YNAP Dumps Yoox in China To Focus on Joint Venture With Alibaba

What happened?
Yoox, the outlet luxury e-commerce player of Yoox Net-a-Porter (YNAP), announced today that it will exit the China market on February 18, 2020. YNAP will focus on developing its two luxury portals, Net-A-Porter and Mr. Porter, in China. As part of a joint venture between YNAP and Alibaba, called Fengmao, both sites have launched on Tmall’s Luxury Pavilion.

Yoox’s announcement to shut down China site.

Bottom line:
What’s behind Yoox’s exit from China? First, it was a decision by Richemont, who acquired YNAP in 2018, to consolidate and refocus. In 2019, the expense of upgrading the tech system and logistics of YNAP heavily impacted Richemont ’s margins, costing them some $200 million euro, according to the Business of Fashion. Secondly, Yoox’s journey in China has been a bumpy one. Since 2013, one of the core services it offered was developing e-commerce platforms for luxury brands, with many for Kering, including Bottega Veneta, Saint Laurent, Balenciaga, and Sergio Rossi. However, as more and more luxury brands strengthen their own in-house tech capabilities, the need for outside help has diminished. Given this, Yoox decided to diversify its revenue stream by helping smaller scale Italian brands to enter into the Chinese market, so in 2018, Yoox rolled out to be a bigger initiative with over 100 brands and a three million dollar investment from the Italian government. These efforts, unfortunately, barely paid off. WWD concluded: “The Yoox China business is understood to have been small.”

Implications:
China’s e-commerce market proves to be a challenging one to conquer foreign players. Outnet, the other luxury discount e-commerce company of YNAP, was the first to exit the Chinese market back in 2015. As many foreign companies have found out, it’s very difficult to take on and beat local Chinese players, who can garner massive data and build a stable and growing consumer reputation. To combat this, many foreign players have looked to partnerships with successful local companies, i.e., YNAP with Alibaba, Farfetch with JD.com. Time will tell if shuttering Yoox the Alibaba joint venture will eventually pay off for YNAP in China.

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E-Commerce, Tech