'Luxury Industry's Amazon' Farfetch, What Is the Secret to Its Soaring Growth? [Hidden Industry Story]

Global E-commerce 'Amazon' Struggles to Access Luxury Market
UK Online Platform 'Farfetch' Dominates After 14 Years
Founded by Portuguese Entrepreneur CEO Jove Neves
Overcoming Financial Crisis, Acts as a 'Bridge' Connecting Luxury Brands
Combines Online and Offline Consumer Experiences Through IT Technology

Global luxury e-commerce company 'Farfetch' homepage / Photo by Farfetch capture

[Asia Economy Reporter Lim Juhyung] The luxury industry is known to be so exclusive about going online that even the world's largest e-commerce platform, Amazon, has struggled to dominate it. However, there is a company that has demonstrated outstanding growth in this market and proudly earned the title of the 'Amazon of the luxury industry.' It is Farfetch, a global online luxury platform founded in 2007 by Portuguese entrepreneur Jose Neves. How did Farfetch transform into a company that receives 'love calls' from luxury brands that were skeptical about e-commerce?

◆The luxury industry Amazon couldn't conquer, Farfetch did

Amazon ambitiously launched a mobile application (app)-based 'Luxury Store' last September. The Luxury Store is an online shopping mall specializing in luxury goods, accessible only to VIP customers. However, about six months after its launch, by the end of the first quarter of this year, only 12 famous luxury brands had joined the Luxury Store.

The American business media outlet 'The Wall Street Journal' (WSJ) pointed out that this situation of the Luxury Store "still remains a burden for Amazon."

There are various reasons why luxury brands hesitate to participate in e-commerce platforms like Amazon. First, the online shopping mall's biggest advantage of 'lowest price sales' does not align with the luxury industry's premium strategy. Also, since luxury brands consider their unique identity as their greatest competitive edge, shopping apps that gather various sellers in one place may negatively affect the brand image. Above all, it is difficult for online shopping malls to filter out counterfeit products.

Giant e-commerce platforms like Amazon are also facing difficulties in the luxury goods industry. The photo shows people lined up in front of a luxury store in London, UK. / Photo by Yonhap News

Nevertheless, despite these drawbacks, there is an online platform that the luxury industry sends 'love calls' to. It is Farfetch, a luxury-focused e-commerce company established in London, UK, in 2007.

Last November, Farfetch received a $1.1 billion (approximately 1.284 trillion KRW) investment from Richemont, a Swiss luxury company owning brands such as Cartier, Montblanc, and IWC, and Alibaba, China's largest e-commerce platform, and began expanding its business in China.

It is also passionately loved by consumers. Looking at Farfetch's performance last year, the number of subscribers increased by more than 900,000 over the year, and app downloads nearly doubled. As the number of visitors increased, site traffic soared by over 60%. Farfetch's stock price was only $8 (9,337 KRW) in March last year but now exceeds $42 (49,022 KRW), marking an increase of over 500% in one year.

◆Rising as a luxury platform by seizing the global financial crisis opportunity

Farfetch is a startup founded in London by Portuguese entrepreneur Jose Neves in 2007. Located in 'Tech City,' where many tech companies gather in London, Farfetch faced adversity right after its founding. One year after its establishment, in 2008, the global financial crisis triggered by the US subprime mortgage froze investment funds abruptly.

Jose Neves, CEO of Farfetch / Photo by Farfetch website capture

However, CEO Neves turned the crisis into an opportunity. As the real economy worsened due to the financial crisis, consumers tightened their wallets, and luxury brands had to find new sales channels. At this point, Farfetch earned trust by playing a crucial role as a 'bridge' connecting luxury brands and online stores.

Farfetch's management secret to winning over the demanding luxury brands is its specialized solutions for luxury. CEO Neves, who learned about clothing and the fashion industry under his grandfather, a shoemaker, during his childhood, had a deep understanding of the luxury industry's ecosystem. Farfetch took charge of brand curation through IT technology, managed complex delivery processes, and devoted all efforts to counterfeit management and customer service.

In particular, Farfetch placed great importance on the 'experience' of consumers purchasing luxury brands. To satisfy consumers' eyes when viewing products on the website, Farfetch paid for brand photography costs and managed quality, and even established its own customer service center to handle consumer complaints and suggestions.

◆Differentiation by connecting online and offline stores... "Luxury market is highly resilient"

Farfetch's efforts to enhance consumer experience do not stop there. Although an e-commerce company, Farfetch also invests heavily in operating offline stores.

Regarding this, CEO Neves emphasized in a past interview with a fashion media outlet that "stores are the core of the shopping experience." Since fashion products require customers to try them on and evaluate in front of a mirror, it is important to combine the advantages of online and offline stores.

To connect online and offline stores, Farfetch actively utilizes digital technology. The most representative example is the 'store of the future' that Farfetch has been opening in global metropolitan cities such as New York since 2018.

Exclusive offline store of Farfetch 'Store of Future' / Photo by Farfetch website capture

These luxury stores provide services closely linked to Farfetch's online app, where offline store staff recommend products tailored to customers' tastes using their online shopping data, or conversely, the product data selected by customers in offline stores is analyzed to change the recommendation rankings in the online mall. They also assist consumers' shopping using advanced technologies such as virtual reality (VR) and augmented reality (AR). Farfetch has gone beyond simply operating offline and online stores together; it has broken down the boundaries between online and offline.

Farfetch also experienced a significant period of turmoil during the global COVID-19 pandemic last year. However, CEO Neves is confident that Farfetch will emerge as the true winner in the luxury industry in the 'post-COVID' era.

In a letter sent to investors on April 16, he recalled, "When I first founded Farfetch, the US financial firm Lehman Brothers went bankrupt, triggering a global financial crisis and a worldwide recession. At that time, we went through economically difficult times, but by connecting and curating brands worldwide, we were able to grow into a global company."

He added, "During the 2009 global recession, the luxury market shrank by 8%, but it grew by 14% the following year," emphasizing again, "Even if luxury purchases shrink due to the pandemic, the resilience of the luxury market, which is worth $300 billion (approximately 350 trillion KRW), is very strong."

This content was produced with the assistance of AI translation services.