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What happened
Net-a-Porter is scrapping its in-house beauty division in favour of an affiliate model linked to its magazine Porter. It will no longer hold stock; instead it will send shoppers to the brands’ websites to complete their purchases.
“Net-a-Porter is launching a new affiliate programme for some of the world’s top beauty brands. Starting next year, customers will be directed to partners’ e-commerce channels to complete their purchases. This new programme will leverage Net-a-Porter’s award-winning editorial platform Porter and community to drive high-quality traffic to our partners’ channels,” the Richemont-owned company said in a statement.
The pros and cons for brands
Net-a-Porter is not the biggest beauty player in the market. At the time of writing it lists 67 brands available to purchase via its website, though these include big names such as Augustinus Bader, La Mer, 111Skin and Charlotte Tilbury. (A marked drop from the 230 brands it stocked back in 2019.)
Switching from a wholesale model to an affiliate model has both benefits and drawbacks for brands.
On the plus side, brands will have another marketing channel through which to funnel their customers to their websites, increasing site traffic, says Neil Saunders, managing director and retail analyst at data research firm Globaldata. Brands will also receive exposure via Porter’s Instagram account, which has over a million followers, as well as Net-a-Porter’s TikTok account (81,600 followers) and the magazine's print edition, whose circulation figures are not publicly available. In today’s consumer landscape, this is important; brand loyalty is dwindling and brands must create new opportunities for engagement to retain customers.
Another factor brands can have greater control over is pricing, says Jessica Ramírez, senior research analyst at brand investment research firm Jane Hali Associates. She points out that brands are largely at the mercy of retailers' discounting strategies, but with an affiliate model, this is no longer the case.
On the other hand, brands are losing an efficient method of distribution and the consumer experience will become less streamlined. Saunders says brands should expect some friction with customers who have to sign up to a brand’s own site (instead of Net-a-Porter’s) to receive their products. “It can erode conversation rates,” he warns.
One of Net-a-Porter’s currently stocked brands, Macrene Actives, says it was informed of the change over the summer. CEO and founder Dr Macrene Alexiades sees it as a positive move: “The upcoming changes will be very interesting and more of a partnership and a collaboration than a classic e-commerce platform. We’re very excited and eager to work with the [team] to help sculpt the future of this endeavour.” Macrene says it is talking to the retailer about how to increase its editorial and online exposure, ensure a smooth transition for product fulfilment and maintain its access to the Net-a-Porter client through exclusive partnerships and editorials. (Net-a-Porter declined to comment further on the details; as did other brands contacted by Vogue Business.)
The upsides for Net-a-Porter
It’s a wise move for Net-a-Porter, experts say. “It will allow them to get the most out of social platforms, where the vast majority of beauty brand discovery occurs,” says Louise Yems, strategy director of marketing agency The Digital Fairy. “They’ll have the freedom to reinforce their own brand clout by doubling down on individual identity and worldbuilding and it will create more depth of opportunity for collaboration.”
There is also a cost advantage. “Consumers are more inclined to buy beauty online, as there are significant reorder volumes but the operational challenges are much higher, given the relatively small basket size,” says Luca Solca, luxury goods analyst at Bernstein. Orchestrating beauty to work from a cost viewpoint isn’t easy and fashion marketplaces or multi-brand online retailers have to deal with significantly smaller volumes than beauty specialists, hence the huge cost crutch. Farfetch shuttered its beauty business after 18 months, while Burberry Beauty handed over its beauty operations to Coty in 2017, switching back to a licence model after initially taking the category in-house in 2013. “Beauty is a difficult nut to crack,” Solca says.
Saunders echoes the point about volumes: “Beauty has never been a core category for Net-a-Porter and it just doesn’t do the volume needed to make a meaningful contribution.” This has been exacerbated by the wider slowdown in luxury demand and intense competition from beauty pure players. “Consumers can head to multiple specialist retailers, both online and in stores, and Net-a-Porter has to compete with those stronger offerings,” he says.
The affiliate model has a successful reputation in the industry, he adds. “Affiliate programmes are big in beauty. They are a way of pulling more people into the e-commerce funnel, which should, in theory, lead to higher sales. Because beauty is a category where people love to discover new products and tips, affiliate programmes can work well.” Importantly, the affiliate model is asset and capital-light — meaning it doesn’t require a retailer to invest in and hold stock, lessening risk at a time when luxury multi-brand retailers are struggling with profitability.
That said, Saunders cautions that Net-a-Porter will have to navigate the reputational risk that comes with affiliate programmes: “If YNAP [Yoox Net-a-Porter group] is marketing brands and products, it needs to ensure its partners offer great service and keep their brand promises.”
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