Posted on Friday, Jan 16th 2015
The Billion Dollar Unicorn club, of course, is not restricted to cloud technology. Here is an analysis of a luxury retailer Net-a-Porter, which successfully leveraged principles of e-commerce and strong design to become the club’s member.
According to recent market reports, online sales within the luxury segment still account for a modest 5% share. The global luxury market is expected to be worth $270 billion. Analysts believe that online penetration within the segment is growing 30% annually and should account for nearly 20% of luxury revenues by the end of the decade. Another report by McKinsey revealed that the online avatar of the luxury market was growing twice as fast as the offline market.
Net-a-Porter was founded in 2000 by former fashion journalist Natalie Massenet. Through Net-a-Porter, Natalie was trying to “redefine magazines” by creating a site that looked like a magazine and where the reader could just click to buy what was displayed in the magazine. Soon, the website was launched out of Massenet’s Chelsea flat.
They have distinguished themselves not only through a glamorous website, but also by offering significant soft add-ons such as elegantly turned out delivery drivers in the London and Manhattan markets, beautiful ribbon wrapped delivery boxes, and by successfully integrating editorial content and e-commerce functionality on their website.
Today Net-a-Porter sells luxury goods that include categories such as clothing, bags, shoes, accessories, and gifts. They feature products from designers like Miu Miu, Valentino, Victoria Beckham, and several others. They claim to have a viewership of over 2.5 million women monthly. They also expanded into the men’s category with a Mr Porter website that sells more than 200 leading international brands. Net-a-Porter provides shipping to more than 170 countries and offers same day delivery to cities like London and New York. The site boasts of over 22 million monthly page views.
When Net-a-Porter was being set up, they took the help of investment banker Arnaud Massenet, who was also Natalie’s husband then, to raise £1.2m (~$1.8 million) in startup costs. By 2010, Net-a-Porter was bought over by the Swiss luxury group Richemont. The deal valued Net-a-Porter at £350 million (~$550 million). For the year ended March 2014, Net-a-Porter had earned revenues of €660 million (~$840 million). They remained unprofitable and reported a loss of $16 million last year but are expected to break even this year.
Meanwhile, Richemont is planning an exit. They are evaluating options of either listing Net-a-Porter as an independent entity and file for an IPO this year or exploring the sale of the company. Market valuations for Net-a-Porter range from conservative estimates of €1.4 billion (~$1.9 billion) to more aggressive ones of €2.5 billion (~$3.4 billion).
Either way, Net-a-Porter has clearly shown how to create a Unicorn in the luxury fashion segment and there is still so much more to do within the online fashion segment. I have repeatedly spoken about the prevailing inability of the Silicon Valley to understand the design, merchandising, and marketing of fashion.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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