Can LVMH Compete with Net-a-Porter?

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Some industry insiders have wondered what LVMH chief digital officer Ian Rogers has really been up to since joining the French luxury goods conglomerate in 2015 from Apple, where he led the technology giant’s music business. Now, the answer is becoming more clear.

This week, a report in the Financial Times revealed that LVMH — widely seen as a digital laggard — is set to launch its own multi-brand e-commerce site under the brand umbrella of Le Bon Marché, the department store LVMH has owned since 1984. The site is expected to sell many of LVMH's 70 brands, as well as others, and is thought to be launching sometime in May.

It’s a gargantuan undertaking and one that comes 17 years after the launch of Net-a-Porter, 10 years after the founding of platform player Farfetch and nearly a decade after the demise of eLuxury, LVMH's initial foray into multi-brand fashion e-commerce, which was shuttered in 2009 as the group’s individual brands — in particular Louis Vuitton — began to prioritise their own standalone e-commerce operations.

Some consider Le Bon Marché to be one of the finest department stores in the world, with an exceptional mix of brands and a customer experience that delights at every turn, from the store’s gorgeous food hall to its novel merchandising strategy. But its current website is out-of-date and offers a poor user experience. Though the site can be read in four languages, it is only shoppable in French and its limited product assortment is a far cry from the exciting range for which Le Bon Marché is known.

In order to make a successful play in the fast-growing and strategically significant global luxury e-commerce market, LVMH will need to invest tens of millions of dollars in a complete front-end overhaul of the site, develop a top-notch back-end distribution and logistics infrastructure and build a 24-7 customer service function. And these are just hygiene factors.

LVMH will also need to ramp up content creation and invest in digital marketing in order to acquire customers in what is a highly competitive luxury e-commerce space and educate international shoppers about the Le Bon Marché brand, which currently has little recognition outside of France. In the UK, for instance, the store could easily be confused with Bonmarché, a West Yorkshire-based retailer that sells affordable plus-size clothing on its website.

Furthermore, it remains unclear how brands outside LVMH will react to the move: will Kering and Richemont’s brands sell their wares on a site operated by their biggest rival? That said, after Net-a-Porter was acquired by Richemont in 2010, the site continued to sell non-Richemont brands and Sephora, LVMH’s highly successful multi-brand beauty retailer, already sells many products from Richemont and Kering brands.

Of course, LVMH has a number of advantages that will play in its favour, not least of which is the sheer power of its high-quality brand portfolio. "Because consumers have unlimited choice and the customer's voice is so loud, we are moving from a world where marketing has hyper-efficiency to a world where quality has hyper-efficiency," favouring brands that are genuinely high-quality and wilfully disseminated across networks, explained Rogers at BoF VOICES, last December.

Indeed, LVMH’s stable of brands — including Christian Dior, Louis Vuitton and Céline — have their own strong direct relationships with end consumers. And, in a retail climate where exclusive products are powerful sales drivers, the group should be able to truly differentiate Le Bon Marché’s product offering, especially since Céline currently has no e-commerce presence and Dior’s online assortment is limited. Being an exclusive distributor of top LVMH brands could be a real differentiator for the rebooted Le Bon Marché and help with customer acquisition. The group can also tap learnings from Sephora.com, which dominates the high-end online beauty market.

Additionally, LVMH has the financial heft to invest deeply in the venture. With nearly $4 billion in free cash flow at the end of its 2016 fiscal year, LVMH is well positioned to go head-to-head with well-funded fashion e-commerce natives like Yoox Net-a-Porter and Farfetch.

Most importantly, by putting a strategic mind like Rogers in the driver’s seat and choosing to build its e-commerce capability in-house, the group appears to be signalling that strengthening its digital competency is now a serious group-level priority. But, whether LVMH gets its digital strategy and execution right, remains to be seen.

Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.

THE NEWS IN BRIEF

BUSINESS AND THE ECONOMY

Neiman Marcus hires debt advisor. The American department store has appointed investment bank Lazard as an advisor, as it looks to manage its $4.9 billion debt, according to reports. The move follows Neiman Marcus' decision to call off its planned IPO earlier this year, and comes at a time when US department stores are attempting to navigate declining retail foot traffic, as consumers increasingly turn to online shopping.

