Richemont deal with Alibaba positions it to become luxury’s Amazon

By Alec Hogg

There was once a theory that nobody would buy online. It was too dangerous, too difficult and, besides, shoppers just loved the experience of actually visiting the store. Doubly so when buying expensive goods. So developers kept building shopping centres and investors kept funding them.

No longer. Amazon has crashed the fantasies of retailers and shopping centre owners alike. And at the luxury end, JSE-listed Richemont is proving its millions of well-heeled customers are also comfortable in cyberspace. In the six months to end September it disclosed online sales now account for 14% of Richemont’s total – translating into a hefty R30bn a year.

Chairman Johann Rupert is clearly upbeat about this new adventure. The first half of his commentary to Richemont’s results was devoted to its online activities spearheaded by global market leader Yoox Net-A-Porter (YNAP). Indeed, Rupert himself travelled to China last month to sign YNAP’s strategic partnership with Alibaba, that country’s dominant online retailer.

Until recently the online vision received mixed reviews. After Richemont took full control in May, its $6bn valuation of YNAP was criticised as too rich. Those critics are now silent. Farfetch, a rival only half YNAP’s size listed in New York last month. Its current share price values the company at $6.2bn. And Farfetch also doesn’t have an Alibaba up its sleeve.