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What Should Amazon Buy Instead of Net-a-Porter?

Fashion-obsessed Amazon missed out on NAP, at least for now. But are there other viable candidates?
Photo: Getty Images

Photo: Getty Images

In March 2015, the Yoox Group merged with the world’s leading online luxury retailer, Net-a-Porter. Previously, it was was majority owned by Richemont, a Switzerland-based conglomerate. Under this new agreement, Richemont will still own 50% of the combined company's shares but only 25% of the voting rights. (It’s thought by many insiders that Richemont, which owns jewelry and watch brands including Cartier and Van Cleef & Arpels, wants to get out of the "soft luxury” game, i.e. apparel, handbags and shoes.) 

While the news wasn’t entirely unexpected — Yoox's courtship of Net-a-Porter seems to have been going on for more than two years — it did land on the heels of reports that Amazon also wanted to buy the site. “Net-a-Porter doesn't necessarily have great economics and I suspect that Amazon probably didn't offer them enough,” says Forrester analyst Sucharita Mulpuru. "If, in fact, the rumors were true and Amazon made an offer at all."

If Net-a-Porter and Richemont did indeed have a choice between Yoox and Amazon, it makes sense why they went with Yoox. Both companies are European, and both companies are in the business of selling luxury goods online. Along with its own popular off-price site, Yoox also handles website operations for several of the world’s largest luxury brands, including Armani, Lanvin, Valentino, Alexander McQueen and Stella McCartney.

But that’s not exactly where the story ends. While Amazon might not have won Net-a-Porter, it’s not unreasonable to think that the world’s largest Internet-based retailer is thinking about acquiring another business in the luxury space. Its more than 40 subsidiaries already include Zappos and Shopbop, which both sell luxury goods. And over the past couple of years, it has spent a considerable amount of marketing dollars wooing the upscale customer by sponsoring events including the 2012 Met Gala and the forthcoming Men’s Fashion Week in New York.

But other than Net-a-Porter, what complementary company is significant enough for Amazon to buy? The first that comes to mind is Farfetch, which funnels the inventory of hundreds of independent, upscale boutiques across the globe into one URL. Much like Amazon, it’s a marketplace, although it acts a little bit more like a department store, making the visuals and customer experience across each store even more uniform. Farfetch, which has raised $86 million since its founding in 2008, could certainly benefit from Amazon’s logistical know-how. And given that Amazon tends to allow its subsidiaries to maintain their unique company cultures, Farfetch would be able to continue to build its burgeoning brand identity.

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In many ways, this week’s news that Farfetch had acquired brick-and-mortar retail Browns only makes it a more desirable candidate. It’s not a surprise that Farfetch would buy a store outright: The demand for product on the site is constant, and this will allow Farfetch to better control inventory and gather even more data on the luxury shopper. (For instance, if a boutique in Hawaii is selling Saint Laurent Kitten 50 heels like hotcakes but doesn’t plan on placing a second order, Farfetch could potentially order more via Browns.)

But Farfetch is not the only option. Another idea is Matches Fashion, the UK-based luxury retailer that has spent the past decade building its e-commerce business into a viable competitor to Net-a-Porter. Matches generated sales of $130 million in 2013, which is nowhere near Net-a-Porter’s $840 million (in the year ending March 2014). But it attracts a similar customer and certainly has the potential to capture a larger share of luxury fashion sold online. (The market for digital sales of women’s luxury alone is meant to reach $12 billion in 2018, according to McKinsey.)

However, luxury is not the only avenue that Amazon could take in order to better infiltrate the fashion market. “Amazon is already in luxury. Remember, they have Shopbop,” says Mulpuru. "It’s not necessarily as high end as Net-a-Porter, but it has a very attractive demographic.” Instead, Mulpuru believes that Amazon’s "sweet spot” is the mid-tier. “They’ll continue to build out Zappos and their own offerings.”

One left-field candidate could be Everlane, which attracts a fashion customer without the high price tags of a luxury retailer. "Perhaps a company like Everlane is an option because they source their own materials and have an EDLP [Every Day Low Price] model,” she says. "That could be interesting for Amazon.” ASOS, which arguably owns fast fashion online, also falls into this category.

The truth, though, is that while Amazon can afford to acquire several of these companies, it may not touch any of them. “[Luxury fashion] is a nice-to-have. If it were a must-have, Amazon would own Net-a-Porter,” says Mulpuru. "I think Amazon has its eye on bigger prizes. It has to if it wants to be a $200 billion company."