli said. “We did not invent a new way of shopping online, but rather a Madison Avenue kind of product, selection and service.”
The assortment includes handbags, scarves, belts, eyewear, jewelry, watches, ties and home and travel goods. Prices start at around $50 and climb to $3,500 for the Valentino luggage. “To go higher, it’s a different market,” advised Clarelli. At the same time, he noted, “Many people on a certain budget may not realize there are affordable accessories from a Dolce & Gabbana, a Versace.”
That, in fact, was another reason Clarelli decided to start with accessories: They’re more affordable, for more consumers, than apparel, plus they bring better margins and they’re hot at retail.
LuxLook is purchasing its merchandise — in season — directly from the companies that produce it and will own the inventory. According to Clarelli, LuxLook is “studying a number of joint activities” with those labels, such as in-store promotions at designer boutiques.
All of the brands that have signed on with LuxLook, Clarelli said, were “extremely cautious” about doing business with the fledgling site. “We were new. They weren’t used to people like us,” he said of players like himself and Pesano, people with backgrounds in finance rather than fashion, hawking a yet-to-be seen Web site for designer accessories.
Orders will be fulfilled from Kentucky, where LuxLook has leased a 350,000-square-foot warehouse, three miles from the Greater Cincinnati Airport, in Covington. Most of LuxLook’s deliveries in the U.S. will be handled by United Parcel Service, while those headed for Europe will be fielded primarily by FederalExpress.
The company’s revenue stream will come solely from e-commerce. There are no plans to sell advertising or to license rights to contribute content to the site. Although prices on each version of LuxLook.com will appear in U.S. dollars, the actual price paid by cyber-shoppers will vary by country, according to local currency fluctuations and consumer demand.
Prices quoted on the designer items will include shipping and handling fees and taxes, so that users will not be unpleasantly surprised when they attempt to purchase goods. One of the reasons most frequently cited by cyber-shoppers for failing to complete a purchase they’ve begun to transact is that they are put off by steep shipping and handling fees — sometimes pricier than the goods themselves.
Details of LuxLook’s marketing campaign are still being worked out, but Clarelli said the program would be “extensive,” both online and off. “We plan to spend in excess of $25 million on marketing during our first year,” Clarelli estimated.
In another week or so, the site will be opened, on a password-protected basis, to 5,000 people worldwide, who will participate in a test of the destination, due to go live in August. “The one thing you can never be happy with is a Web site,” Clarelli counseled. “In two years, with the spread of broad-band, today’s Internet will look like the Stone Age.
“I keep a screw and bolt with me, always, as a reminder this whole thing is real,” he added, smiling and plucking them from his pocket. “I’m 43. I wouldn’t have totally changed my life if I didn’t think I had a good chance to succeed.”