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Moda Operandi Is Fundraising in a Tricky Luxury E-commerce Space

It’s a tough time in digital luxury retail.

Consumers are cautious. The big brands are forging their own paths online. Farfetch needed rescuing. Matches was bought and then sent into administration. And Compagnie Financière Richemont could finally offload Yoox Net-a-porter.

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Now Moda Operandi is out in the market, speaking to private equity companies about investing and looking for capital.

The company said it’s looking for just that last little boost to get it over the finish line.

“We are extremely pleased with the progress of our financial performance over the past few years,” Jim Gold, who’s been chief executive officer of Moda since 2021, said in a statement to WWD. “While current business is quite strong, we are seeking a very modest amount of capital to achieve the final stage of our path to profitability.”

Jim Gold
Jim Gold

Moda is operating in a glitzy yet tough sector that has vexed many rivals, most recently Matches.

On Monday, Gold and Lauren Santo Domingo, Moda’s cofounder and chief brand officer, sought to affirm the company’s commitment in a letter sent to brand partners.

Moda Operandi is fully committed to our long-term partnership,” the pair wrote in the letter, which was obtained by WWD. “As the online luxury retail landscape is shifting dramatically, our unique market positioning and strong financial progress has created even more opportunity for business success.

“Thankfully, three years ago we shifted our focus to profitability,” they said. “As a result, we have seen remarkable improvement in our financial performance. We did this by cutting cost and improving our margins without sacrificing our commitment to service, curation and editorial authority.”

Gold and Santo Domingo said the company has been focused on healthy sell-throughs over the last year and catering to the highest-tier of its customer base.

Lauren Santo Domingo
Lauren Santo Domingo

They pointed out that “sales have rebounded in 2024. We are experiencing double-digit growth in our full-price segment and our outlook for the remainder of the year is very optimistic.”

Trunk shows and emerging designers represent about 60 percent of business at the company.

Bringing new investors on board might well be trickier than it was three years ago when Moda raised fresh funds from G Squared and existing investors New Enterprise Associates and Andrés Santo Domingo.

William Susman, managing director of Cascadia Capital, said of the market: “Finding investors for third-party digital retailers at this point of the cycle is hard. While e-commerce boomed during the pandemic, shoppers today are eager to have the choice of in store and online. We have seen a very steep drop in the effectiveness of digital marketing spend — ads — further creating headwinds for retailers like these.

“An investor needs to be scaled to be able to afford consistent and increased marketing spend while ideally also offering a physical in-store experience,” Susman said. “I would think investment would be as much strategic as sponsor based.”

Moda is not the only company out looking to bring in some new capital.

Marc Metrick, CEO of Saks.com, recently said the site was “very close to finalizing a capital raise.” Saks.com operates independently, but works closely with Saks Fifth Avenue stores through a series of agreements. Both businesses are under the umbrella of Richard Baker’s Hudson’s Bay Co.

Certainly, the landscape has shifted since the last time Moda was in the market looking for funding.

Those were better days for luxury online generally — although it was also a period when growth was winning out over profits. In the spring of 2021, Farfetch’s market cap topped $15 billion, Mytheresa had just gone public and the IPO market was still percolating with a host of consumer companies that ultimately came to market with big valuations that fall.

But 2021 proved to be the end of the post-pandemic rush.

The luxury consumer is showing that they are not fully comfortable recreating the luxury aspirational experience all online.”

Michael Prendergast, Alvarez & Marsal

Geopolitics and inflation hit hard in 2022 and although the oft-predicted recession didn’t materialize in 2023, consumers reset their priorities, leading to a long-lean stretch for luxury online and warp speed changes in the sector.

Valuations have fallen sharply as investors prioritized profits rather than growth and many fashion and luxury brands switched from wholesale to e-concessions so they could control inventory and margins.

Michael Prendergast, managing director in Alvarez & Marsal’s consumer and retail group, remains bullish on both luxury and e-commerce, but said the third-party marketplaces haven’t yet figured out how to bring the two together in the right way.

“The luxury consumer is showing that they are not fully comfortable recreating the luxury aspirational experience all online,” Prendergast said. “A lot of the luxury, aspirational experience is about touching and feeling the product.”

And a lot of luxury is about big, flashy brands.

But the luxury groups have upped their own online game, creating lavish websites and offering customer service and VIP after care to rival any retailer.

“You’re not just competing with the marketplaces, you’re actually competing with the actual luxury brands who are growing their own e-commerce businesses,” Prendergast said. “A marketplace is going to struggle without the big brands, there’s no two-ways about it.

“I think Saks.com has the best opportunities of all of these marketplaces,” he said.

It’s a market that has some of the once-mighty retailers that dominated e-commerce trading hands for knockdown prices.

Frasers Group bought Matches for 52 million pounds, only to turn around and put the company into administration after only two months, laying off more than half its workforce and setting up another potential fire sale.

Next plc, which was competing with Frasers Group last year to purchase Matches, could return as an interested party.

Crucially, Next has money. It also has profitable stores and a large online platform selling third-party brands. And it specializes in buying distressed assets or licensing bits of defunct U.K. companies and relaunching them online or in-store.

Also on the move is Yoox Net-a-porter, which is still owned by Compagnie Financière Richemont.

Burkhart Grund, the company’s chief financial officer, said Richemont had already received “unsolicited interest” from a number of parties and “sees a reasonable chance” that YNAP will be sold within the next 12 months. In the third quarter, sales at YNAP were down 14 percent in what Richemont described as “a continued challenging environment for pure play online distributors.”

Industry sources said that Net-a-porter is already tightening its belt and buying only brands with 80 percent sell-throughs or more. The company has declined to comment.

Farfetch had been set to take control of YNAP but that deal fell apart when Farfetch, in need of some rescuing itself, was bought out of administration by Coupang in January.

Coupang declined to comment when asked if it was interested in buying YNAP.

But Coupang has already been fielding questions from wary analysts about its move to buy Farfetch, prompting the firm to reassert that, while it sees a luxury opportunity, it remains focused on its main e-commerce business in South Korea.

Moda just has to find its way through all that change and successfully make that last push to profitability.

If it does so, it just might blaze a new path for multi brand luxury online.

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