tv Bloombergs Studio 1.0 Bloomberg December 23, 2017 5:30am-6:00am EST
♪ francine: he has been dubbed the geek of chic. he is a tech entrepreneur in the world of luxury fashion, founding the online retailer yoox as an online marketplace. 15 years later, he merged it with its biggest competitor net-a-porter, creating the biggest online shopping giant. joining me on "leaders with lacqua" is federico marchetti. thank you for joining me and speaking to bloomberg. fashion or tech entrepreneur, what are you? marchetti: i am 50/50.
i think it was my advantage. i look at fashion from a nerd point of view and technology from a business point of view. i try to find a link between the web, fashion, and luxury. lacqua: do you only work for yourself, or that you have revolutionized the way that we do things? marchetti: tech and fashion entrepreneur -- i liked the feeling that i was building something from scratch. i started with no money. my family is a very normal family from the northeast of italy. i really -- i feel like i am a builder. i am not an entrepreneur. i am not someone who is building and selling, like in silicon valley.
i am someone who loves being in a company and wants to build it to last. lacqua: even growing up? do you remember what you wanted to be as a child? marchetti: i always wanted to be an entrepreneur. even if my parents were not entrepreneurs, i really wanted to become an entrepreneur because i wanted to create my own thing, my own project, my own company. i left my hometown when i was 19 and went to milan. i said bye to everybody and i went. francine: do you think that it is not typical? marchetti: i think italians, they are definitely brave italians, as you know, but generally speaking, we need a little bit more determination and taking courage. >> yuck! francine: yoox was a strange name for the radical concept to
sell high-end fashion on the web just as other fashion sites were going bust. bring me back to when you thought e-tailing was the future. marchetti: i had just finished my mba in 1989, and at that point in time i said, now or never. i had taken the mba at columbia. i had worked for three years in investment banking with the specific goal of training myself. even if i did not like to be in investment banking, i wanted to learn as much as possible in the shortest timeframe possible. at the time, lehman brothers was amazing. i do not regret it at all. i would do it again because there is a moment where entrepreneurs, they need to take risks.
it is part of our everyday life. there is a moment where, if you go too much, you lose your appetite for risk. so i realize when i was 29 years old, and basically put together my passion for fashion, my appetite for innovation because i always tried to come up with new ideas and looking at things in a different way, which is my 50% tech, also being one of the first to use the internet, that was from my passion of the internet, and i put them together with the competitive advantage of being an italian, being based in italy, that culture, being able to talk with the different brands and to bring them aboard. francine: did you see it at the time and say, look, i would like to build this company because
e-tail will pick up in five to 10 years, or was it simple as saying, let us see how this goes? marchetti: no, my plan which i wrote by myself in fall of 1999 was that it would be a global partner for the fashion brands. the global partner. it was a very ambitious plan. it was not just to try out and test. it was immediately global, and in fact when we opened the doors of the website in june of 2000, -- we just celebrated 17 years, and it was immediately pan-european, both in italian and english, so it was ambitious from the very beginning. i thought it was going to be something amazing in the future, projecting the customers to that website. i have invented everything starting from a customer point of view.
in the end, i am the customer, i am now the customer of net-a-porter, so i wanted 18 years ago that kind of shop to buy and shop from. all of the strategies we are doing now, they look very simple because i put myself in the shoes of the customer. i invent new things all the time. francine: do you remember the first meeting, maybe with the brands or with financing? what did you have to convince them of? marchetti: it was christmas of 1999. i left my job, and i had my business plan. francine: which you wrote yourself? marchetti: yes. i was quite brave because i was jobless. i did not do looking for capital
and continuing to work. i said i will try and go full speed. so in only 45 days, i got my first funding from a very famous venture capitalist in italy, probably the best venture capitalist in italy who has now retired, and i am very thankful. i got i think $1.5 million for 33%. then i started to look for brands. i went to knocking on the door of all the brands without knowing them. i completely cold-called them. lacqua: hi, i have a great proposition! >> yes, i shared my dream with them, and i have to say that the most innovative ones were the ones i had good empathy with, and they shared my dream immediately. starting from mr. giorgio armani, he is not a young boy
♪ francine: by 2015, federico marchetti's fashion site had carved out an enviable niche in the fashion world. he wanted more. for years he had been chasing a merger with net-a-porter, his flashy competitor. the merger made frederico a major fashion insider. when did you decide once you had yoox that you wanted to merge with net-a-porter? frederico: that is another dream. i had many dreams. i started thinking about merging with net-a-porter around 2009,
before going public. i remember it was february. i went public in europe in december 1999, and i thought immediately, the two companies were sharing the same objective, the same goals, to be the leader in luxury online, but we completely took different ways. they were perfectly complemented in terms of geography, customers, business models, so putting them together was definitely going to create the leader, which was the first page of my business plan in a 1999. francine: lacqua: what is your dream now? frederico: my next dream? i am very practical. my next dream is just to finish the integration.
