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For many fashion companies, 2020 was the year the pandemic broke their business.
Farfetch, an online ready-to-wear retailer, added 900,000 new customers in those twelve months, and third-quarter revenues were 71 percent higher than last year.
So it was also the year that it became clear that people were buying luxury clothes online like crazy.
And more and more, it seems, are doing so at Farfetch.com.
Hardly anyone in the industry expected this.
Farfetch has positioned itself not as a retailer with its own inventory, but as a global intermediary between fashion boutiques and end customers - as a marketplace where you can order Rick Owens sneakers from Tokyo as well as the Jacquemus bag from Milan.
In contrast to competitors such as Net-a-Porter, Matchesfashion or Mytheresa, Farfetch was not considered particularly chic for a long time.
There were no exclusive fashion week dinners and no photogenic head buyers, instead an enormous range of branded goods.
Some people therefore speak of the “Amazon of fashion” - and that is not meant as a compliment.
Company founder José Neves
Source: Image Courtesy of Farfetch
The Portuguese José Neves founded the company twelve years ago and went public in 2018.
Last November, he announced a mega-deal with the Chinese e-commerce giant Alibaba and the luxury group Richemont.
The joint venture is intended to finance a platform with which Western fashion brands can sell even more goods in China.
So far, Farfetch has its largest sales in Europe and the Middle East, with Asia Pacific in second place.
Farfetch also provides the technology for online stores that European brands operate themselves, it produces its own fashion and has bought the London fashion boutique Browns.
You want to be active in as many areas of the fashion market as possible.
These seven factors explain why the Farfetch model works.
1. No slow-moving
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The marketplace concept is one of the main reasons that the company has weathered the crisis so well.
Farfetch was able to benefit from the desire to shop online without having to struggle with the disadvantages of being a seller without having to store and manage its own goods, and without millions of unsold items of clothing that are a burden on the balance sheet.
"You have the advantage of a large offer, but you do not take any risks," said the analyst Edward Yruma from the consulting firm KeyBanc Capital Markets of the American "GQ".
Neves sees his company as a link between buyers, creatives and customers.
2. Large network
Farfetch also owes its success to its good relationships with small and large designer stores, which initially saw online retail as a threat.
1300 boutiques, brands and department stores now belong to the Farfetch network.
Some of them, like L'Éclaireur from Paris or Société Anonyme from Florence, have been there from the start.
During the first high phase of the global lockdowns, a campaign was devised to mobilize customers as “boutique savers”: The hashtag #SupportBoutiques encouraged people to buy from small shops - of course via Farfetch, which received a commission of 20% from its partners up to 25 percent of the sales value.
The American "GQ" found out, however, that the costs for the business are often significantly higher due to many additional fees.
"Ultimately, you never know how much money you will have left at the end of the month," Andrew Dryden, co-owner of the California men's outfitter Departamento, told US magazine.
3. Good timing
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When Farfetch was founded in 2008, the prospects for luxury shopping were rather bleak: there was much to suggest that Neves would not be successful with this business principle shortly after the bankruptcy of the Lehman Brothers.
Lucky for him: When local markets weakened, stores around the world desperately looked for ways to reach new customers.
The Farfetch system came in handy.
Shortly after it was founded, Neves won 40 partners who wanted to try something new during the crisis.
4. California role models
Farfetch's business practices are strikingly similar to those of the big tech companies in Silicon Valley.
It's not a coincidence.
Neves is driven by the ambition to lead the next big digital platform that will completely change a market segment - only in this case the platform does not come from California, but from Europe, the home of many luxury brands and design talents.
The CEO prefers to compare his company with the streaming service Netflix.
The company initially acted as a service provider who only distributed the films of others, and later became a producer who influences cultural discourse and wins awards.
Netflix is now a brand that users have developed an emotional relationship with.
Farfetch wants to achieve that too.
5. Huge selection
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Farfetch's site looks like a gigantic but impersonal luxury mall, but customers don't seem to mind.
Anyone willing to spend 2000 euros on a sweater will appreciate the huge selection of shops and brands that would otherwise have to be found in several online shops.
Exclusivity is no longer so important, says Neves.
“It's much more about inclusivity.
Luxury fashion has long been perceived as a closed world, but that has completely changed. "
6. Own trends
To become the Netflix
of fashion, Farfetch must design fashion itself.
And it already does: in 2019, the company bought the New Guards Group, an Italian streetwear holding company that includes the popular labels Off-White and Palm Angels.
These brands have many fans and keep producing bestsellers.
Now they are controlled by Farfetch.
On the one hand, this should be the customers of the brands
lure them to the company's platform.
On the other hand, Neves plans to establish its own star designers and labels through the takeover and to set trends in the process.
If that works, it will soon be difficult for the fashion-conscious target group to bypass Farfetch when shopping.
7. Analog business
Fashion, says José Neves, cannot be downloaded.
“I firmly believe that the physical experience of buying clothes continues to play a role.
Software cannot offer the personal service that one knows from a human salesperson. ”However, the shopping experience can be“ upgraded ”technologically.
For years, Farfetch has been refining tools that connect analogue businesses and digital offerings.
An approach that even convinced Chanel.
Farfetch has made the label's regular Paris boutique the “Store of the Future”.
Selected customers get access to an app with which they can view the offer, create wish lists and make appointments with consultants.
In the shop, you can take virtual tours through Coco Chanel's apartment on Rue Cambon using a tablet, and in the changing room you can view the current collection on interactive mirrors and order items to try on.
With such offers, Farfetch wants to consolidate its relationships with large luxury labels that generally do not sell their products via secondary platforms - and that are spreading in analogue retail as well as on the Internet.
This text is from WELT AM SONNTAG.
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Source: Welt am Sonntag