Despite having a profitable business, German luxury fashion eTailer, Mytheresa, is pivoting away from its existing retail model.
Instead of buying wholesale from brands and then selling products to shoppers, Mytheresa will now look to hold inventory from select vendors in its warehouses and ship directly to purchasing customers. The twist here is that the inventory will still belong to the brand and Mytheresa will now collect a fee on all of its sales. Mytheresa, however, still plans to keep a tight focus on the curation of products on its platform – a big differentiator that has helped it succeed and set itself apart from other platforms such as Farfetch.
To date, Farfetch boasts 3,500+ brands while Mytheresa merely carries just over 200 labels. While that shows a significant difference in the approach of the two competitors, Mytheresa emphasizes that it has deepened its relationships with each label and has succeeded in developing a much more loyal customer base that has contributed immensely to its overall success. According to a regulatory filing, the top 2.6 percent of its customers contributed just over 30 percent of its total sales in 2020.
“Luxury has been significantly less digital than other industries. Today, the share of luxury fashion bought online is around 12 percent. That is likely to rise to 30 percent,” said Mytheresa’s Chief Executive Michael Kliger in an interview with Reuters.
At this point, Mytheresa has not revealed the brands it will be holding inventory for but it plans to begin rolling out the program very soon. The company is initially anticipating the new model to account for less than 20 percent of its total merchandise sales and in the long term, it expects it to reach a maximum of 35 percent.
The new approach is part of the retailer’s effort to gain more access to inventory and drive conversion rates. The initiative also comes on the heels of its strong performance over the past year. In fiscal 2021, ending on June 30, 2021, Mytheresa reported a 36.2 percent increase in sales, reaching $722.7 million — the fastest pace of growth it has seen in years. Its success also led the company to raise $406.8 million in its U.S. initial public offering (IPO) and increase its valuation to $2.2 billion. Kliger attributes Mytheresa’s success to the major shift toward online shopping since the rise of the pandemic.
As Mytheresa rolls out its new model, the company is expecting sales volume to rise. However, it anticipates revenue to slightly decrease since it will now collect a fee instead of making a regular sale. The customer experience, however, will remain the same as before.
Upon the announcement, Mytheresa’s stock closed nearly 14 percent lower than its close the prior day.