Fashion brands

Farfetch’s business model wins fashion brands’ trust

Several major luxury fashion brands continue to prefer selling direct to customers, but a growing number are also choosing to distribute and trade through Farfetch, an online fashion marketplace founded by Portuguese entrepreneur José Neves.

Despite the huge impact of the pandemic on economies around the world, Farfetch recently secured a $ 1.1 billion investment from rivals Alibaba and Richemont, the Swiss watch and jewelry group, as well as an investment. staff of 50 million euros of François-Henri Pinault, the billionaire founder of the luxury group Kering. .

Farfetch and its new backers plan to expand into China, the world’s second-fastest growing luxury market, according to the Financial Times after interviewing it.

Main reasons for Farfetch’s business success

  • Neves’ choice of a business model differs from other online retailers, such as Net-a-Porter, in that Farfetch does not buy inventory and therefore takes less risk on fleeting trends.
  • Instead, it acts as a marketplace that connects consumers to brands, earning around 30% commission on each sale, and has a sophisticated distribution system whose technology can match the offer to. Requirement.
  • Under a system Neves calls “direct electronic dealerships,” brands decide what to sell on the Farfetch platform and set their own prices to avoid discounts that could harm their high-end image.
  • He also believes that the confusion of shopping online and in physical stores is such a big opportunity for the fashion industry, especially in China, that there will be room for both models.

Key quote

“Alibaba and Farfetch share a vision for how luxury will evolve over the next five to ten years, and we believe we can build something amazing with them” – José Neves, founder of Farfetch.

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From the Financial Times