How To Get Out Of The Predicament Of Luxury Goods

　　 After many acquisition rumors, Lifeng group finally made an official announcement on the fate of ynap. On August 24, RiFeng group announced that it had reached an agreement with farfetch, a luxury e-commerce company, that farfetch would acquire 47.5% of the shares of ynap (Yoox net-a-porter), a luxury e-commerce owned by RiFeng. The initial stage of the transaction is expected to be completed by the end of 2023.

　　 In the past, several companies in Siku have been filed for bankruptcy, and the existing farfetch "swallows" ynap. In 2022, luxury e-commerce is doomed to undergo a round of reshuffle.

The e-commerce platform Yoox net-a-porter is mainly composed of net-a-porter, Yoox, the ounet and Mr Net-a-porter was founded in 2000 by Natalie Massenet, a British fashion editor, inspired by her work experience as a fashion magazine editor.

Unlike other e-commerce platforms that simply sell products, net-a-porter will launch an e-magazine composed of fashion blockbusters every week, attracting many young consumers and stimulating its rapid growth into one of the most successful luxury e-commerce platforms in the world. In 2010, net-a-porter was acquired by Richemont group as a whole, with a valuation of about 350 million pounds.

Yoox, like net-a-porter, was founded in 2000 and was once considered "the Amazon of fashion" by Federico Marchetti. In 2015, Richemont group sold net-a-porter to Yoox. Although the specific transaction amount was not disclosed, some analysts expected that Richemont group would gain about 317 million euro from the merger of Yoox.

Due to differences in business philosophy, Natalie Massenet decided to leave the company one month before the merger. According to the agreement, she successfully realized 140 million euro. On October 5 of the same year, the merged Yoox net-a-porter was listed on the Milan Stock Exchange. The share price of Yoox net-a-porter rose by 6.7% on the same day, and its market value reached 3.7 billion euro.

With the changing trend of global retail industry, Richemont group re acquired Yoox net-a-porter at the price of 38 euro per share at the beginning of 2018, increasing its shareholding from 49% to 90%, and the total transaction volume was about 2.8 billion euro. In the same year, net-a-porter entered tmall, causing widespread concern.

At the same time, farfetch also ushered in the most important milestone in 2018. It officially landed on the New York Stock Exchange on September 20, and identified four key tasks after listing. The first is to expand the consumer base, the second is to increase product supply, the third is to invest in new technology and innovation, and the fourth is to establish its own brand.

After entering the capital market, farfetch began to accelerate its expansion and fully invested in the development of luxury Omni channel retail business. Both technology and platform have been upgraded to a new level. It has successively acquired new guards group, a multi brand sportswear retailer, and gradually attracted the attention of the global luxury fashion industry.

In 2019, farfetch not only became Chanel's digital partner, but also obtained nearly $300 million in financing jointly sponsored by Chinese e-commerce giant Alibaba and Lifen group. Previously, the major shareholder of the platform was JD, and Tencent was also one of the investors.

On March 1, this year, farfetch Faqi's official overseas flagship store opened on tmall luxury channel, which means that after withdrawing from Jingdong at the end of last year, farfetch officially joined the Alibaba camp. After the emergence of luxury fashion e-commerce industry, farfetch has conquered the industry and consumers with light assets and high-efficiency labels. Due to the company's deep technology gene, it has become a landmark enterprise combining fashion and technology. This is why farfetch can attract investors' attention as many Internet companies.

Turn accidental explosion into planned continuous growth

According to the announcement, yonet-3% and yonet-3.5% will become shareholders of the United Arab Emirates, respectively, and will not become a shareholder of the United Arab Emirates. After that, ynap will use the farfetch platform solution to drive growth and move to a hybrid business model.

Meanwhile, farfetch's acquisition of ynap will be divided into initial stage and second stage. In the initial stage of the transaction, farfetch does not require the merger of ynap. In the second phase of the transaction, farfetch will increase its shareholding in ynap to 100% through put and call options. This means that farfetch may acquire the remaining shares of ynap and eventually wholly own it.

After farfetch's acquisition of 7.5% of ynap4 shares, Richemont will acquire 53 million to 58.5 million class a common shares from farfetch. Richemont will also receive $250 million on the fifth anniversary of the completion of the initial phase of the deal. After the completion of the transaction, ynap will cancel its financial debt and Richemont will provide an additional US $450 million of committed credit line within 10 years.

