On­line sales boost Richemont

Group cred­its e-com­merce site YNAP with 25% jump in earn­ings

Business Day - - FRONT PAGE - Larry Claasen Re­tail Writer [email protected]­nesslive.co.za

Jo­hann Ru­pert’s Richemont, the lux­ury goods group that was ini­tially wary of e-com­merce, has seen on­line busi­nesses YOOX Net-a-Porter (YNAP) and Watchfinder giv­ing its earn­ings a handy boost. The Swiss-based group, which owns, among oth­ers, the Cartier and Van Cleef & Ar­pels brands, said YNAP’s con­tri­bu­tion was the main rea­son sales were up 25% to €3.91bn for the third quar­ter.

Jo­hann Ru­pert’s Richemont, the lux­ury goods group that was ini­tially wary of e-com­merce, has seen on­line busi­nesses YOOX Net-a-Porter (YNAP) and Watchfinder giv­ing its earn­ings a handy boost.

The Swiss-based group, which owns, among oth­ers, the Cartier and Van Cleef & Ar­pels brands, said YNAP’s con­tri­bu­tion was the main rea­son sales were up 25% to €3.91bn for the third quar­ter to end-De­cem­ber.

The con­tri­bu­tion of Richemont’s on­line op­er­a­tion off­set a some­what slug­gish re­tail op­er­a­tion whose sales rose a mod­est 7% to €2bn. Sales for its whole­sale op­er­a­tions only in­creased 1% to €1.1bn.

By com­par­i­son, on­line sales surged from €59m to €694m. Prior to the ac­qui­si­tion of YNAP, the group’s on­line sales con­trib­uted only 1% to to­tal sales, but now make up close to 18%.

The suc­cess of its on­line re­tail op­er­a­tion has been a long time com­ing. Though Richemont had been look­ing to ex­pand its e-com­merce op­er­a­tions for a while, lux­ury brands have gen­er­ally been cau­tious when it comes to sell­ing on­line.

The Deloitte Global Pow­ers of Lux­ury Goods 2018 re­port said for much of the past decade, these brands have “struck a sen­si­ble bal­ance be­tween ex­clu­siv­ity and ac­ces­si­bil­ity, re­sult­ing in strong fi­nan­cial re­sults”. This meant they were slow to grow sales on­line, as they feared they might be­come “too vis­i­ble”.

A change in con­sumer be­hav­iour, how­ever, meant they had to take sell­ing on­line more se­ri­ously. “As lux­ury con­sumers be­gan spend­ing more on­line, brands were left with no choice but to adapt to their cus­tomers’ new pur­chas­ing pat­terns.”

Richemont has been steadily build­ing its on­line pres­ence. It took a hold­ing in e-com­merce re­tailer Net-a-Porter in 2002 and then took full con­trol in 2010. In 2015, Richemont sold half of Net-a-Porter to Ital­ian ri­val, YOOX, in a €1.3bn deal. Though Richemont owned half of the merged en­tity, it only had 25% of the vot­ing rights.

The group bought the hold­ing in YNAP it did not own for €2.69bn in March 2018.

The boost from its on­line op­er­a­tions off­set Euro­pean re­tail dif­fi­cul­ties. Un­rest in France neg­a­tively im­pacted tourism and led to store clo­sures for six con­sec­u­tive Satur­days. When mea­sured by re­gion, quar­terly sales were up across all re­gions ex­cept the Mid­dle East and Africa, and Europe.

The group blamed un­favourable cur­rency move­ments and a strong ba­sis of com­par­i­son for a 13% dip in sales in the Mid­dle East and Africa.

In con­trast, the group’s ef­forts in Asia Pa­cific paid off, re­sult­ing in a dou­ble-digit sales growth in China. Sales in Hong Kong, how­ever, slowed mostly as a re­sult of the strength of the Hong Kong dol­lar against the ren­minbi, which damp­ened tourist spend.

PRIOR TO THE AC­QUI­SI­TION OF YNAP, ON­LINE SALES CON­TRIB­UTED ONLY 1% TO TO­TAL SALES, BUT NOW MAKE UP CLOSE TO 18%

Be­sides in­vest­ing in on­line re­tail, the group is also fo­cus­ing on the Chi­nese mar­ket. In 2018, it an­nounced a part­ner­ship with e-com­merce gi­ant Alibaba.

Richemont’s sales in­creased 7% in Ja­pan and were up 9% in the Amer­i­cas.

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