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Kering to Take Control of E-Commerce, Ending YNAP Partnership

The move follows rival conglomerate Richemont's takeover of Yoox Net-a-Porter.
Photo: Paul Price for BoF
By
  • Kati Chitrakorn

LONDON, United Kingdom — Kering is planning to take e-commerce in-house, dealing a blow to Yoox Net-a-Porter, which currently manage online sales for most of the French conglomerate's brands, including Saint Laurent and Balenciaga.

Kering, then known as PPR, established the joint venture with Yoox in 2012 to power its online retail businesses. At the time, the French company was just beginning to explore the potential for e-commerce, and aside from Gucci, many of its brands lacked the knowhow internally to quickly build its own platform. Since then, Yoox merged with luxury online seller Net-a-Porter, and the combined company was acquired by Richemont, a Kering rival, earlier this year.

The partnership covered brands including Bottega Veneta, Saint Laurent, Alexander McQueen and Balenciaga — but not Kering's cash cow, Gucci. At Kering, e-commerce is the fastest growing channel across its luxury brands, but online sales accounted for only six percent of revenue in the first half of 2018. That compares with 10 percent of global luxury sales completed online last year, according to Bain & Co.

Going forward, Kering will “leverage its in-house technology and operations team to fully internalise the e-commerce activities currently handled through the joint venture with YNAP,” the group said in a statement. The transition is expected to be complete in the first half of 2020.

Kering's move to assert greater control over its e-commerce business was inevitable at some stage. Online sales have become the luxury industry’s most important engine of growth. According to consultancy Bain, e-commerce will drive 25 percent of all luxury sales by 2025.

"Kering correctly identifies digital ... as a vital competitive ground for luxury brands," said Luca Solca, head of luxury goods at Exane BNP Paribas. "Consumer engagement, distribution ... the fronts are multiplying and getting more and more difficult. I think it is appropriate for Kering to invest in them and to bring these activities under direct control for all brands."

At the same time, the move represents a setback for YNAP, where as much as 10 percent of annual revenue — about $340 million — is vulnerable to being lost as brands take their e-commerce businesses in-house, said John Guy, head of luxury and sporting goods at MainFirst Bank. He added that Richemont, likely anticipating Kering's decision, has found a new source of revenue in a joint venture with Alibaba to boost sales in China.

After a slow start, Kering has begun to ramp up investment in its digital strategy. On Monday, the company also announced a partnership with Apple to develop a suite of apps to support sales staff across its brands' stores. According to Kering, the app will enable sales associates to access stock levels in real-time to provide customers with personalised service, including customised styling recommendations.

“Digital can be many different things at once — a distribution channel; a platform for offering seamless omni-channel services to clients; a driver of brand image and visibility; and a tool for engaging with customers in a personalised way,” said chief client and digital officer Grégory Boutté in a statement. “Digital technology, data science and innovation provide a way of offering our customers the best possible experience — on every touchpoint.”

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