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Cartier's Owner Spreads Its Bets Online


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An investment by the owner of the Cartier jewelry brand in luxury fashion website Farfetch is a smart move. It might also be an indirect admission of weaknesses at the rival online business it owns, Yoox Net-a-Porter.

On Thursday, Swiss luxury goods giant
Compagnie Financière Richemont
said it would invest $550 million in New York-listed Farfetch, made up of $250 million in a new joint venture in China and the balance in notes that can be converted into Farfetch stock. Tech giant Alibaba will contribute the same amount. Richemont and Alibaba have the option to up their stakes in the Chinese JV from 25% now to 49% after three years.

Richemont’s shares rose 7% in morning trading Friday. First-half results that showed booming sales in mainland China and a recovery in lucrative jewelry sales certainly helped. But there is also speculation that some kind of future tie-up with Farfetch, which operates a fast-growing online marketplace, could allow it to unload digital retailer Yoox Net-a-Porter.

“The market’s hope is that this will be an opportunity for Richemont to find a way out of the online distribution business,” says Luca Solca, luxury -goods analyst at Bernstein.

This wouldn’t be out of character. The Swiss company has switched in and out of full control of its fashion website over the years. Richemont merged its Net-a-Porter business with Italian competitor Yoox five years ago before taking over the combined group in 2018. Farfetch—which appears to have approached Richemont rather than the other way around—may have good reason to bulk up now that
has launched a rival platform called Luxury Stores. And YNAP’s close relationships with the best brands, built up over two decades, has to be appealing to its competitor.

Selling YNAP to Farfetch, if the possibility arises, could address an eyesore at Richemont. Sales at the company’s online distributors, including luxury watch reseller Watchfinder, fell 21% in the half. The weak performance does reflect warehouse closures during the height of the pandemic. And the Swiss company gave priority to its bottom line by not slashing prices on YNAP’s sites, which nonetheless made a loss.

YNAP’s problem is that luxury brands are cooling on independent retailers, even online ones. Increasingly, they prefer platforms like Alibaba’s Luxury Pavillion or Farfetch, which give them full control over pricing and how their goods are presented. Quality digital department stores like YNAP are still in demand, but momentum is moving toward the marketplace model.

The business of selling luxury goods online remains at a relatively early stage of development, and brands are still trying to work out the right approach. Richemont’s latest digital bet makes sense for investors—but it also highlights the costs of being an early mover.

Write to Carol Ryan at carol.ryan@wsj.com