The quake came suddenly, but not unexpectedly, and the shock waves altered the digital luxury landscape forever.
It took less than a year for the fate of fashion e-tail’s first-movers — Farfetch, Matches and Net-a-porter — to change, and their new owners are still figuring out how to rebuild them in a difficult time for luxury and amid the resurgence of physical retail.
The speed of it all has been dizzying — and there are still challenges ahead.
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Coupang, which rescued the ailing Farfetch in late 2023, has been trying to take the platform back to its roots in e-commerce. It is slimming operations, and restructuring New Guards Group, which has been placed under bankruptcy protection in Italy.
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Earlier this year, Frasers Group gave up on Matches, placing the once-mighty retailer into administration shortly after purchasing it at a discount last year. Frasers’ decision hit London-based fashion brands hard in particular, leaving them with millions of pounds in losses and forcing some to shut their businesses or look for new investors.
With its former partner Farfetch in distress, Compagnie Financière Richemont was quick to pivot and find a new owner for Yoox Net-a-porter. It made a deal with Mytheresa, one of the few first-movers in e-commerce that is still standing — and thriving.
Richemont, owner of brands ranging from Cartier to Dunhill, had previously planned to sell YNAP to Farfetch in a much-touted deal, but that all fell apart late last year after Farfetch was purchased out of administration by Coupang.
Why Multibrand Digital Retail Collapsed
Tom Chapman, who founded and ran Matches with his wife Ruth Chapman, said fashion e-commerce had been under pressure for a while — and from all directions. Chapman, who sold Matches to Apax Partners in 2017 at the height of its success, believes the big luxury brands’ decision to move to a concession model was particularly damaging.
“They wanted to control the inventory. We’d already seen it happen with the department stores. But when a brand starts to give an e-commerce player 30 to 35 percent of its margin, that e-commerce player cannot be profitable. There are logistics costs, operations costs. Everything falls to pieces. From my perspective, we should have rejected those deals and gone back to the core of what made us unique, a place where the customer could find unsung pieces, ones they couldn’t find anywhere else,” he said.
Chapman added that once the brands’ concession models kicked in, “retailers were all offered the same product. The brands keep the good stock for their retail spaces because they have an even better margin in their own stores. Also, we weren’t given the right replenishment levels. What we were given was ‘airport’ fodder. [Had we still been at Matches] I think Ruth would have turned around and said, ‘Let’s pull away from it and go back to what’s great. Our sales will suffer, but we’re going to be profitable.'”
Those multibrand e-commerce platforms were also expensive to run. They had to keep spending to build backend capacity, keep up with the demands of shipping more individual orders, and process all the online returns. Matches may have been profitable when it was sold, but those profits came at a high price.
The businesses also suffered from a post-COVID-19 slowdown in luxury demand, and the virtual disappearance of the Chinese consumer.
Business owners found it hard to respond to all of the changes and challenges. Between 2017 and 2023, Apax cycled through four CEOs at Matches, not including the temporary ones. Having purchased Matches at a reported valuation of $1 billion, it ended up selling the company for 52 million pounds to Frasers Group.
“Private equity is tricky,” said Ruth Chapman in an interview alongside her husband. “Apax are a very reputable firm, but when you bring men with business degrees and certain business models into the fashion arena, it just doesn’t work. Also, chasing growth over profitability is never a good idea.”
It wasn’t just Apax that fundamentally misunderstood the mechanics — and magic — of online fashion retail. Frasers Group didn’t have a clue and, by the end, neither did Farfetch. Once touted as a “unicorn” for its $1 billion valuation, the company was purchased in a distress sale after years of struggling to turn a profit.
The Coupang Solution
Coupang has been trying stabilize the Farfetch business by going back to basics. Earlier this year the South Korean e-commerce giant shut down Farfetch Platform Solutions, Farfetch’s white label business unit, which launched in 2015 with Manolo Blahnik as the first big client.
It is understood that Farfetch Platform Solutions never achieved the scale or momentum that was envisioned by Farfetch’s founder José Neves, who has since left the business and is now running his eponymous, education-focused foundation based in Portugal.
Coupang has also begun to restructure New Guards Group after placing it into bankruptcy protection in Italy.
New Guards Group is home to a host of international brands, including Marcelo Burlon County of Milan, Palm Angels, Unravel Project, Heron Preston, Alanui, Peggy Gou, Ambush and There Was One. It is also the licensee of Off-White, which was purchased by the New York-based Bluestar Alliance LLC earlier this year.
Before the bankruptcy protection move, NGG had already lost its license to distribute Reebok footwear and apparel in Europe. It is understood that, as part of the deal, NGG owes the licensor Authentic royalty payments of around $300 million.
As late as mid-2023, NGG had had high hopes for the Reebok business. Last year it launched the NGG+ division to operate the Reebok licenses, which gave it control over the activewear company’s branded retail stores, e-commerce and wholesale in Europe. It had also planned to create and distribute high-end collaboration products for Reebok in more than 50 countries.
Frasers’ Matches Debacle
Two months after placing Matches into administration, Mike Ashley’s Frasers Group ended up repurchasing the intellectual property and non-tangibles of the company it had been eager to snatch from Apax.
While Ashley has moved on — trying (and failing) to take control of Mulberry and now attempting to become CEO of Boohoo — hundreds of brands that sold at Matches continue to suffer in this difficult climate.
Some retained lawyers to help them claw back millions of pounds of inventory, or to press the administrators for outstanding payment. The mess was so big the British Fashion Council even got involved to help the designers who were most impacted.
BFC CEO Caroline Rush and her team tried to connect crisis-hit designers, such as Roksanda Ilincic, with potential investors. Ilincic eventually found a white knight in The Brand Group, which purchased her fashion label in May.
In an interview, Rush revealed that following Matches’ demise earlier this year, the BFC had also been having conversations with the U.K. government about how it could help brands access emergency finance in the wake of the company’s collapse.
The Mytheresa Strategy
YNAP survived the digital earthquake, emerging with a new owner in Mytheresa. While that deal still has to close, CEO Michael Kliger already has a clear plan — and Richemont is relieved.
Kliger’s aim is to create a 4 billion euro online juggernaut in the luxury fashion space by operating the Mytheresa shopfront alongside Net-a-porter and Mr Porter. He plans to deal with the discount Yoox business separately.
“Net-a-porter, Mr Porter and Yoox are pioneers in the industry. But they have backend problems and they have technology problems, and we believe we have a strong answer to that,” Kliger told WWD.
“On the front end, the YNAP brands are valuable — we don’t want to weaken them, we actually want to strengthen them — the back end is where there’s been too much complexity, creating too much cost which did not fulfill the specific needs of the different businesses,” added Kliger.
The deal will see Richemont sell YNAP to Mytheresa with a cash position of 555 million euros and no financial debt. Richemont will also make available a six-year revolving credit facility of 100 million euros to finance YNAP’s general corporate needs, including working capital.
In exchange, Mytheresa will hand Richemont a stake representing 33 percent of its fully diluted share capital. Richemont will also have the right to nominate a member and an observer to the Mytheresa board following the close of the deal, which is set for the first half of 2025.
Richemont chairman Johann Rupert described Mytheresa as a “good home for YNAP” while chief financial officer Burkhart Grund said that, going forward, Richemont will part-own “a very strong customer-facing business, which is what we ultimately wanted to achieve.”