11 Facts That Show Why Online Marketplace Farfetch is Disrupting Luxury Retail

Woman wearing jeans

Luxury retailers continue to struggle with how to translate their personalized high-touch shopping experience on-line while at the same time maintaining brand standards.  This has led to low eCommerce adoption within the sector.  One of the growth areas in eCommerce sales within the luxury sector comes not only from individual brands’ eCommerce sites but online marketplaces like Farfetch.  Farfetch launched its eCommerce marketplace site in 2008 and only sells luxury brands. The etailer provides digital storefronts, inventory management tools, logistics tools, analytics tools, and other software to merchants.  

Marketplaces are convenient, offering customers the ability to shop from hundreds of retailers in a more efficient manner.  They are really, from a customer perspective, the online department stores of the retail industry.  Farfetch was created with the goal of: “redefining how fashion is bought and sold” through technology, data and innovation.  A decade after launch, at any time there are approximately 280,000 items for sale on the Farfetch’s site and the company’s customers are from over 190 countries.

Farfetch’s website has a very different look from other online marketplaces such as Amazon.  A high-end design aesthetic and content from industry insiders and icons (one of current interviews on the website’s home page is with Sandra Choi, Jimmy Choo’s Creative Director) distinguishes the site from other online marketplaces.  The site feels more like a fashion magazine meets high end boutique but the digital version.  Farfetch plays within a lucrative customer demographic with an average customer who is 34 years of age and the average order value of is $618.60. It has over 2 million customers and total revenue in 2018 was $602 million up 56% over the previous year.  The retailer is not profitable yet but the company is valued at over $7 billion.  This shows the market expectations for future growth of a retailer that looks more like a high growth technology company. The luxury world has taken notice with Chanel among many high-profile investors.  

The company has done a great job of identifying and staying ahead of retail trends and may have the model to emulate.  Here are 11 ways Farfetch is changing the luxury eCommerce market and the way a retailer goes to market in the age of continual technological change. 

1.  Farfetch got its start by giving brands without any eCommerce presence a way to sell online.  Over the years other brands followed with some of the biggest luxury brands in the world selling on the site including Alexander McQueen, Burberry, Balmain and Gucci.  Farfetch has over 1,000 brands on its platform.  Most of its brands have exclusive contracts with the retailer

2.  Farfetch generates revenue by taking a commission on sales from brands that sell on its site.  Commissions typically range from 25%-33% and an additional 8% is required if Farfetch handles fulfilment 

3.  Farfetch does not own inventory instead it has an “asset light” model that investors are paying a premium for.  

4.  One of the benefits of shopping on Farfetch is that it gives luxury customers faster shipping options.  With only 54 out of 100 high-end monobrands offering same day (4 brands) or next day delivery (50 brands) in the UK, Farfetch provides a compelling value proposition. by offering same day delivery in certain cities. 

5.  The company has a partnership with Conde Nast (which owns Vogue) with the goal of pairing commerce with great content.  Speaking about the company’s partnership with Conde Naste, José Neves, CEO of Farfetch said: “we have long felt that inspirational content is a natural part of any luxury shopping experience. In the same way as we empower the fashion industry and connect consumers with the world’s best brands and boutiques, we want to connect them with outstanding content.” Editorial content is front and centre on the site with a high-end feel which powerfully differentiates Farfetch from other online marketplaces.

6.  While Chanel is not selling on Farfetch it is working with the etailer on digital customer experience innovations.  Speaking about the partnership, Chanel’s President of Fashion Bruno Pavlovsky said: “imagine a customer can book an appointment through WeChat or Whatsapp and say they would like to come at two o'clock to see in the fitting room this silhouette or this bag or this shoe.  If we want to enrich the customer experience, we have to think about a range of services like that.”  Similar to Alibaba, Farfetch wants to“reinvent the luxury shopping experience online as well as offline.” 

7.  Farfetch also has a shoe customization business called Platforme which its website claims offers the “world’s first truly customisable luxury fashion sneaker”. All styles on the website are fully customizable with a choice of over 60 possible colour and material combinations. Shoes from Emilio Pucci to Nicholas Kirkwood can be customized online.

8. Jd.com merged its online luxury platform with Farfetch’s earlier this year. This is a significant opportunity for Farfetch since jd.com is the second largest eCommerce site in China.  China is a crticial market for Farfetch since Chinese consumers generate a third of the luxury purchases worldwide. The goal of the partnership is to create the: “premier luxury gateway to China’ for luxury brands.”  The partnership will give jd.com’s customer base of over 300 million people access to the brands on Farfetch’s platform. 

9.  Farfetch purchased a London boutique in 2015 called Browns where it is testing technologies that will lead to the store of the future. The bricks and mortar store has touch screens and connected racks.  This is similar to Alibaba’s approach to reinventing off-line retail.

10. The organization’s Black & White solution builds eCommerce platforms for other retailers.  Harrod’s recently signed on as a client.  The partnership will provide Harrods with eCommerce management, operations support, international logistics support and technical support. Speaking about the partnership, the Managing Direct of Harrods, Michael Ward, said: “partnering with Farfetch Black & White Solutions allows Harrods to work with the market-leader in e-commerce technology to deliver a seamless service online, which will continue to feel instantly and unmistakably Harrods. Our shared objective with Farfetch Black & White Solutions is to ensure that Harrods digital customers receive the same exemplary service as those who visit us in-store.”

11. Farfetch, which is committed to personalization, provides customers with real-time wishlists based on data gathered from the search history of customers. This system allows merchandise suggested to be tailored to fit the needs and wants of customers. It is quick and automatic, updated constantly based on the search results. Therefore, customers are able to receive items that fit their style.

Check in weekly for articles on digital transformation and customer experience innovation to learn what strategies businesses are using to accelerate their sales growth.

Emily McCullough, a Digital Marketing Intern, with Indigo9 Digital Inc. contributed to this article. You can learn more about Emily here.

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Tricia McKinnoneCommerce