Shares in Yoox Net-a-Porter soared Monday after Chinese fashion website Ladymax.cn reported that Alibaba had contacted the online fashion retailer about an investment or even possible buyout, although a source familiar with the matter later denied the report, according to Reuters. An Alibaba spokesperson declined comment to Retail Dive on "market rumors," and a Yoox Net-a-Porter spokesperson told Retail Dive in an email that the company does not comment on market speculation.
The rumors came just days after Alibaba rival JD.com announced its investment of about $397 million into U.K.-based luxury brand marketplace Farfetch. In that deal, widely seen as a challenge to Alibaba, JD.com CEO Richard Liu is taking a seat on the smaller company’s board of directors.
Continuing strength in the Chinese economy is one reason the luxury retailers' earnings growth could nearly double this year to 7%, according to a note released last month by Moody’s Investor Service. However, Moody's analysts said that growth is unlikely to reach the double-digit levels the sector enjoyed between 2010 and 2013.
China may be a source of strength for luxury retail, but even Moody’s in its report on the sector noted that its economy is slowing and that new demand is coming from middle class consumers whose spending power is relatively limited.
Still, Alibaba is targeting revenue growth of between 45% and 49% for the current fiscal year, Alibaba Group CFO Maggie Wu told the company’s investors in Hangzhou, China, earlier this month. In the last fiscal year, Alibaba generated free-cash flow of $10 billion, which Wu said would be plowed back into the company to gain business-to-consumer market share. “This is a company that always invests for the longer term, for the future,” she said.
E-commerce in general is increasingly a frontier where luxury brands are finally seriously putting down stakes in search of sales and marketing opportunities. In recent weeks, for example, LVMH Moet Hennessy Louis Vuitton SA unveiled a new e-commerce site for Le Bon Marche, its Paris-based department store, just weeks after announcing a new lifestyle and experiential e-commerce platform, Clos19, for its Moët Hennessy wine and spirits brands.
In China in particular, competition between JD and Alibaba appears to be heating up. JD.com's star looks to be rising in China over the last year or so, as Alibaba has been forced to focus on ameliorating its reputation as a marketplace rife with counterfeit products, an especially thorny issue for luxury brands.
Despite many possible limitations, a tie-up with the Chinese e-commerce giant could be very appealing to Yoox Net-a-Porter, which would be privy to Alibaba's search, order, fulfillment and social infrastructure, online and off. Similarly, Farfetch now gets to tap into JD.com’s existing luxury-focused courier service, massive logistics network and other capabilities. A high-fashion outlet like Yoox could also benefit from Alibaba's focus on search, which the company lately has been underscoring as a key differentiator of Chinese e-commerce compared to that of the West.