The connections keep coming for José Neves.
The founder, chairman and chief executive officer of Farfetch, who has successfully planted himself at the intersection of luxury, e-commerce and physical retail, has solidified a partnership with Chinese giant Alibaba and European stalwart Compagnie Financière Richemont that just might transform high fashion.
In a landmark deal, Farfetch, Alibaba and Richemont will work together to offer “enhanced access to the China market,” but to also accelerate the digitization of the global luxury industry.
Farfetch will launch luxury shopping channels on Alibaba’s platforms, Tmall Luxury Pavilion and Luxury Soho, China’s premier luxury and luxury outlet destination within the Tmall marketplace, as well as Alibaba’s cross-border marketplace Tmall Global. The channels expand the reach of Farfetch’s global luxury platform to Alibaba’s 757 million consumers, offering luxury labels a multibrand solution through a single integration with Farfetch.
Luxury consumers will be able to shop either through the Farfetch integration or Richemont subsidiary Net-a-porter’s integration on Tmall Luxury Pavilion, which was set up last year.
It’s a complicated bit of dealmaking, with competitors, frenemies and high-powered players all in the mix — or interested parties — across two continents.
Neves synced up first with Daniel Zhang, ceo of Alibaba, which has also been building bridges between digital and physical shopping. Then he brought in Richemont chairman Johann Rupert and secured more high-end buy-in, and investment, from François-Henri Pinault, managing partner of Artemis, which owns another luxury giant, Kering.
The idea is to not just extend Farfetch’s platform to Alibaba’s mammoth Tmall marketplace, but to push the entire luxury fashion sector into a future defined by a blended physical and digital experience — a future that might have been inevitable but seems to be coming all the quicker now because of the global pandemic.
Neves has long been building up this more connected approach, creating Farfetch as a platform, working with Chanel to create a more digital store environment that can now be used by anybody and generally bringing a bit of the high-tech approach to the tradition-bound world of luxury his way.
“People loved the vision, understood the potential and we knew it was only going to go in one direction, which would be the ultimate convergence of digital and physical. But I think the pandemic just exposed that as an imperative,” Neves told WWD in an interview Thursday. “It’s no longer a nice-to-have.”
Alibaba has been thinking along the same lines for years and developed its New Retail click-and-brick approach parallel to Farfetch’s own efforts.
“They are a true technology platform and we are a true technology platform,” Neves said of Alibaba. “We really see ourselves as enablers for the best retailers and brands in the industry. We’re not trying to fight physical retail, we see our biggest opportunity is to enable physical retail to thrive. We found that we have, actually, a suite of products and solutions that can really serve the industry at a very critical time, which is COVID-19.
“It’s really about the future of retail, the future of luxury, the future of online powered by two technology companies, Farfetch and Alibaba, and endorsed by Richemont and Kering, but hopefully by many others in the future,” he said. “This is really an industry movement here that we’re trying to start.”
(The deal unveiled Thursday has lots of interesting side notes. For one, Neves is, in a sense, switching dance partners, having linked with JD.com, which made a nearly $400 million investment in Farfetch and set up a store that “didn’t ramp up the way we expected,” said the ceo, referring to JD as a “cherished shareholder.” Earlier this year, WeChat parent Tencent Holdings — and JD’s largest shareholder — invested $125 million in the firm.
(Meanwhile, the vision of a “luxury platform” echoes one that Rupert laid out several years ago when Richemont eventually gained full control of Net-a-porter. His idea then was that other players in the luxury world would also be able to take stakes in Net-a-porter, which would become the luxury world’s global digital platform.)
This is a revolution that, to Neves’ way of thinking, is being implemented and planned at the same time, with many tools available now — including easy online access to Chinese consumers and the connected store concept developed with Chanel.
“This is really about very practical things,” Neves said. “So it’s not about the future in 10 years’ time. Of course it’s also about that, but it’s about bringing real solutions to the market when the market needs it and really about bringing the whole industry with us.”
