Farfetch, Alibaba and Richemont set to accelerate luxury sector digitisation
A luxury ecommerce superforce takes shape as Farfetch, Alibaba Group and Compagnie Financière Richemont unveil a global strategic partnership to provide luxury brands with enhanced access to the China market.
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In a joint initiative with profound implications for the luxury sector – and potentially the travel retail channel – Farfetch, Alibaba Group and Compagnie Financière Richemont (Richemont) last week announced a global strategic partnership to provide luxury brands with enhanced access to the China market.
The alliance will also accelerate the digitisation of the global luxury industry, the partners pledged. The deal comes one month after Alibaba Group agreed to form a strategic joint venture in China with the world’s leading travel retailer, Dufry and take up to 9.99% in the company.
The alliance will leverage each company’s expertise and extensive reach to bring luxury retail to the next generation by “seamlessly integrating the digital and physical realms”, the parties said.
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 new channels expand the reach of Farfetch’s global luxury platform to Alibaba’s 757 million consumers, offering luxury brands a multi-brand solution through a single integration with Farfetch.
In a statement the partners said: “This will provide luxury labels with a unique opportunity to elevate their brand awareness, while also significantly expanding their addressable market of luxury consumers through their participation on Farfetch’s global marketplace. For luxury consumers, this provides multiple ways to shop for their favoruite brands either through the Farfetch integration, or through the already highly successful NET-A-PORTER integration on Tmall Luxury Pavilion.”
Alibaba and Richemont will each invest US$250 million in Farfetch China, taking a combined 25% stake in a new joint venture
As part of the global partnership, Alibaba and Richemont will each invest US$300 million in private convertible notes issued by Farfetch Limited. Alibaba and Richemont will also each invest US$250 million in Farfetch China, taking a combined 25% stake in a new joint 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% of Farfetch China after the third year of the joint venture’s formation.
Alibaba and Richemont will also 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, Artémis, the family investment arm of Kering majority owner François-Henri Pinault, also agreed to increase its existing investment in Farfetch with a US$50 million purchase of Farfetch’s Class A ordinary shares.
‘Luxury New Retail’
The partners said that ‘Luxury New Retail’ (LNR) is a visionary initiative which will leverage Farfetch’s and Alibaba’s “state-of-the-art” omnichannel retail technologies to serve the needs of luxury businesses, including a full suite of enterprise solutions powered by Farfetch.
These solutions will serve both mono-brand and multi-brand distribution strategies for luxury brands, including fully-connected ecommerce websites and apps, omnichannel retail technology, and access to the Farfetch and Tmall Luxury Pavilion marketplaces via a single integration.
Farfetch and Alibaba have also formed a steering group to further enhance the LNR initiative, which is aimed at leading the digitisation of the global luxury retail industry.
Richemont Chairman Johann Rupert, and Artémis Chairman François-Henri Pinault will join Farfetch and Alibaba on the LNR steering group as founding members, bringing their combined decades of industry leadership and expertise.
Farfetch Founder, Chairman and CEO José Neves said: “This announcement is a major step in our mission to connect the curators, creators and consumers of the luxury fashion industry.
“The US$1.15 billion investment in Farfetch from Alibaba Group, Richemont, and Artemis is a strong validation of our position as the global platform for luxury. The new initiatives with Alibaba Group and Richemont extend Farfetch’s strategy to power the digital transformation occurring across the luxury industry, which has been accelerated by the unprecedented challenges resulting from the COVID-19 pandemic.
“The Luxury New Retail initiative will explore ways we can help the wider industry move forward and thrive in the post-COVID world.”
Alibaba Group Chairman and CEO Daniel 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.
‘Luxury New Retail’: A visionary initiative to leverage Farfetch’s and Alibaba’s omnichannel retail technologies to serve the needs of luxury businesses
“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 digitisation of the global luxury retail industry and transform the luxury shopping experience for consumers.”
Richemont Chairman Johann Rupert said: “Building on our successful joint venture with Alibaba, these developments represent a further meaningful acceleration of our journey towards Luxury New Retail.
“The US$1.15 billion investment in Farfetch from Alibaba Group, Richemont, and Artémis is a strong validation of our position as the global platform for luxury”
Alibaba Group is enhancing its focus on luxury and on travel via recent agreements with power players in these sectors
“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.”
Artémis Chairman François-Henri Pinault said: “The growth potential of luxury ecommerce has never been so promising, and the importance of China for the luxury industry is only becoming more obvious every day. Thanks to the vision of José Neves, Farfetch played an important role in improving the omnichannel experience for luxury customers in recent years.
“The investment by Artémis 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.”
A 12-year success story
Farfetch claims to be the leading global platform for the luxury fashion industry, connecting creators, curators and consumers.
Founded in 2007 by José Neves and launched in 2008, Farfetch began as an ecommerce marketplace for luxury boutiques around the world.
Today the Farfetch Marketplace connects customers in over 190 countries with items from more than 50 countries and nearly 1,300 of the world’s best brands, boutiques and department stores, to what the company claims is the most extensive selection of luxury on a single platform.
The Moodie Davitt eZine Issue 286 | 16 November 2020
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