After the deal, Richemont's jewelry and watch division brands will also be incorporated into farfetch. In recent years, jewelry and wristwatch brands have been slow in the online market of luxury goods industry, which is partly due to the brand image positioning and the production process of partial customization.

Richemont group has not set up jewelry and watch business on ynap before, and the cooperation with farfetch seems to be mostly a transfer measure to reach an exchange. Johann Rupert said that the future launch of e-commerce (online counter) on farfetch platform is a major change in hard luxury strategy.

Strong union or group heating?

However, this transaction seems to be a combination of powers, but in fact, it is more like the embodiment of the stop loss of luxury e-commerce.

Ynap and farfetch were two high-profile luxury e-commerce platforms. Ynap was re acquired by Lifen group in 2018, showing its ambition to expand the scale of e-commerce; Farfetch has also performed well in the Chinese market. It has successively obtained investment from Jingdong, Alibaba, Tencent and other enterprises, both of which are trying to establish their market position in the luxury e-commerce business.

However, the performance of Yoox net-a-porte has not been satisfactory in the years since the acquisition. In the 15 months to 31 March 2019, Yoox net-a-porter's sales increased by 11% to 710.9 million pounds, but lost 10.5 million pounds, compared with a profit of 47.6 million pounds in the same period of the previous year. During the period, its cost of sales increased by 17% to 426 million pounds, and administrative expenses rose nearly 40% to 261 million pounds.

After the outbreak of the epidemic, the revenue of the e-commerce Department of Lifeng group, where Yoox net-a-porter is located, decreased by 9.4% to 2.197 billion euro, and the operating loss was 223 million euro.

The project of Yoox net-a-porter has always been questioned by investors of Richemont group because of its losses in successive years. At the end of last year, yfetch disclosed the intention of the group to sell, so it indicated that it would be willing to sell the group at the end of last year. After selling ynap to farfetch, Richemont group can focus on the development of offline retail, wholesale and other businesses, even if it has handed over the "hot potato" of luxury e-commerce.

However, for farfetch, this cooperation is a good opportunity to broaden resources. Founded in 2008, farfetch now has 200 brands, such as barische, Gucci and Maison Margiela.

In recent years, the luxury market has been monopolized by LVMH, Lifeng group and Kaiyun group. Compared with tmall and Jingdong, which are supported by many small and medium-sized enterprises in China, e-commerce platforms such as farfetch rely more on luxury group. Coincidentally, there are famous brands of jewelry and watches, such as Cartier, van cleft, IWC and so on. The presence of head jewelry and watch brands such as Cartier, van clenburg and constanton will further enhance the positioning of farfetch.

The head brand resources accumulated by e-commerce platforms are the key to winning in the market. However, in recent years, several luxury brands including Kaiyun group have announced to cut down on wholesale channels, reduce discount activities and open their own e-commerce. All of these moves have hit farfetch's business.

At the same time, mytheresa and luissaviaroma are also intensifying market competition. Therefore, another important significance of ynap acquisition for farfetch is to bring more consumers. In the potential economic recession, expanding the number of users is the basic logic to ensure stable growth.

For Yoox net-a-porter, in the future, ynap will adjust its management staff, including the appointment of a new CEO. Richemont and farfetch will each have three people on the board of directors, with another one from Alibaba group.

However, the current transaction is still in its first phase and is expected to be completed by the end of fy2023. In the second stage, farfetch can increase the equity of ynap through the put and call option mechanism, up to 100%. During the blank period, Lifeng group and farfetch are particularly important for the operation of ynap.

On the one hand, Lifeng group has basically decided to sell off, and ynap is currently marked as "asset for sale". On the other hand, farfetch is not required to integrate ynap services in the first phase. And it is very easy for ynap to fall into a state of "no matter what". Due to the fierce competition in the luxury e-commerce market, it is possible for the future development to fall into a passive state.

The market is always a tool to verify the success or failure. In this place where the fittest survive and the fittest survive, the reasons for the collapse of any existence can be found. In recent years, with the booming economy, e-commerce is booming. But today, although the market is still booming, facing the problems of various luxury brands narrowing the wholesale channels and vigorously developing self-employed retail, the life of the platform is becoming more and more difficult.

The reason why luxury e-commerce is in trouble is that it is difficult to adapt to the rapidly changing market and find a way suitable for itself. They are always content with the status quo and will be eliminated sooner or later. Whether the merger of farfetch and Yoox net-a-porter will bring a new spring to luxury e-commerce is still unknown.