Farfetch’s journey to a $1bn valuation, blending creativity and technology to form a European Unicorn
Farfetch has crafted a unique business idea by combining creativity with technology, and has executed well on it, illustrating Europe’s ability to lead in digital lifestyle opportunities.
Joining the “Unicorn” club
Farfetch, the fashion and luxury marketplace, just announced a major milestone in its short history, with a new funding round that values it at $1bn. Farfetch joins a select group of the top Internet companies in the world in this valuation range and in the “Unicorn club”. Such an achievement is no mean feast, especially in the fashion space where many companies have launched and been funded, but few have hit that kind of milestone as a private company.
Launched in 2008 in Portugal, by Jose Neves, founder and CEO, Farfetch created an innovative way to buy fashion straight from 300 of the world’s best independent designer boutiques, from Paris, New York or Milan to Bucharest and Tokyo. This allows hundreds of thousands of Farfetch customers, across 180 countries worldwide, to shop a very unique and wide range of fashion items.
A large vision, great execution plus three traits of very successful companies
The investment thesis behind our bet on Farfetch, was that it had early on three characteristics that are often those of companies with such calibre:
- A highly differentiated positioning and business model: Having aggregated most of the best independent fashion and luxury boutiques across 30 countries, thanks to a careful curation, it has built a very unique business, with an unparalleled range of brands and unique pieces. This makes Farfetch a very unique asset and consumer proposition, almost impossible to replicate.
- A global opportunity and ambition: Far away from Silicon Valley, and not originating from the traditional fashion capitals such as Paris, Milan or New York, Farfetch took a global view from scratch, aiming to connect fashion lovers anywhere in the world to those unique products, wherever they may be. Today the company’s largest market is the US and undoubtedly over time it will become Asia, especially China
- A remarkable founder and CEO: When I first met Jose Neves I was struck by the clarity of his vision and impressed by his early execution. He conceived the model of a new type of “cooperative”, building a compelling consumer proposition by gathering some of the best independent fashion boutiques on the platform. From the early days of boot-strapping Farfetch with 15 employees or so 6 years ago, to a phase where it has now nearly 500 employees and nearly $200m of funding, Jose remains true to his original entrepreneurial vision, with the ambition to make Farfetch a large, independent and innovative player in the global fashion industry.
At the intersection of key mega trends in retail, multichannel and cross-border commerce
Since the beginning, the company has benefitted greatly from two mega trends that are reshaping retail globally.
The first trend is obviously multi-channel, connecting physical stores (currently over 1,000 unique outlets connected to Farfetch) to customers across the world. The vast majority of the world’s inventory (in any retail segment) sits on shelves and gradually that inventory is getting online, thanks to platforms like Farfetch. Multi-channel commerce is a much greater opportunity than pure-play ecommerce, enabling the product owners to sell both directly where the product is and globally via online channels.
The other big trend that is becoming more and more apparent is cross-border commerce, thanks to a growing ease of shipping items fast and reliably from one country or continent to another. Consumers want a product and do not really care whether it sits in a beautiful boutique or in a remote warehouse. They just want that product as fast as possible, at the best price with most convenience (i.e. free shipping, duties and taxes included etc.). Etailers like Farfetch just need to focus on making it easy for consumers to access products they love while shopping on a site in their own language, with local payment solutions and customer service that addresses their needs. That’s how Farfetch is shaping its next phase of growth entering markets like China, Japan, Korea or Russia, all with great potential.
Over 15 years of innovation in digital fashion retail, led by European start-ups
Farfetch shows that there are many opportunities for entrepreneurs to innovate and create valuable businesses building on Europe’s heritage in lifestyle, in fashion, luxury, beauty, and design. Europe’s creativity and know-how in crafting and marketing desirable products are major assets in areas where talent pools like Silicon Valley or China cannot compete as efficiently. In the past 15 years we have seen the emergence of a first wave of “Unicorns” such as Vente-Privée (which invented the flash-sale model), Net-A-Porter (which built a unique brand and business by mixing content with commerce) or Asos (which built the largest online destination for young fashion lovers). We expect to see many more successes emerge from Creative Industries, especially those able to successfully blend culture and technology, creativity and operational execution, “right brain” and “left brain”.
Success stories such as Farfetch should inspire both start-ups and established businesses to innovate and find new ways to connect fashion and luxury lovers to unique products through digital. Logically the next big champion should come from mobile platforms, and who knows from Paris or Milan this time?
Frederic Court (@fcourt) is a Venture Capitalist and lead investor in Farfetch since 2010.