Yoox | Understanding it’s history and uniqueness
Yoox Group is made up of a set of profitable fashion based ecommerce stores. In this article, we will look at 1) what is Yoox?, 2) products, 3) business model and key components, 4) learning from Yoox’s success.
WHAT IS YOOX?
Yoox is an Italian e-commerce company that has successfully created an online fashion store and business that serves more than 100 countries all over the world. The store sells clothing and accessories from multiple brands and was founded by Frederico Marchetti. Marchetti is a former investment banker who created the company in 2000. He studied economics at the Bocconi University in Milan and then went on to complete his MBA from Columbia Business School in the United States.
The Yoox name is supposedly a play on the male chromosome Y and the female chromosome X. The two are linked with the infinity symbol displayed as two OOs. The company has been listed among the Time Magazine’s “50 coolest websites” in 2004 for the Lifestyle and Culture category. The internet platform is powered by Hewlett-Packard since the beginning of its operations. The company maintains the quality of its website by maintaining multiple studios that take merchandise photos to display on the website. About 60 trained photographers work within these studios in Italy and the United States.
In the past year, 3 million orders have been delivered to 1.1 million active customers in a 100 countries. Sales for Yoox have grown at an average rate of 37 percent every year. The online luxury market itself grew from close to $1 billion in 2003 to almost $13.5 billion in 2013. A major portion of this growth is centered in the United States and American brands make up 50 percent of all sales.
This growth is convincing luxury brands of the necessity of embracing the internet and planning for it in the long term. Yoox has enabled these brands to showcase their products in ways that keep the brand’s name and tradition alive.
History of Yoox
The history of Yoox is very much interlinked with its enigmatic founder Frederico Marchetti. He was born in Ravenna, in North-East Italy in 1969, completed a degree in Economics from Milan and went on to work for three years in an investment bank. After completing his MBA from Columbia University, he returned to Milan and joined a consultancy firm.
Extremely unhappy with this career move, he was inspired to become an entrepreneur and with a clear vision of converging the worlds of fashion and the internet, Frederico Marchetti conceived the idea for Yoox.com in 1999. His target was not the bargain hunter or a traditional off price website. Instead, he aimed to target the sophisticated shopper who was confident about creating their own outfits without the need for current season offerings. This was his pitch to his future partners, this is what encouraged them to trust him with their brands and he ensured that this trust was not misplaced.
Marchetti created a twenty page business plan and left his job at a consultancy firm. With very little connection within the fashion world or banks, he decided to approach venture capitalists. These were relatively rare in Italy at the time. He eventually connected with Elserino Piol who heard his plan and offered him an investment. Within a few months, the site was designed and ready for launch. The website broke even within three years and continued to grow from there on.
Though faced with competition, Marchetti stuck to his vision of being “a global partner in ecommerce for leading fashion brands.” His calculated expansions and strategy has made the company continue to fulfill this vision and promise.
The Yoox Group has a variety of similar businesses. These include the Yoox online multi-brand stores that sell at discounted prices, mono-brand online stores for established brands and the full price multi-brand online stores.
- Yoox.com: Yoox.com sells clothes and accessories from luxury brands at discounted or outlet prices. The company manages this by purchasing last season’s overstocked or unsold items from the brands that they work with and their authorized dealers. This enables the brands to sell the excess stock without reducing the brand’s value or affecting sales of new stock. These brands include well known labels such as Dolce & Gabbana, Diesel, Gucci, Armani and Cavalli. Some labels such as Chanel, Dior and Pucci sell only at special occasions while others such as Hussein Chalavan and Alexandre Herchcovitch create special, smaller collections specifically to be sold at yoox.com.
- Mono-Brand Stores: Yoox created a separate business, Yoox Services, in 2006 to operate and manage the online presence for major fashion labels such as Marni, Armani, Diesel, Stone Island. Valentino, Emilio Pucci, Dolce & Gabbana, Moschino, Dsquared, Roberto Cavalli, Coccinelle, Giuseppe Zanotti, Alberta Ferretti, Maison Martin Margiela and Y-3 among others.
- Thecorner.com: Yoox’s full price item venture exists under the domain name thecorner.com. Launched in 2008 as a menswear retail store, the website soon expanded to include womenswear as well. The website stocks a selection of clothes and accessories from established designer brands and smaller, more niche labels.
- Shoescribe.com: In 2013, the company launched a dedicated shoe store. The site offers a shoe subscription service which includes free shipping, free repairs and a 50 percent discount on the buyer’s birthday.
The company began as a privately held business funded by a series of venture capital firms such as Capital Kiwi of Italy, 360 Capital Partner (Net Partners, Italy) and Balderton Capital. In 2009, the company went public and listed on the Milan Stock Exchange, generating 104.5 million Euros as a result.
Yoox.com primarily sells overstocked or unsold items from major brands at discounted prices. The company takes what it sells very seriously and does not just sell whatever is available. A team of buyers is sent to catalogue available items that the brand itself or its authorized manufacturers and retailers are offering. The carefully curated items, which include predominantly European designers or unusual pieces from other leading labels are then sold in the online store. The site offers the option of looking for an outfit for a particular event by recommending appropriate items from its available stock.
BUSINESS MODEL & KEY COMPONENTS
Yoox is a turnkey solution for its partner brands and handles all merchandising, digital production, packaging and delivery. The company earns close to 72 percent of its revenue from three of its websites. This revenue totaled $605 million in 2013. All three Yoox businesses (Yoox.com, shoescribe.com and thecorner.com) make money. According to Marchetti, “Business is meant to be profitable.”
