Digital luxury retail is going through tough times.
Consumers are cautious. Big brands are carving their own path online. Farfetch needed rescue. The matches were purchased and then sent to administration. And Compagnie Financière Richemont can finally offload Yoox Net-a-porter.
Currently, Moda Operandi is on the market talking with private equity firms about investing and finding funding.
The company said it is looking for that last small push to cross the finish line.
Jim Gold, Moda's chief executive officer starting in 2021, said in a statement to WWD that he was “very pleased with the progress in our financial performance over the past several years.” “While the business is currently very strong, we are seeking very modest capital to reach the final stages of our path to profitability.”
jim gold
Moda operates in a glamorous but cutthroat space that has bedeviled many of its rivals, most recently Matches.
On Monday, Gold and Moda co-founder and chief brand officer Lauren Santo Domingo asked brand partners to confirm the company's commitment in a letter sent to them.
“Moda Operandi is fully committed to a long-term partnership,” the pair said in a letter obtained by WWD. “As the online luxury retail landscape changes dramatically, our unique market positioning and strong financial progress create further opportunities for our business to succeed.
“Thankfully, three years ago we became focused on profitability,” they said. “As a result, our financial performance has improved significantly. We have achieved this by reducing costs and increasing profit margins without sacrificing our commitment to service, curation, or editorial privilege. We have achieved this.”
Gold and Santo Domingo said the company has focused on healthy sell-through and serving its top-tier customer base over the past year.
Lauren Santo Domingo
Stéphane Fougere/WWD
They noted that “sales have rebounded in 2024, with double-digit growth in the full-price segment, and the outlook for the rest of the year is very optimistic.”
Trunk shows and emerging designers make up about 60 percent of the company's business.
Bringing new investors on board may be more difficult than it was three years ago, when Moda raised new funding from G Squared and existing investors New Enterprise Associates and Andres Santo Domingo. .
William Sussman, managing director of Cascadia Capital, said of the market: “At this point in the cycle, it's hard to find investors in third-party digital retailers. E-commerce boomed during the pandemic, but today's shoppers want in-store and online options. We're seeing digital marketing spend, and therefore advertising, become much less effective, creating further headwinds for these retailers.
“Investors need to scale to be able to pay consistently increasing marketing costs, ideally while also offering a brick-and-mortar experience,” Sussman said. “I think the investment will be as strategic as the sponsor base.”
Moda isn't the only company considering bringing in new capital.
Saks.com CEO Mark Metric recently said the site is “very close to closing on funding.” Although Saks.com is independently operated, it works closely with Saks Fifth Avenue stores through a series of agreements. Both businesses are part of Richard Baker's Hudson's Bay Company.
To be sure, things have changed since Moda was last in the market seeking funding.
It was a good time for online luxury goods in general, but it was also a time when growth trumped profits. In the spring of 2021, Farfetch's market capitalization exceeded $15 billion, Mytheresa just went public, and the IPO market is still penetrated by many consumer companies, which will eventually reach the market at a large valuation in the fall. entered into.
But 2021 turned out to be the end of the post-pandemic hustle and bustle.
Luxury consumers have shown that they are not completely comfortable recreating their coveted luxury experiences entirely online. ”
Michael Prendergast, Alvarez & Marsal
Although geopolitics and inflation hit hard in 2022, and the well-predicted recession didn't materialize in 2023, consumers reprioritized their priorities and expected the longevity of luxury online and the sector's growth. This led to a change in warp speed.
Valuations plummeted as investors prioritized profits over growth and many fashion and luxury brands switched from wholesale to electronic concessions to control inventory and margins.
Michael Prendergast, managing director of Alvarez & Marsal's consumer and retail group, remains bullish on both luxury goods and e-commerce, but believes third-party marketplaces are the right way to do both. He said he hasn't found a way to integrate it yet.
“Luxury consumers have shown that they are not completely comfortable recreating their coveted luxury experiences entirely online,” Prendergast said. “Many luxury and aspirational experiences involve touching and feeling the product.”
And a lot of luxury goods are about big, flashy brands.
But the luxury group has upped its own online game, creating a luxury website and offering customer service and VIP aftercare that rivals any retailer.
“Not only are we competing with the market, we're actually competing with actual luxury brands that are growing their own e-commerce businesses,” Prendergast said. “Without big brands, the market will struggle, but it's not a two-way street.
“I think Saks.com has the best opportunity of all these marketplaces,” he said.
It is a market with several powerful retailers that once dominated e-commerce transactions through knockdown prices.
Frasers Group bought Matches for £52m but reversed just two months later, putting the company into administration, making more than half of its staff redundant and setting up the possibility of a new fire sale.
Next PLC, which competed with Frasers Group to buy Match last year, could return as an interested party.
Importantly, Next has the money. It also has a profitable storefront and an extensive online platform that sells third-party brands. And the company specializes in buying distressed assets and licensing parts of defunct British companies to relaunch them online and in stores.
Yoox Net-a-porter, which is still owned by Compagnie Financière Richemont, is also in the works.
Burkhard Grund, the company's chief financial officer, said Richemont had already received “unilateral interest” from a number of parties and that there was “a reasonable possibility that YNAP would be sold within the next 12 months.” “There is,” he said. His YNAP sales in the third quarter fell 14% in what Richemont described as “a continuing challenging environment for pure online distributors.”
Industry insiders say Net-a-Porter has already tightened its grip, only acquiring brands with sell-through rates of 80% or higher. The company declined to comment.
Farfetch was set to take control of YNAP, but the deal fell apart when Farfetch, which needed to be rescued, was acquired by Coupang in January and stripped of control.
Coupang declined to comment when asked if it was interested in acquiring YNAP.
But Coupang has already responded to questions from cautious analysts about its move to acquire Farfetch, saying that while the company sees opportunities in luxury goods, it remains focused on its core e-commerce business in South Korea. I insisted again.
Moda will need to navigate all of these changes to succeed in its final push toward profitability.
That could open up new avenues for multi-brand luxury goods online.
