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Mytheresa, the luxury multi-brand digital platform that listed this year, said growth in the US and demand from top luxury clients at physical events has driven a 36 per cent rise in annual sales.
MYT Netherlands, the parent company of Mytheresa Group, said sales rose to €612.1 million for the full fiscal year ended June 30 2021. Sales climbed 60.5 per cent over the same year period in 2019. Adjusted EBITDA rose 55.2 per cent to €54.9 million. The shares fell 8 per cent in New York trading in the hour after its earnings call on expectations of faster growth.
Mytheresa, one of the few profitable digital luxury platforms, is driving growth with its strategy combining a wider array of products with strong brand partnerships, bringing exclusives and pre-launch capsules to drive excitement. (Farfetch reported sales climbed 43 per cent in its most recent quarter ended June 30, while Mytheresa rose 36 per cent in the same period.) This year, the business, which expanded its active customer base by 38 per cent to 671,000, launched resale for top customers with a Vestiaire Collective partnership; ramped up physical events to appeal to its top spenders; and is planning a new curated platform model with major brands (inventory is held by the brand but orders are fulfilled by Mytheresa, which takes a fee). Demand in the US increased revenues by 133 per cent in the final quarter of the year versus a year earlier.
Mytheresa’s growth and consistent profitability was driven by the change in consumer behaviour to online and “a superior business model compared to many of our competitors,” says Mytheresa CEO Michael Kliger. He points to Bain & Co’s estimates that 30 per cent of personal luxury goods spend will take place online. “We believe that this trend [of online shopping] will continue but it will probably be at a slower pace in the post-pandemic world.”
It was “an extraordinarily successful year”, says Mytheresa’s chief financial officer Dr Martin Beer, adding that he is “very confident on sustaining the overall strong profitability levels”.
Analysts are bullish. “Luxury spending remains robust. It’s fuelled by a stock market performance that has been solid and reopening trends in retail. Luxury is going online and Mytheresa stands out because of its elite great product content, high-touch serve and proprietary marketing, given that their business is European-centric but has exposure to the US and Asia,” says Oliver Chen, managing director of retail and luxury at financial services firm Cowen.
A “spiced up” marketing approach
Mytheresa’s online marketing costs have decreased over the past five years, as the result of better customer targeting through AI-supported algorithms, Kliger tells Vogue Business. “We are making sure we attract customers that bring a high lifetime value. We’re really focusing on long-term wardrobe builders, and not on those who buy a single piece of hot luxury item.” Their purchases are driven by their lifestyle, rather than a specific product, he says.
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Customer acquisition costs have declined over the past four years, and continue to do so, as shoppers pivoted online during Covid-19 lockdowns, according to the company. Mytheresa is instead increasing its marketing spend on localised physical activities that boost its brand reputation and awareness, citing high-impact events in Shanghai, Beijing and the Hamptons and global styling suites connecting top-spending clients with their personal shoppers. The focus for the remainder of the year is on America’s West Coast: October will see three events hosted in collaboration with brands. Mytheresa’s push into physical activities is smart at a time when it has a minimum retail presence, Chen says.
“The US, with the appointment of new executives there, is a key opportunity for building relationships and awareness. They will also be trying to increase visibility in China, so we’ll probably see innovation through partnerships as well as marketing and pursuing unique ways to market in that environment,” says Chen.
Virtual experiences are also a priority: Mytheresa launched a virtual AR campaign for its recent capsule collection with Christian Louboutin, and plans to do the same with other brands. Mytheresa’s next campaign will be set in the metaverse where guests can visit a virtual showroom — but Kliger declined to share more. The company has already begun to experiment with virtual shopping on Wechat in Jan 2021. The approach, he says, will “spice up” Mytheresa’s marketing mix. “We are trying to stir up interest but it’s always product focused.”
Introducing e-concessions
Mytheresa is among a wave of multi-brand retailers shifting towards a marketplace model that consists of online concessions and consignments. It is introducing what it calls a “curated platform model” for 2022, where it will have access to brands’ “highly desirable” inventory for swifter in-season replenishment. Inventory will remain under the ownership of brands until it is purchased by the Mytheresa customer. Mytheresa will take a platform fee that feeds into its net sales. Kliger declined to reveal which brands it would start with.
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Mytheresa’s “privileged access” to exclusive products and pre-launches with brands including Alexander McQueen, Jacquemus, Roger Vivier, Valentino and Christian Louboutin are already big drivers of growth. The company also opened its first beauty pop-up in collaboration with the Estée Lauder Companies, where it stocked brands including La Mer and By Kilian.
The adoption of a marketplace model marks “an evolution” for Mytheresa and will help the retailer “further strengthen its unique value proposition,” says Kliger. “This will be greatly appreciated by our customers. Our control over the assortment curation, marketing and relationships will not change day-to-day, but our capital efficiency will improve. A great upside is that there isn’t only one model but many different ones that allow brands to work even better with us.”
The virtues of curation and a tight edit — a formula successfully adopted by Mytheresa — could be at risk if the company goes too wide, some analysts warn. “In the world of luxury digital commerce, the biggest trade-off is how you differentiate yourself. Retailers need to offer a curated product selection,” says Mario Ortelli, managing partner at strategy and advisory firm Ortelli&Co.
The clear winning model is becoming the marketplace where brands can be in control of their assortment and pricing, and the solution for retailers could be found in technology, he says. “From one side, brands will manage their concessions coherently with their brand positioning and channel strategy. For example, also in the physical world, Gucci has different stores and concessions that have different assortments. From the other, the retailer can use consumer data to create a curated, tailored selection for the consumer. The devil is in the details — for example, who owns consumer data? The platform? The brand? — and to arrive at that will take a lot of work.”
“We’re not going to add an endless number of new brands,” says Kliger, noting that curation will always come first for Mytheresa. “We will stay focused but also creative and work with brands to employ this evolution of collaboration.” The process of discovering new brands won’t change, he says. “We will continue to go to the shows and talk to the brands to understand what worked the last couple of seasons, what’s new and where we should be putting our dollars.” Success of this model will depend on the company’s tech capabilities, which Mytheresa already has in place, he adds.
Supply chain issues
There has been inflation across the retail industry, specifically for freight and delivery, both inbound and outbound, due to Brexit, observes Chen. The Covid-19 delta variant has also led to factory shutdowns in different regions of the world, he adds, and ports are also a risk factor. Some retailers have been putting in bigger or more frequent orders of stock earlier, he says. “Mytheresa is at the very pinnacle of average unit retail, which makes it less of a risk factor. You’re somewhat less at risk when you sell other people’s stuff, because you have a portfolio. You’re more directly at risk when you own your own factories and brands. Diversification can help mitigate some of the risk.”
Mytheresa’s Kliger isn’t too worried, stating that remaining Autumn/Winter 2021 and first Spring/Summer 2022 collections are expected to arrive on time. Most of its suppliers are based in Europe, he adds, and most clothing carried is fully produced in Europe as well, helping the company avoid shipping delays. “We’re aware of the supply chain problems with Brexit and customs, where brands are struggling to get enough containerships and freight. There’s hardly any challenges in our supply chain and I don’t expect any major challenges for Christmas,” says Kliger.
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