What: Prada struck an unusual deal with Net-a-Porter, by selling its products via dropshipping

Why it is important: No more stock to buy for Net a Porter, reduced margin… is that the future of department stores?

Net a Porter was until very recently significantly different from Farfetch, as 100% of its sales were direct, under wholesale terms. This had to collide at one point with major luxury brands, eager to regain control of their distribution (and margins), such as Prada, who now sells directly up to 90% of its total turnover.

Prada went even further by forcing Net a Porter to accept a drop-ship model in order to keep the brand: Net a Porter will earn a commission on sales of Prada products, which will be shipped directly from Prada’s warehouses without having to be handled physically or financially by Net a Porter.

The perks are clear: less investment on inventory, reduction of financial and seasonal risk… but with a margin decreasing from 50-60% to 20-30%, which would not be enough to run a store for instance.

More importantly, this model can work with the cooperation of brands only if they see an interest to it, which is to be able to reach an “audience”, a “community”. As usual, the retailer’s positioning and specificity are crucial for its very own existence in this particular scheme.

Is Net-a-Porter’s Unconventional Prada Deal the Future of Wholesale