CORDER’S COLUMN: Richemont’s ecommerce empire is ready to transform watch economy

The saga of Richemont’s acquisition of Yoox Net-A-Porter has been so protracted and complex that, rather like Brexit, people have stopped paying attention until the final shape of the deal has emerged. That point has now been reached, with YNAP being delisted from the Milan stock exchange in June and Richemont taking complete ownership of the group.

In the same month, Richemont announced the acquisition of Watchfinder, the award-winning British specialist in pre-owned and ex-stock fine watches.

Entering July, Richemont is now the outright owner of Yoox, Net-A-Porter, Mr Porter and Watchfinder; a portfolio of ecommerce giants that could transform the global watch industry. In the parlance of the space industry, the business has reached escape velocity, the speed required to escape earth’s gravitational pull and start cruising in an almost effortless orbit.

The next steps will not be effortless, but the opportunities that Richemont’s ecommerce portfolio present are considerable.

First, the group now owns two of the most trusted sites for men’s and women’s fashion in Net-A-Porter and Mr Porter. Both have been growing their watch portfolios, not only by signing up additional brands, but also generating rich and trusted editorial content about the watches they sell. As Mr Porter managing director Toby Bateman explains in an interview with WatchPro, content is key to acquiring new customers to its watch business because it gets picked up across the web and social media.

Net-A-Porter currently sells watches from most Richemont’s female-friendly brands including IWC, Jaeger-LeCoultre and Piaget along with non Richemont brands Chopard, Buccellati and Gucci. It experimented with Cartier last year, but is not currently offering the brand’s watches or jewellery.

Mr Porter’s portfolio stretches to 16 watch brands, nine of which were added in the last year, and Mr Bateman says the line-up will continue to grow at pace.

More important than their brand rosters are the businesses’ reputations for reliable style advice and industry-leading customer service. Customers in New York and London can order from their smartphones in the morning and have items delivered to their doors on the same day. If a customer is not happy, the items can be returned with no questions asked. They have come as close as any competitor to offering a genuinely luxurious experience without bricks and mortar stores.

Yoox is a global outlet store for luxury fashion. Its concept is to buy up overstocked or unsold items from previous seasons either directly from fashion houses like Dolce & Gabbana, Diesel, Gucci and Armani, or from their authorised dealers. It is all sold online at discounted outlet prices and run from a global network of distribution and logistics hubs.
Turnover for the combined Yoox Net-A-Porter Group was €2.1 billion.

Watchfinder is not on that scale, but is a crucial piece in the ecommerce jigsaw for Richemont. The company’s most recent accounts show turnover in the financial year ending March 2017 of £85 million, up from just over £60 million the previous year, but managing director Stuart Hennell has stated that the business is now trading at an annualised turnover of £120m.

Operating profit in 2017 was £5 million, a figure that surprised industry experts who thought there was little margin in the cut-throat market for luxury pre-owned watches, particularly those properly serviced and given a warranty like those from Watchfinder.

Watchfinder’s model is to buy and sell pre-owned watches from the public and from businesses. It differs from marketplaces like Chrono24 because it is prepared to invest in stock, service repair and restore watches, and sell them with a fresh guarantee. It also buys unsold stock from retailers that can be sold unworn, boxed and with original papers.

Joining the dots of this portfolio of ecommerce businesses creates a fascinating picture for Richemont. In just a few months this year it has acquired control of a global, direct-to-consumer channel for new and used watches. In so doing, it has created the opportunity to follow its watches from cradle to grave.

Here is a hypothetical scenario: a brand new Cartier watch launched at SIHH in 2015 was bought by an authorised retailer in Shanghai. That retailer had over-estimated demand, and only managed to sell 50% of the watches it ordered that year. With SIHH 2016 looming, it needed to unload as much stock as possible to generate cash for the new collections. Richemont generously said it would buy them back. The Cartier is now a year old, but still brand new, so selling it on Net-A-Porter is an option, where it can be sold at full price, or it can go on Yoox at a considerable discount. A customer in California buys it, and is delighted to wear it for a year but then wants to trade it in for something new. Watchfinder provides an immediate offer to buy, and it ends up at the company’s service centre in Kent where it is checked, cleaned, photographed and put back on sale. When Watchfinder sells the watch, it even builds up a profile of the customer, so might suggest other watches over the following months and years or offer to buy back the Cartier to put cash back in the customer’s hand.

Not only has Richemont profited several times from the sale of the Cartier, it has also minimised the losses that a normal buy-back programme incurs (almost €500m to the group in 2016-17). In addition, it has accrued priceless data about customers and the general market conditions in Shanghai, California and the UK.

All of this is possible today. Building out the infrastructure to make the cradle to grave model work for the entire Richemont operation will take time, money and painstaking integration work, but the rewards should be transformative.