LVMH’s Bernard Arnault is convinced that no e-commerce player can make a profit from online fashion sales at all, but is he right? We took a look at the biggest fashion platforms.
Only losses online?
Arnault does not like Amazon (and similar companies) at all: according to the billionaire, they are even financed by terrorism, he replies to the question of whether he sees his luxury group cooperating with Amazon. But most of all: all ‘pure players’ in fashion are making losses and that is not a good sign, according to Arnault. “The bigger they get, the greater the loss”, the CEO continues, admitting to having been approached several times – having refused all offers to cooperate.
LVMH knows from its own experience that it is difficult to make money through e-commerce: the luxury holding company has its own (albeit modest) online platform called 24S, which fails to make a profit. But does the claim that there is nothing to lose but money, hold true? We check the facts at the largest European online retailers.
Top three make a profit
The largest European pure player is, without doubt, Zalando. The fashion platform prides itself on making a profit since 2014, although this is by no means a constant: on a turnover of 5.4 billion euros in 2018, the German fashion player made a net profit of 51.2 million euros, only half as much as a year earlier. The numbers regularly dive in and out of the red.
Veepee, the former Vente-Privée, is said to have achieved a group turnover of 3.7 billion euros in 2018. The company does not disclose its profit figures, but it says that Veepee is profitable in every country where it operates today. Whether this also holds true at group level is questionable, however, given the aggressive takeover policy of the offer site.
British Asos is the third top player, with a turnover of 2.73 billion pounds (3.1 billion euros). The fashion retailer does not want to divulge its net profit, but the pre-tax profit for the financial year ending 31 August 2019 was 33.1 million pounds (39 million euros). That was only a third of the profit of a year earlier, which was 102 million pounds.
Growth at the expense of profit
Most interesting for Arnault, is the performance of online luxury platform Yoox-net-a-Porter, which is largely owned by LVMH’s competitor Richemont. In 2018, the fashion platform achieved a turnover of 2.09 billion euros, an increase of 12 %. Although the company is still making a loss, this loss more than halved from 49 million euros to 21 million euros.
The German fashion online shop Bonprix, part of the Otto Group, achieved a turnover of 1.57 billion euros in the 2018/2019 financial year. Although growth is slowing down as a result (in 2017, turnover already was 1.5 billion euros), this online shop too is profitable. In their own words, the company says that for ten years in a row, they have been growing and making a profit. Profit before tax has increased by between 3 % and 5 % for a few years now.
American Farfetch does not hide the fact that turnover takes priority over profit: on a turnover of 602 million dollars (550 million euros) the luxury retailer makes a loss of 156 million dollars (140 million euros). The online boutique sold clothing for more than 1.4 billion dollars, a stunning 55 % more than a year previously.
Myth versus reality
Looking at the British fast-fashion online shop Boohoo, a first cautious profit amount can be found: in 2018, sales increased by 48 % to 856.9 million pounds – the fast-growing fashion player has just reached the billion euro mark. Profits also went up: an increase of 38 % resulted in a pre-tax profit of 59.9 million pounds (70 million euros).
About You, the newcomer to the Otto Group, already has a turnover of 461 million euros. Founded with the goal of becoming the main rival to Zalando, it should come as no surprise that About You is still making significant losses: in terms of the financial year that ran until the end of February 2019, the loss amounted to 114 million euros.
All in all, we can hardly blame Bernard Arnault: consistently profitable growth through online fashion sales is somewhat more of a myth than a reality. Those who do manage to make a profit, usually do so by trial and error, while there is rarely anything left net below the line.