i feel very comfortable now, so we are halfway, actually more than halfway, and we are basically meeting all of the milestones, everything is going well. i'm very happy, but i cannot wait to be finished because at that point we will have a brand-new machine, a brand-new car that is going to go superfast. francine: so who are your main competitors that you worry about? marchetti: i mean, we are worried about everybody but also nobody. we do not underestimate anybody, because it is an industry which changes. i have to say that in the last 17 years, we have always been good in inventing new things and new business models and we never followed anybody, but we are still followed by many. i think we will continue that because we are innovators and
will continue to be innovators. francine: do you worry about being disrupted as the destructor, and if you see the pace of change in which we changed our shopping habits online in the last five to 10 years, what will it look like in five to 10 years from now? frederico: since i started running yoox and net-a-porter in october 2015, my mission was to bring the company into the mobile and smartphones. i am a little bit obsessed about smartphones and mobile. i remember in university, i was among the first to get a mobile phone, 24 years ago, it did not fit in my pocket at the time definitely -- than a remember in 2006, i put a strategic priority for my company, mobile then commerce. at that time he was about 21% of our sales.
fast-forward to 2016-2017, 50% of our sales, $1 billion of it is coming from smart phones and mobile, so we see the growth coming and we expect the growth to be unstoppable. i see the mobile as being the next shopping center for luxury. so the next department stores will be in mobile phones. francine: how their customers shop is changing, and so is what they are buying. the group's foundation was built on selling designer clothing, shoes and accessories to fashion addicts, the next frontier is hard luxury like watches, jewelry, that costs tens of thousands of pounds. shoppers are putting more trust in online stores. what is the one thing that will change over the next four to five years. will i be more demanding as a customer?
frederico: on the net-a-porter business, we have an importer and incredible customer base made up of people who spend -- women of today, who spend over one million lira easily, to buy a watch. or to buy a watch of 100 thousand pounds or more net-a-porter. they just sold a valentino dress for 35,000 euros. we have the most discerning customer out there. we definitely do not share the same customer base as our competitors. imagine 2% of our customers make about half of the total revenue, so it is very concentrated. francine: you were one of the first to put hard luxury, with watches costing 30,000 pounds or more, was there any skepticism about selling such things online? frederico: again, i'm a customer. so as a customer, if you are in a great environment with great content, great storytelling, great products and assortment, if you are buying a valentino dress for 35,000 euros, why not
also by bugelatti watch, or any other type of watch like that? francine: but there was skepticism? frederico: of course, but that is the fun part of my job, always trying to push boundaries. i would it is part of my dna and i will continue to do so. i am super happy that now the highest growth in terms of category is watches and jewelry. and we expect a lot of growth to happen in this. it is another differentiation point.
francine: federico marchetti runs one of the largest online luxury retailers in the world. but yoox-net-a-porter is more than that, it is of the most recognizable and expensive fashion houses, creating the technical know-how and logistics that convinced luxury to move on to the web. how mature is the e-market right now? frederico: it is still at the very beginning. luxury online represents about 5% or 7% of the total revenue, so there is a lot of space for
growth. i also feel myself that the company, even if we are the leader with $2 billion in sales, i still feel like we are at the beginning of the story. francine: because we are going to shop differently, so are we going to buy more health and beauty online? will men shot more online? frederico: simply because the new generations are online on -- all the time especially under smartphones. they are growing and they have more spending power, so there is a progression coming soon. francine: how do you think people shop? not just high net worth individuals, do people go online, go to the store, then buy online, is it very fluid? frederico: yes, i believe that physical shopping will always exist.
