Farfetch Fetches Far: Key Details
A compilation of key details to know about the Farfetch-Alibaba-Richemont deal
[ This is a featured article in The Closet On The Cloud, a Fashion Tech Newsletter.] Check out the latest edition here!
(This is a developing story)
On November 06, 2020, the supremely exciting rumours of a possible investment by Chinese giant Alibaba Group & Swiss leader Richemont in Luxury Fashion retail platform Farfetch was confirmed.
Goal: To accelerate the digitization of the global luxury industry.
This is being done via the “LNR” initiative. LNR stands for Luxury New Retail. LNR is a visionary initiative that seeks to leverage Farfetch’s and Alibaba’s expertise in omnichannelism (selling seamlessly across different channels) to digitize the global luxury industry.
The aim is to serve the needs of luxury businesses, including a full suite of enterprise solutions that would be powered by Farfetch.
Both mono-brand and multi-brand ventures seek to benefit with fully-functional services that would power their journey to a digital, global audience via a single integration.
What exactly happened?
This huge investment can be broken down into two deals:
- Deal 1: Alibaba & Richemont Group are investing $300 million each into the global FARFETCH in the form of “private convertible notes”. Which literally means, Farfetch would now be liable to return these “notes” in the form of shares at a later mutually acceptable date.
- Deal 2: Farfetch’s expansion into China, i.e. FARFETCH China, is receiving an additional investment of $250 million from Alibaba & Richemont each. This shall give the two a combined 25% stake in a new joint venture that will include FARFETCH’s marketplace operations in the China region.
Consequences:
- Farfetch will launch luxury shopping channels on Alibaba’s platforms: Tmall Luxury Pavillion, Luxury Soho & Tmall Global.
- The new channels add Alibaba’s 757 million consumers to FARFETCH ’s global audience.
- The deal will lead to a give and take between China & the world. Chinese brands to global audience 🔁 FARFETCH’s global brands to Chinese customers
- Farfetch will bring the global inventory of brands on its marketplace to China, i.e. instead of selling the same products that the brands are already selling on Tmall, brands can now sell inventory that is outside China to Chinese customers.
- Farfetch will close its storefront on JD.com (Tencent) due to less than impressive results while continuing to work with its 90 luxury brands that are present on WeChat (still, Tencent) to maintain the stellar brand awareness efforts on the platform.
- Farfetch will replace YOOX Net-a-porter as the primary technology provider, i.e. aid in setting up their back end on the platform and other logistical help.
Doubts Cleared:
1. What’s the difference between Farfetch & Net-a-porter?
The main difference remains the uptake of inventory responsibility. While Net-a-porter is involved in purchasing wholesale and curating ready-to-wear from different brands on its platform (similar to a department store), Farfetch does not take responsibility for inventory (its biggest strength) & simply acts as a marketplace connecting global brands with global customers.
With this collaboration, Luxury consumers can shop for their favourite brands either through this FARFETCH integration or even through the NET-A-PORTER integration on Tmall Luxury Pavilion.
2. What’s the difference between those different Tmall platforms?
Tmall Luxury Pavillion: Launched in 2017, the luxury Pavillion is an exclusive platform where invite-only brands are allowed to sell. At the moment, 180 brands sell on the platform.
Luxury Soho: Launched in 2020, this is a feature launched to introduce younger consumers to the world of luxury via a more accessible price point. It allows brands to choose a select set of inventory and launch it into an online outlet store to the target consumer. It has been especially useful during the pandemic.
Tmall Global: Launched in 2014, this is a cross-border platform for brands that do not own a legal entity within China to sell to Chinese customers internationally. It is particularly used by cosmetic companies that do not meet Chinese regulations in terms of testing or ingredients.
What other doubts do you want to be cleared?
Feel free to write to me!
If you haven’t signed up for The Closet On The Cloud yet, do it here!
