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Luxury clothing sales platform Yoox Net-a-Porter has closed its operations in China, highlighting the struggle of luxury retailers to compete in the vast e-commerce market as they face a worsening economic climate.
The decision was made “as part of the global Yooke’s Net-a-Porter plan to focus investments and resources in core and more profitable regions,” said a spokesman for Swiss luxury group Richemont, which owns the retailer.
Yoox Net-a-Porter operated in China as a joint venture with Chinese e-commerce group Alibaba, but the company is set to be liquidated, according to people familiar with the matter.
The profitability of China’s luxury goods market, a key source of sales for major international groups, has come into sharp focus this year as a long-term slump in the property market and weak consumer demand weighs on the world’s second-largest economy.
François-Henri Pinault, chairman of French luxury group Kering, blamed “weak market conditions, particularly in China” for the company’s poor first-quarter performance in April.
One of the group’s flagship brands, Gucci, has been suffering sluggish sales in mainland China, weighing on growth for LVMH, the world’s largest luxury goods group, but other brands such as Hermes are defying the gloom.
Founded in London in 2000 and made a name for itself in Europe as an online platform for luxury clothing, Net-a-Porter merged with Italy’s Yoox in 2015. The company expanded into China in 2013, and Richemont, the owner of the combined group, partnered with Alibaba in 2018 to “provide retail services to Chinese consumers.” At the time, the company said it sold 950 luxury brands in China.
A year later, YNAP opened a store on Alibaba-owned Tmall, China’s largest e-commerce platform.
Jack Roizen, managing director of Shanghai-based consulting firm Digital Luxury Group, said the business model “just doesn’t make sense in China’s consumer market, which is dominated by Tmall and JD.com.”[.com]He added that Alibaba “invested in the joint venture to boost its luxury credentials,” referring to Alibaba’s biggest rival.
Richemont has been exploring a sale of a majority stake in YNAP for years, but a sale to online rival Farfetch fell through in late 2023.
The Swiss luxury group, which also owns brands such as Cartier and Van Cleef & Arpels, said last month that “discussions are ongoing with potential buyers” and that it “expects to announce further details before the end of the year.”
China’s overall retail market is also showing signs of pressure. Uniqlo, which has grown rapidly in mainland China in recent years, said it will cut new store openings this fiscal year from 80 to 55, according to parent company Fast Retailing.
Roizen suggested that in the luxury market, ultra-premium brands are more resilient to economic pressures.
“Brands that have accelerated growth with the rise of the middle class are the ones most vulnerable to China’s current economic environment,” he said.