The Yoox USP
The biggest advantage Yoox has over its competitors is its early start in a market that was wary of taking the online plunge. The company partnered with the right people at the right time and continued to justify their trust by preserving their brand image. The key to success for Yoox remains a mix of precise customer targeting, strong direct relationships with the designers and labels, control over brand images and exceptional operational efficiency.
LEARNING FROM YOOX’S SUCCESS
Focusing on the Right Idea
Yoox founder Marchetti is one of the most important people in fashion. But it did not start out this way. Unlike most other people that matter in the fashion world, he was not among the buyers, editors, celebrities, socialites or designers. Rather his beginning was among the back-office operations and the jumble of overstock. This has not stopped him from establishing himself right at the center of power and control. Online shopping has created a landmark disruption in the luxury fashion world and Marchetti is at the forefront of this revolution. Yoox remains one of the largest and most successful online fashion sites in the world, selling both discount items as well as full price ones. The company is also in demand by major labels to power their own online versions.
Since the beginning, the Yoox founder had a clear vision of where he wanted to take his venture. His aim was to become a trusted partner for high fashion brands and labels. He set out to take this brands to the internet in a beautiful way and not lessen the impact and equity of the brand itself.
Convincing Skeptical Partners
Traditionally, the people behind luxury brands and labels remained vary of the online phenomenon. These brands were about exclusivity while the internet was the opposite, a tool for the mass audience. The Yoox founder managed to convince these people that online retail spaces would complement their business, enhance their sales, and be essential for the future growth and success of the business. He ensured that the online space would not be for the causal bargain hunter but aimed at the fashion conscious buyer who would want to be adventurous in their clothing choices. He assured them that the products would be displayed through elegant and responsive websites. His success in convincing these people led to partnerships with dozens of brands for both the overstock sales as well as new season items.
Rather than focus on marketing or search engine optimization, the company focuses on the operational side of the business. This includes vital processes such as understanding and following the customs requirements of over a 100 countries, translating product information into several different languages and converting sizes to make them relevant worldwide. Much like Amazon, Yoox has managed to master the logistics aspects of its business. This includes the complete management of the online store, product shipping and handling, digital production, reliability in payments and excellent customer service and care. These are aspects of the business of selling luxury goods online that are not part of the usual fashion narrative. But it is these same aspects that remain crucial to how a brand is perceived and how it maintains its image.
In 2011, the company managed to ensure 99 percent on time delivery of products. In 2013, the company delivered 2.8 million orders. These are tough milestones to achieve given the spread of the Yoox customer base worldwide. Orders are received every 11 seconds on average. The order reaches the warehouse in Italy. The company also has a few local hubs in New Jersey, Tokyo, Honk Kong and Shanghai. The basic model is of centralized inventory, so most of the products are shipped from the central warehouse. Some items may be stocked in the hubs to be closer to target audiences.
In 2010, the company moved from the traditional use of barcodes and manual picking to RIFD tagging and robotic cranes. This allowed full control over inventory levels, with exact locations of items known at any point in the supply chain. This allows any of the 5 million items in inventory to be instantly located and matched to customer orders. Orders may be either for the local hubs or directly for the customer. The process is automated till packaging which significantly improves productivity.
The Yoox website is not editorial in its design. Instead, it assumes that the shopper is a little familiar with fashion and allows a knowledgeable consumer to browse easily. Yoox pays special attention to the product photography. When new stock arrives at the warehouse, one item is taken from each type and this is used for website design. All relevant product data needed before the item is put online is collected and added to the item including product descriptions, photos, post-production and quality control. The warehouses use dozens on photographers in several studios for the mono brand stores while there is a system of automated photography for Yoox.com that allows nearly 15,000 items to be photographed on a daily basis.
Embrace New Technology
As a pioneer in its business, Yoox continues to keep an eye on emerging trends and deliver on these with commitment and in a timely fashion. Research was conducted on mobile sales as early as 2006 and an iPhone application was released in 2009. This was one of the first shopping applications for a smart phone. The company continued along this path and released an app for the iPad the day it was launched in the United States. This timely action was rewarded and mobile based channels now make up as much as 40 percent of the total traffic to the website. This has been especially successful in China where ecommerce is very popular and ecommerce spending is expected to reach 540 billion Pounds in 2015.
Fredrico Marchetti’s Ideas for Successful Entrepreneurial Ventures
Marchetti has been extensively interviewed about his business ventures and his early foray into the world of luxury brand ecommerce outlets. He highlights some important points repeatedly, that have contributed to his success over the years. These points are:
- Speed – This is a key element for an entrepreneur. Being the first to innovate is vital. This means analyzing trends and rightly predicting what actions need to be taken to stay relevant in the long run.
- Timing – Along with speed, there needs to be an eye on the timing. Some actions cannot be taken too early and definitely not too late. An idea can be kept on the horizon until the time is right to take actions based on it.
- Embrace Mistakes – being innovative and a pioneer cannot be without a few mistakes. The important thing is to highlight these, learn from them and ensure that they are not repeated.
- Understand the Customer – Marchetti emphasizes the importance of becoming a mirror for the customer. Yoox employs 60 percent women in their 30s which also reflects their customer base. The customers make quick choices and want quick results. And the company provides this through very reliable deliveries.
- Courage – Marchetti emphasizes that he started out with no money and even some debt. It is a combination of courage and luck that leads an entrepreneur from that place of uncertainty to one of success, and not just success but long term success.
Keys for a Successful Online Store
According to Marchetti, a successful online fashion store should have the following:
- Innovation – An good selection of unique items.
- Service – Excellent customer service that makes the user experience both entertaining and satisfactory. Important aspects here are reliable shipping, free returns, refunds and customer care.
- Privacy – The ability to try on clothes in the privacy on a customer’s own home and see how the clothes fit in with the rest of the wardrobe is an important aspect that draws people to shop online.
Image credit: Yoox.