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German luxury ecommerce platform Mytheresa says it will be one of the few winners following the implosion of industry competitors including Farfetch and Matchesfashion.
The New York-listed company’s share price has gained over 30 per cent so far this year giving it a market value of roughly $362.5mn — still significantly below the $2.3bn it was valued at during its 2021 IPO at the height of optimism about tech valuations and online luxury sales, but an indication of where investors are placing their bets.
“I think there is an understanding in the market that the industry is consolidating, and that there are some winners and some losers,” said Michael Kliger, Mytheresa’s chief executive. “We believe, and the stock market certainly believes, that we are one of the winners.”
Mytheresa, which sells luxury brands including Prada and Gucci has held fast as its rivals have faltered. Since December, Farfetch has been sold at a cut price to Korean online retailer Coupang in order to avoid bankruptcy while Matchesfashion was put into administration by Mike Ashley’s Frasers group in March a mere three months after it was acquired.
Meanwhile Swiss luxury group Richemont has been trying to offload its lossmaking online retail division Yoox-Net-a-Porter for years and has taken billions in writedowns on the venture.
Mytheresa is among potential bidders who could buy the lossmaking business, with private equity firms Bain Capital and Permira also weighing up a bid for the business, the Financial Times reported last month. Mytheresa declined to comment.
“The valuation we received [at IPO] was sumptuous, generous, maybe was overrated . . . then we went into a situation where ecommerce started to become a bad word,” Kliger said.
After a challenging 2023 for both ecommerce players and the luxury industry more broadly as the industry slows from a multiyear boom “we are pivoting . . . as a company for sure and as a sector, I have confidence as well”, Kliger said.
The tumult has exposed structural weaknesses in many luxury ecommerce groups, especially for platforms that aimed for mass appeal as opposed to a more curated experience. Rapid expansion without profitability was exacerbated by spiralling costs, while a race to the bottom on discounting as competition between platforms stiffened alienated top luxury brands who jealously control their pricing and image.
Mytheresa — which focuses on wealthier, slightly older customers looking to purchase a wide range of products as opposed to those shopping for individual items — is emerging as one of the last major players standing. Its target audience is someone who spends six figures annually on clothing and accessories, according to Kliger. The platform also has a restrained approach to discounting, appealing to brands.
“Consumers that you attract with a high discount will only come back with high discounting. If you start with that, you will have to find a model that supports continuous discounting. That’s not our business model,” he said.
Mytheresa gives top clients access to regular exclusive events around the world with designers and labels, as well as offering products that can’t be found elsewhere — such as a 60-piece capsule collection with Dolce & Gabbana or early pieces from the first collections designed by Gucci’s new creative director Sabato de Sarno. Kliger estimates that about 10 per cent of Mytheresa’s product offering at any given time is exclusive.
“[Our clients] are busy people. That’s one of the reasons why people go online . . . they have a need for luxury in the sense of occasions: they travel, they represent companies and organisations. They have very busy social calendars which drives the need to dress,” Kliger says.
Preliminary figures for its most recent quarter to March 31 show Mytheresa’s net sales increased by at least 15 per cent to €230mn compared to a year earlier and its margins improved, although the group still suffered a loss.
It also reported a loss for 2023, described by Kliger as “a very tough year for the whole sector”.
Nevertheless Mytheresa remains one of the only online luxury retailers to have consistently reported positive operating income over time, albeit with slim margins and high fixed costs.
“We go back to retail. Our founders were boutique owners, not magazine or tech people,” Kliger said.
The slowdown in luxury growth has revealed a widening polarisation between the strongest brands such as Hermès and weaker players including Gucci, where sales have plummeted, as well as among the platforms who sell the brands.
“We see this on the retail side too . . .[but] I don’t think there is an issue with ecommerce,” said Kliger. “There is an issue for undifferentiated, price driven models. This was glossed over during the boom times.”