Merchants will get more connections with more shoppers, especially in China, a vast market they can now tap into with a flip of the switch if they are on the Farfetch platform. And consumers in the West will see more stores that center around “a fully integrated seamless journey from physical to digital,” Neves said.
“We see Amazon Go, a few experiences in supermarkets, but we have not really seen it in the luxury industry, a fully, fully integrated physical and digital retail experience, that is what we’re really trying to bring to the market with Alibaba and Richemont,” he said.
Neves has always talked the talk of tech ceo with mega ambitions and is increasingly walking the walk.
“Our ambition is to be the global platform for luxury,” he said. “It’s really to enable the luxury industry to really elevate the consumer experience. For us, this is not about online. This is about online [and] off-line, this is about enabling potentially every single transaction in luxury both in physical spaces and online in a way that’s win-win and benefits the consumer and the brand.”
That’s a sentiment that very much syncs with the approach Alibaba has used to become not just the online giant in China, but a key facilitator for physical retailers.
In a statement on the deal, the partners each gave the broader vision their own take.
• Alibaba’s Zhang said: “This highly complementary partnership brings together some of the world’s leading luxury retail and technology platforms, representing another milestone in Alibaba’s strategy to meet the rapidly growing demand for luxury products in China. The Chinese luxury market — which is expected to account for half of global luxury sales by 2025 — consists of hundreds of millions of young, digitally native consumers. By partnering with Farfetch and expanding our existing relationship with Richemont, we will accelerate the digitization of the global luxury retail industry and transform the luxury shopping experience for consumers.”
• Richemont’s Rupert said: “These developments represent a further meaningful acceleration of our journey toward Luxury New Retail. This initiative brings together a powerful combination of highly complementary strengths — notably with our maisons’ luxury retail expertise and Yoox Net-a-porter’s deep brand partnerships, expert curation and exceptional customer care — that will help us deliver a seamless omnichannel experience to our discerning clientele. Partnerships make you stronger. I am delighted to partner with Daniel, José and François-Henri to bring our shared vision to fruition, setting new standards for the future of luxury.
• And Pinault of Artemis/Kering said: “The growth potential of luxury e-commerce has never been so promising, and the importance of China for the luxury industry is only becoming more obvious every day….The investment by Artemis demonstrates our belief in the future of Farfetch and I am personally looking forward to exploring the future of luxury retail with this group of visionaries and experts.”
As part of the global partnership, Alibaba and Richemont will invest $600 million, or $300 million each, in private convertible notes issued by Farfetch. Alibaba and Richemont will also invest $500 million, or $250 million each, in Farfetch China, taking a combined 25 percent stake in a venture that will include Farfetch’s marketplace operations in the China region.
In addition, Alibaba and Richemont have an option to purchase a further combined 24 percent of Farfetch China after the third year of the venture’s formation. Alibaba and Richemont will explore additional opportunities to work closely with Farfetch to provide services to luxury brands.
The investments by Alibaba and Richemont in Farfetch China and the establishment of the joint venture are expected to be completed during the first half of calendar year 2021, subject to the satisfaction of closing conditions.
Separately, Artemis will increase its investment in Farfetch by buying $50 million in stock.
In all, it adds up to a power move for Farfetch that comes just as the ultracompetitive U.S. web leader Amazon moves into its turf.
Amazon finally unveiled revealed its by-invitation Luxury Stores platform for eligible Prime members in the U.S. only this fall, including shops-in-shop with designers Oscar de la Renta, Roland Mouret and others.
Interestingly, Mouret was one of the first designers to join Net-a-porter, “when nobody said it would work. But I am always challenging myself to envision what the future should be, and how designers can sell their creativity.”
Mouret described Amazon as “the next frontier” for luxury fashion online.
But clearly there are now other, powerful forces out there on the next frontier, where the competition could still get rough.