Condé Nast to offer digital ad inventory with other companies. The media giant will offer its digital inventory to advertisers in a joint package with NBCUniversal and Vox Media. The three companies, which previously competed for advertising spend, have been pushed to work together to offer larger scale advertising in a bid to compete with Google and Facebook, which currently dominate the digital ad market and are predicted to account for 60 percent of digital ad dollars in 2017.

Adidas shares surge on higher forecast. Shares of the German sportswear maker hit a record high as the company raised its sales and earnings forecast. Adidas said it expects profit to grow by 20 to 22 percent a year through 2020, on the back of new CEO Kasper Rorsted's plan to overhaul Adidas and Reebok as fast fashion businesses and offload underperforming brands such as golf equipment maker TaylorMade.

Hugo Boss sees possible return to growth. A turnaround led by new CEO Mark Langer may help Hugo Boss's earnings rise this year, following a 17 percent decline in profit for 2016. The struggling fashion brand is focusing on lower-priced products and menswear and shifting away from luxury items and womenswear. However, the company is not expected to return to growth until 2018, according to Langer, as it closes unprofitable stores and streamlines brands.

Saint Laurent modifies ad campaign after outcry. The luxury fashion house has been asked by France's advertising watchdog to two change two images from its Spring 2017 campaign, following 50 complaints that they were "degrading" to women. The images, which were widely criticised on social media, breached the Autorité de Régulation Professionnelle de la Publicité's rules to ensure "dignity and respect in the representation of the person."

Nike launches hijab for female Muslim athletes. The sportswear giant has released the Nike Pro Hijab, its first head covering for Muslim sportswomen. The launch is Nike's latest move to support inclusion for athletes of all faiths and follows its recent commercial celebrating female Arab athletes, many of whom face criticism from conservative members of the Muslim community, who consider sport a conflict with female modesty.

PEOPLE

Clockwise from top left: Julie de Libran, Clare Waight Keller, Tory Burch, Maria Grazia Chiuri, Martine Rose, Molly Goddard

Female designers speak out on International Women's Day. Maria Grazia Chiuri, Tory Burch and Julie de Libran were amongst female designers speaking out on International Women's Day about the barriers facing women in fashion. Although women are the majority consumers of fashion, they remain underrepresented in leading business and creative roles in the industry.

Chloé names Natacha Ramsay-Levi as creative director. The French fashion house's announcement confirms a January report that Ramsay-Levi would succeed Clare Waight Keller, who left Chloé last week following the label's show at Paris Fashion Week. Ramsay-Levi, who will start her new role on April 3, joins from Louis Vuitton, where she was creative director of women's ready-to-wear.

Lubov Azria departs BCBG Max Azria. Luvbov Azria, wife of the Los Angeles-based brand's founder, Max Azria, has left her position as chief creative officer. Bernd Kroeber, an employee of BCBG Max Azria since 2007, has been named executive vice president and creative director. The news comes days after the company filed for bankruptcy, as it undergoes a restructuring, closing 120 retail stores and consolidating its businesses in Europe and Japan.

Bernard Arnault to renovate Paris museum. The LVMH CEO and chairman has unveiled a $167 million plan to transform the Musée National des Arts et Traditions Populaires in Paris, which has been empty since 2005, into a multicultural arts and crafts centre designed by Frank Gehry. The building is just 300 metres away from Arnault's Louis Vuitton Foundation, which opened in 2014 and was also designed by Gehry.

Philip Green doubles pension contributions. Just a few days after agreeing to contribute almost $450 million to the BHS pension fund, retail tycoon Green has said he will pay as much as $60 million a year into the fund for Arcadia, which includes include Topshop, Dorothy Perkins and Miss Selfridge and has a growing pension deficit.

TECHNOLOGY

Yoox Net-a-Porter will sell on WhatsApp. The online retailer is working on technology that will allow it to sell products directly through Whatsapp, as it looks to get ahead of rivals such as Farfetch in the increasingly competitive luxury e-commerce market. Customers are already able to use the app to communicate with the company's personal shoppers, although so far fashion has been slow to capitalise on messaging services' retail opportunities.

Flipkart aims to raise $1.5 billion. In a bid to keep up with rivals including Amazon, the Indian e-commerce site is looking to raise between $1.2 and $1.5 billion. However, new investment could mean accepting a lower valuation of around $10 billion, down from $15.5 billion. Many Indian Internet businesses have faced markdowns recently due to investor concerns over profitability and deep discounting used to drive growth.

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