Dubai: Billionaire Mohammad Alabbar-owned Symphony Investments has lined up a 40:60 joint venture with the online luxury retailer Yoox Net-a-Porter (YNAP) to launch similar operations targeted at shoppers in the Gulf. The agreement between the two entities also provides options to add other “emerging markets” if such an opportunity exists.
A typical luxury online transaction would average about $1,000. In a marketplace such as the Gulf’s, the scaling up could be immense.
Milan-based YNAP operates multiple portals - all of them luxe-focused — and has a base of 2.5 million visitors. The average unique visitor traffic has hit 27 million. Last year’s revenues were 1.7 billion euros.
Some parts of the new venture — with an enterprise value of 130 million euros — are set for launch sometime late next year and will be separate from the Noon.com ecommerce portal that was announced earlier this month by Alabbar, one of Dubai’s most prominent businessmen. (Symphony Investments, incidentally, also has exposures in a $1 billion regional fund that would — “in the next 60 days” — pick up a stake in digital-related venture. Apart from Alabbar, Symphony Investments has on board multiple investors from within the region. Their names were not revealed.)
The new joint venture will also bring under its fold existing multi-brand portals of Yoox Net-a-Porter, such as Net-a-Porter, Mr. Porter, Yoox and The Outnet, that were serving a regional audience.
“No company in the world has the experience of 17 years that Yoox Net-a-Porter has in online luxury and which has delivered in different markets such as China and the US in addition to (its home market of) Europe,” Alabbar said. “What we are building now is not for 5 or 10 years.”
It was in April last that Alabbar - who made it clear that he will remain connected to real estate and devote as much as 80 per cent of his time to it - invested in YNAP by subscribing to a 100-million-euro capital increase.
“We could have launched operations earlier... but the reason was Yoox had just merged with Net a Porter,” said Mohammad Alabbar’s son Rashid Alabbar, who oversees the digital side of the business.
“We would have loved to launch much sooner. But the integration process for the new operations should not take more than six months.”
That would mean a staggered launch schedule — a distribution centre in Dubai is set to open late next year, and there will be rollouts of Yoox and The Outnet and followed by Net-a-Porter and Mr. Porter in 2019. The final piece of the rollout will take the form of select online flagship stores.
On whether the JV would consider acquiring any existing regional portal active in the luxury space, Alabbar said: “Not at this stage. Look at the size of YNAP and the culture of merchandising, customer experience, after-sales, etc. Even if you integrate with somebody, the culture will never match.”
Alabbar already has the wherewithal on the logistics side of the future operations, by leading two investor groups into buying a 16.45 stake in Aramex.
Speed will be of essence with speculation rife that Amazon might be lining up for a direct presence in these markets, most likely through an acquisition. The name of Souq.com has been bandied about extensively in this regard.
On whether launching a luxury portal doesn’t put him into direct competition with existing brick-and-mortar retailers for these brands, Alabbar said: “The digital path is one we have to open up... there will be collaboration with all existing businesses in one way or the other - I hope.
“New franchise agreements do not talk about digital but only the (physical) shop. In Singapore, where I spent a lot of my retail life, there is no agency agreement... it doesn’t exist anymore. This is the digital revolution - we all have to do our business differently. All I know is that my Government is very progressive.”
The Middle East’s luxury online marketplace is forecast to go places over the next five years, compared with the 3 per cent of the global total it made up in 2015. The overall size of ecommerce as part of the region’s retail sector is estimated at 1.5 per cent.
“Emaar became a sizable real estate company from nothing - we are ready to build the next Emaar in ecommerce.”
For Alabbar, digital is where the revolution is
- Alabbar is eyeing a social media app along the lines of WhatsApp some time by March next. “We need to compete with the big players... all these guys such as WhatsApp have keep upgrading and improving the experience. We are building the same and add more services such as payment and ecommerce to it.”
- In the alliance with Yoox Net-a-Porter, the Milan company will appoint the majority of board of directors and nominate the CEO and finance manager. The chairman will be appointed by Symphony Investments.