Founded in 2008 by Portuguese entrepreneur José Neves, Farfetch is a UK-based e-commerce platform connecting 500 independent luxury boutiques worldwide with shoppers in 190 countries . With more than a million customers  that spend an average of $700 per order , Farfetch is the world’s most-frequented online luxury shopping destination  and was valued at $1.5bn at its last round of funding in May 2016 , cementing its status as one of tech’s few “fashion unicorns.” Projected to conduct over $800mm of transactions in 2016 (which translates to ~$200mm of sales) , the company is said to be positioning itself for a 2017-2018 IPO .
Unlike other pureplay e-tailers who aim to replace the traditional retailing model, Farfetch recognizes and in fact embraces the value of the brick-and-mortar shopping experience . Equipped with 1,500+ carefully curated brands , Farfetch offers a differentiated value proposition – the seamless integration of online and offline.
To the consumer, the company delivers value by granting access to an unparalleled global selection of fashion-forward pieces rivaling that of Barneys or Bergdorf. To the boutique, the platform 1) helps to clear inventory by connecting the store to a vast network of international shoppers, 2) incentivizes taking riskier merchandising bets by mitigating constraints resulting from regional style preferences, and 3) enables brick-and-mortar establishments to operate 24/7. In return, Farfetch receives a 25% commission from each transaction .
Exhibit 1: Product landing page. Farfetch.com
Similar to eBay, Farfetch serves as a marketplace and does not carry inventory. Given that its boutique partners are typically small-scale operations with limited or no digital experience, Farfetch ensures a smooth offline to online transition by managing the presentation of products, processing payments, and negotiating attractive rates with logistics groups. To assuage shopper concerns around committing to big-ticket purchases without having worn the item, the company offers a “Click-and-Collect” service. Customers can pick up a previously placed order at a boutique, try on items, and return any unwanted goods at any participating store in the Farfetch network . In addition, the platform is available in 9 different languages to both boutique partners and shoppers .
For boutiques, listing products on Farfetch is a multi-step process :
- Boutique checks whether the item it intends to list has previously been sold on Farfetch by another vendor. If so, the boutique can proceed with the listing and product images from Farfetch’s archives are used.
- Otherwise, the item must be sent to one of Farfetch’s studios in LA, Hong Kong, Portugal, or Brazil to be photographed.
- Four on-model shots (front, side, back, and detail) are taken. At the LA studio, for example, this step is expected to take no more than 4 minutes per item.
- Photographer takes standalone product shots.
- Photos are sent to the Portugal studio, where retouching and uploading takes place.
- Item is repackaged and sent back to the boutique, who pays for the return shipping costs. At the LA studio for example, total turnaround time averages 3-5 days.
Exhibit 2: Global boutique partners. Farfetch.com
Recently, Farfetch has made considerable investments to improve the execution of its omnichannel strategy. In May 2015, it acquired London-based boutique Browns with the goal of incubating and testing retail experience innovations at a physical store before implementing them across the broader Farfetch network . Earlier this year, the company debuted its white label platform business, Farfetch Black & White, which builds e-commerce capabilities for monobrands that have historically eschewed digitization . Its first client site, ManoloBlahnik.com, launched in March .
While Farfetch is facing considerable competition from the likes of Moda Operandi that adhere to the traditional wholesale model and aggregators such as Lyst and Polyvore, few have its scale and omnichannel know-how. With more than half of luxury shoppers’ searches now being conducted via mobile , the logical next step would be for Farfetch to further its mobile platform. The acquisition of Browns will likely play a considerable role in helping Farfetch identify opportunities to enhance the shopping experience, from brand discovery to ultimate purchase. In fact, it is already investing in an “image-recognition software that can identify a customer entering the shop and glean from electronic records whether she’d like help, a dressing room, or a heads-up that a jacket she tried on a month ago is now on sale .”
E-commerce is projected to become the world’s third largest luxury market , and Farfetch is uniquely positioned to capitalize on favorable market trends. It is important to note that while Farfetch has enjoyed robust transaction volume growth, the retailer has yet to turn a profit. Nevertheless, by leveraging its rich experience in both offline and online, and beta-testing potential innovations at its Browns boutiques, I am confident that Farfetch is on its way to becoming the preeminent voice in luxury fashion.
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