Luxury in Transition: The Fading Splendor of Online Commerce

The latest development in luxury e-commerce clearly shows that the sheen that once surrounded the industry is fading. After the digital trade in luxury goods grew to a global volume of 73 billion euros in 2022, growth in the online luxury world has now stalled. Farfetch, once celebrated as the leading luxury online department store, had to be taken over by Coupang, a South Korean e-commerce giant, for 500 million dollars—far from its peak valuation of 23 billion dollars in 2021. A similar fate befell Matches, which had to file for bankruptcy after its acquisition. Richemont, the Swiss luxury conglomerate, decided to make significant write-downs on its e-commerce unit Yoox Net-a-Porter. The sale to Farfetch fell through last year due to the potential buyer's difficulties. On October 7th, Richemont announced that the e-commerce division would be handed over to Mytheresa, an emerging German luxury provider. In return, Richemont receives a third of the shares in Mytheresa. Thus, the luxury giant bets on the success of the Munich company in the digital glitter world. Mytheresa has distinguished itself in recent years through a targeted brand strategy. With a carefully curated selection of 250 brands, it clearly stands out from competitors like Net-a-Porter. Moreover, it pampers its loyal clientele with exclusive events and an efficient delivery service, enabled by a huge new distribution center at Leipzig airport. Michael Kliger, the head of Mytheresa, is ambitious: in the coming years, he wants to increase sales to 4 billion euros, despite the predicted cooling of growth in the luxury fashion sector to 3 to 5 percent. He plans to improve efficiency through the combination of logistics, payment systems, and customer service and emphasizes the need to keep discount and luxury markets separate—a mistake Richemont, in his opinion, made. Germany may be known for its excellent household appliances, but perhaps it will also succeed in mastering the art of selling fine shoes and handbags.