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Now that Mytheresa has entered a deal with Richemont to acquire the struggling Yoox Net-a-Porter (YNAP) group, the industry is waiting to see just how the German e-tailer plans to turn it around. A first move, according to Mytheresa CEO Michael Kliger, will be to spin off the off-price businesses, Yoox and The Outnet. It’s a difficult model to get right, analysts say — but the rewards could be significant.
YNAP’s off-price division is loss-making, Mytheresa confirmed when announcing the acquisition, while full-price sites Net-a-Porter and Mr Porter are both profitable. “Our intention is that the off-price business is separated from the luxury division. We believe one of the root causes of the struggles and problems has been high complexity,” Kliger said during a press briefing on Monday. “By separating it from the luxury division, we create a much leaner and simpler operating model that allows for higher growth and higher profitability.” He added: “There’s no plan to shut it down.”
Net-a-Porter, founded by Natalie Massenet in 2000, launched its discount retailer The Outnet in 2009 and menswear retailer Mr Porter in 2011. YNAP was formed in 2015, when Yoox, also founded in 2000 by Federico Marchetti, acquired Net-a-Porter (the combined group was eventually acquired by Richemont in 2018). Since then, the off-price division has gone through a number of changes: The Outnet launched resale in 2022, as well as a menswear offering, and in 2023 it axed its private label Iris Ink. In 2022, Yoox launched a marketplace that would allow certain brands to sell directly to consumers via its platform, alongside its existing wholesale model.
Analysts say it made for a confused business model. “The Yoox site is a bit weak in that it is selling products that are still pretty expensive, but it doesn’t provide a great experience,” says Neil Saunders, managing director of Globaldata’s US retail division.
“The Outnet, we believe, has lost touch with the consumer. We don’t believe the platform is top of mind anymore,” adds Jessica Ramírez, senior research analyst at Jane Hali and Associates.
Mytheresa’s Kliger agrees that something has to change. “One of the problems that YNAP has been facing is that they were in the process of creating an infrastructure that was supposed to serve luxury, off-price and even white label. They created something that serves quite different business needs and the result of that was great complexity and a solution that doesn’t serve anyone particularly well because it’s trying to do so many things,” he tells Vogue Business. “Our view is that the infrastructure for those different business needs should be separated.”
Mytheresa will leverage its own infrastructure to power YNAP’s luxury division and create a separate system for the off-price offering “that can be streamlined because it only needs to serve their specific business needs”, says Kliger. “Being an off-price business, they need to be leaner and more focused. The plan is to make it more efficient and drive higher growth and profitability.” That includes fast shipping, smooth transactions and streamlined operations (though Kliger declined to make any specific operational comments pre-closing).
Analysts agree the key to turning around YNAP’s off-price division is efficiency. “Mytheresa might be able to do [this], but [it] will be made more challenging if it’s not leveraging its existing technology and capabilities,” says Saunders. “Building a more compelling online experience, which gives consumers the thrill of a bargain hunt, will also be important.”
How to get off-price retail right
Off-price retail margins are typically much lower, making it a challenging model. “You also have a far less loyal consumer base as people hunting around for the best price are fickle about where they shop,” says Saunders. Ramírez highlights that off-price retailers are also facing considerable competition from luxury resale sites. “[To turn around the off-price division, Mytheresa] will have to work on stronger marketing and appealing to a consumer who seeks value,” she says.
Kliger still sees value in off-price. He references LVMH-backed L Catterton’s £1.5 billion investment in outlet mall Value Retail (owner of Bicester Village among others) in July, and the high performance of Yoox in its heyday. McKinsey predicts that off-price will grow five-times faster than full-price luxury between 2025 and 2030. “I think having that as a portfolio makes sense, just don’t mix it operationally with the luxury division,” he says.
Analysts say YNAP’s off-price division could learn from conventional luxury discount retail, including considering bricks-and-mortar stores. “It is very difficult to make it work online because of the effort needed to catalogue a diverse and ever-changing assortment,” says Saunders.
“Selling end-of-season products online would give the off-price inventory too high visibility and convenience, so I’m not sure that the internet is the future of off-price, to be honest,” adds Bernstein luxury goods analyst Luca Solca. “I think high-quality physical venues — where you can mix off and full-price — are probably the best solution. Think of Bicester Collection, for example.”
Kliger is insistent that he is building a digital retail conglomerate, however. “It still serves a similar customer, but customers that have a need for convenience and accessibility and prefer a digital experience over a physical experience,” he says. “It’s bargain hunting, it’s discovery, it’s price driven, it’s highly attractive products that customers accept are off-season — similar to what you see in these off-price concepts in high streets or retail parks.”
Bargain hunting, price driven and off-season aren’t words you usually hear from the Mytheresa chief exec. The brand’s strategy focuses staunchly on the highest-spending luxury customers who are wardrobe-builders rather than bargain hunters or aspirational consumers saving up for a handbag. Mytheresa typically doesn’t do many discounts, either. “Off-price is not Mytheresa’s area of expertise,” says Saunders. “This will be one of the most difficult parts of the business to turn around. Mytheresa does not want this business to overlap too much with its core platform.”
Nevertheless, analysts are confident that Mytheresa is up to the task. “Mytheresa’s strength has been to differentiate itself from the competition and they should be able to use that ability in an off-price sector,” says Ramírez.
Kliger says he is excited to have different offerings under one roof. “If you look at any major luxury brand’s outlet business, it serves a different customer,” he says. “You need to know exactly who your customer is. At Mytheresa, we know exactly who our customer is and we serve them — it’s not bargain hunting, it’s inspiration and curation. Net-a-Porter must know who their customer is and The Outnet must serve its customer, too. Don’t digress, don’t dilute, and don’t tell every customer the same answer — that’s the trick here.”
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Mytheresa to acquire Yoox Net-a-Porter from Richemont