also for marketing, not only for sales. i remember with marni who was one of our first flagship stores, i remember the japanese customers, the store had the widest assortment, the biggest store we have in the world, not only in terms of traffic but also assortment. the japanese customer, they went online, and they were choosing the things that they liked, ready-to-wear, and then going to the japanese store of marni and asking, do you have this one? in most cases they did not. so we are trying to make sure the experience is one and only one. francine: is that difficult? frederico: the difficult part is making it simple. for the customer it has to be super simple.
so in order to give them simplicity, the behind the scenes is very complex. francine: this is why they are the experts. inside the warehouse on the industrial estate just outside bologna, italy, is the heart of net-a-porter. a warehouse processing thousands of items per day. the tech comes from here in london where experts are trying to develop ai which can help the group anticipate the desires of high net worth clients. federico, how do you sell differently to a u.k. customer than you do to at sign customer to a chinese customer? frederico: we sell to customers in 180 countries, but what makes yoox-net-a-porter different is the level of localization. all of the customers have
different localizations, country by country. it is not only about the language but also about the details. i will give you an example, again about japan. in japan, we pick the best career in japan -- courier in japan, everything has to be consistent because we are luxury. the most important thing with japanese customers is delivery by appointment. they do not care about delivery in 60 minutes or 90 minutes. they care that they need to be home when the courier comes, which is understandable, no? so the courier in japan does delivery by appointment. i want the package by 5:00 p.m., and so we do it at 5:00 p.m. the assortment, the price, from
country to country -- i think we have over 10 million prices overall. francine: if a young person wanted to go into your business, either in fashion or as an entrepreneur, what would be your number one advice to them? frederico: i think one of the main problem with italians is they think only about italy. so when these startups, they do not think about the world, about europe, the u.s., japan, china, they stick only to a small country in terms of demand. it is a big country in terms of culture and beauty. i am happy that i went back to italy. but i think my advice is that when you think about a business idea, it needs to be applied globally. where also talking about employment among the young generations in italy, the u.k. and elsewhere. the true story is that the
shortage in terms of people trained for digital -- that is why we as a company are part of this coalition in the european union in order to train more people to reach the one million people able to work in digital. i see our company, we are busy looking for talents in the digital all the time, it is part of my job, recruiting -- it is probably still the biggest part of my job, trying to find talent out there. francine: where do you see yourself in five years? frederico: i see them doubling in size. we are on track for growth of 17% to 20% year on year, which is what we did last year. and i see myself still
innovating and trying to come up with new ideas and also, enjoying all of the talents that i have recruited. it is fantastic for me, a fantastic experience for me to work alongside people who are working here since we began, 17 years ago, many people. from the chief operating office, the head of r&d, many people. we have veterans from net-a-porter, we have people who have been with them for 10 years and we will be celebrating our anniversary with them. so i feel very lucky to work with such a talented team and that is what i expect in five years, to continue to work with talent to will teach me, and not only be driven.
francine: if you had a magic wand and you could change something about the company, what would it be? frederico: frankly speaking, i have to say nothing. i know it does not sound good, but i think we really have the best business model for luxury. because we have full control of the supply chain, the brands, they want control because they control pricing, the control service, and they control prestige. and this business is about prestige. so if you have a fragmented supply chain, you lose control and the brands will lose control, and that will not work. this business is about prestige. so i think we have the best business model in this industry. i am always in and trying to push everybody with the sense of
cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi.
♪ lord king: it is difficult to exaggerate the severity and importance of these events. not since the beginning of the first world war has our banking system been so close to collapse. francine: mervyn king was at the epicenter of the biggest exercise in crisis management in modern financial history. he was in charge of the bank of