Online luxury retail - The Financial Times
Six years ago, when Natalie Massenet was trying to raise money for her internet start-up, Net-a-Porter, a luxury online fashion boutique, no one was interested. "This was when people were throwing millions of pounds at almost any web company, but they heard 'women' and 'fashion' and 'internet' and said it didn't compute," says Ms Massenet.
By forging ahead, however, Net-a-Porter now has every other brand in the luxury world playing catch-up.
"The luxury industry couldn't get their heads around the idea that a three-dimensional retail experience they had spent years perfecting could be reproduced in two dimensions, so instead they stuck their heads in the sand," says Marc Cohen, director of Ledbury Research, a consultancy specialising in high-end consumer behaviour.
This week Ms Massenet will announce sales of Pounds 21.3m, an 80.5 per cent increase from 2004. Mark Sebba, chief executive, says trading for the first 12 weeks of the year is up 49 per cent, with an average of 400 orders a day. The company believes this pattern will continue and plans to open a US distribution centre later this year. The web store attracts an average of 90 new customers a day from 101 countries (including Fiji and Greenland), who each spend an average of Pounds 400.
According to Forrester Research, luxury brands now "have no choice but to provide an online sales ÂÂchannel". About 39m Europeans buy clothes online - expected to grow to 73m by 2009 - while US online retail ÂÂrevenue is expected to top Dollars 200bn (Pounds 107.4bn) this year, with apparel one of the three fastest growing categories.
Last October, Louis Vuitton opened an online boutique serving France and Germany (there are plans for a UK site), and at about the same time Christian Dior opened its French online shop. Gucci has been selling online in the US for almost three years, but it was only at the beginning of this year that Francois Pinault, head of Gucci's parent Pinault-Printemps-Redoute, asked Nicolas Ghesquiere of Balenciaga and Alexander McQueen to think about designs for Gucci Groupluxury sites.
Sites such as NeimanMarcus.com and eLuxury.com have caught on to the trend, but Net-a-Porter retains the edge. Ms Massenet says: "I thought if you could combine content (her site is conceived as a magazine)with commerce (everything is for sale and delivered worldwide within 48 hours), you would have the holy grail." It was a shrewd idea: the company is now "the poster child for web-based luxury retailing", according to Mr Cohen.
But even poster children have to grow up, and Net-a-Porter is currently managing its transition from start-up to expanding company. Last year it spent about Pounds 2.1m revamping its back-end operations. Now the issue is, as marketing director Martin Bartle says, "how we go from being a local company that acts globally to a global company that acts locally".
The strategy includes expanding Net-a-Porter's proprietary duty-paid calculator, which allows the company to ship to almost any country without a tax levy on the receiving end.
Customer interaction is another target for review. "We're looking at understanding greater segmentation of our customers and broadening our buy accordingly," says Mr Sebba. The site now includes American middle-market labels Milly and Tibi, whose dresses can cost just Pounds 100. At the other end of the scale is a Pounds 6,500 gown by Roberto Cavalli.
Ms Massenet says: "Because we have no physical limit to the amount of designers we stock, we can offer a very wide range, with the caveat that everything be part of that very pointy end of trend-setting fashion." Weekly "drops" of new products are e-mailed to customers according to their favourite designers.
"You couldn't do that in an off-line store," she points out. "Hey! See the new Louboutin shoes on three; the new Chloe shorts on five! That's the beauty of this business. Everyone underestimated the capacity of the customer to spend in that kind of environment."