WHY AMAZON WOULDN'T BUY NET-A-PORTER
WAR WITH DRONES
Amazon has officially denied it is in talks to acquire Net-A-Porter, the exclusive fashion e-shop. A merger with Yoox, the Italian online retailer will go ahead instead. In deals, it is often the combination of the fight of the competing parties, highest price tag and strategic fit that decides who buys whom - a confusing dance of corporates with unclear result until the last minute. In this case, however, Amazon did not hesitate and resolutely denied any interest in acquiring the business. It is not the Net-A-Porter's high valuation that discouraged Amazon. The retail giant is determined to take on the luxe online shopping domain on its own terms - using technology.
Richemont's decision to sell Net-A-Porter was mostly met with understanding. The e-shop has become darling of luxe internet shoppers over the past years, but its up-side potential now seems increasingly limited in the luxury fashion e-commerce, which is undergoing a shift. What made Net-A-Porter special was its rich content - the site was more like a premium fashion magazine than an online shop. Nothing stays fresh for long in the online commerce domain and many have now discovered the secret of content creation.
Increasingly, sites like Farfetch and Moda Operandi are gaining the attention by offering unique clothes directly from runways or carefully selected boutiques. Aside from personal touch, the shift towards omnichannel proves to be just as important. Most successful e-tailers are opening brick-and-mortar stores to enable their customers to "webstore" - try and feel the product before buying it online - something that is increasingly demanded by luxe fashion shoppers. Net-A-Porter, therefore, stands before the big and expensive challenge to create physical presence for its popular e-shop. According to NYU Stern Professor of Marketing Scott Galloway, there is a rush to the middle where successful online retailers like Warby Parker or Bonobos are opening physical stores and traditional physical retailers must invest in their online presence. For both, the real fashion shops are becoming cross between gallery (a tangible representation of their brand image) and real estate investment. The trend to go physical prevalent for luxury e-commerce goes, however, direct against Amazon's core competencies.
War with Drones
Amazon is a technology company that just happens to do retail. Words of the company's CTO, Werner Vogels, could not be more true. Amazon builds its success on the access to cheap money from investors, who are attracted by the vision of great profits and Amazon's ability to get products to its customers quick and hassle-free. The company invests huge amounts to robotize its warehouses and develop drone delivery. Operating physical retail stores would be too expensive and unnecessary. Just like for all other product categories, Amazon is successfully becoming an online gateway for high fashion. It is the first port of call when we want to buy almost anything, because of its convenience, a quality just as important to grocery shopper as it is to luxe fashion buyer. For Amazon, the value of Net-A-Porter is far less than its estimated $1.5-2bn. Even if we seek inspiration from rich content sites like Farfetch, Net-A-Porter or MrPorter, we will most likely turn to Amazon to make the transaction.