Farfetch.com Case Study

MI 861 Information Networks & Tech Paper 2
Dr. Stenfield
Duoni Yao
Farfetch.com Case Study
Introduction of Farfetch
Farfetch is a global community of over 400 best fashion boutiques from all
around the globe, a cutting edge E-commerce company which has been
continually gaining momentum. Showcasing over 1,000 labels, it is dedicated to
supporting independent fashion, bringing the best boutique shopping in the world
from the boutiques located everywhere from Paris, New York City, Milan and etc..
For those looking for luxury clothing, Farfetch acts as an online private jet since
customers can simply go to one online store and have their pick.
Founded in 2008, at the beginning, Farfetch is the brainchild of the founder of
B Store, a Portuguese entrepreneur José Neves, who decided that what the retail
world really needed was a portal where everyone, regardless of city can access
the 20 best independent boutiques from 10 cities across the globe.
Now with the headquarters based in London, it has subsidiary offices based in
New York, Los Angeles, Guimarães, Porto, São Paulo, Shanghai and Tokyo.
Farfetch works on a commission based model with its partner boutiques, which
see an average of 35% of their sales driven by the website. The company
operates bespoke, local-language websites for international markets in English,
French, Japanese, Mandarin, Portuguese, Korean, German, Russian and
Spanish. As of May 2015, Farfetch has over 600 global employees, with stock
over 100,000 items from more than 2,000 designers.
Business Model and Revenue Model
The unique value proposition of Farfetch Rather than replicating existing
retail models online, Farfetch has built a technology platform that connects
consumers with a global network. They unite the world’s best independent fashion
boutiques in one, easy to shop, online destination.
It works on a commission based model with its partner boutiques, which see
an average of 35% of their sales driven by the website. Unlike traditional
businesses whose value flows in one direction, taking on significant inventory risk
and having high working capital requirements, Farfetch does not simply buy and
push out merchandise. Instead, it provides a platform for certain users (boutiques
and brands) to display and manage items for other users (shoppers) to consume
with zero inventory risk for Farfetch.
While Asos, Yoox and Net-a-Porter are “pure play” e-trailers without physical
stores, Farfetch insists that bricks-and-mortar shopping is here to stay. With a
deep understanding of fashion consumers, Farfetch believes that no one shops
purely online or purely offline. “Physical stores are not going away – a core part of
the retail experience. But the old model, where you define digital and physical as
being separate, that’s going away. E-commerce and traditional retail are merging.
It’s called omni-channel”, said by CEO José Neves. Omni-channel is regarded as
a key part of Farfetch’s business strategy, which basically is sales made in one
channel, completed in the other. Like finding out about a new gadget online and
going into the store and buying it. The feature of luxury relies on the fact that
people want to see, touch and try on the clothes before they buy. Since fashion is
not downloadable, physical experience will be key to the future of fashion.
Therefore, omni-channel experience is really a revolutionary step of online luxury
retail stores in the future. This vision has enabled the company to deploy services
like “click and collect”, which allows customers to buy items from any Farfetch
boutique and pick them up, try them on and return them over the counter at any
store in the network.
Commission Model is the revenue model of Farfetch. It charges a fee for
each transaction that mediates between boutiques and shoppers. Farfetch makes
the majority of its revenue from the luxury brands that it sells such as Valentino,
Saint Laurent, Givenchy and Comme des Garcons, but emerging and
lesser-known labels are said to be key to the Farfetch business.
In 2014, according to market sources, its gross merchandise volume reached
more than $350 million last year, putting estimated revenues in the ballpark of $87
million. In 2015, Farfetch has raised $86 million in a new funding round and the
company was valued at in excess of $1 billion. Other online fashion retailers such
as Asos or Yoox was never valued at $1 billion as a private company. The
average spend of the Farfetch customer was stated as $680 per order in a New
York Times article from March 2013.
Competitive Analysis
First, the design of Farfetch’s website is quite notable. On Farfetch.com,
there is am impressive amount of non-shopping, editorial content. Fashion
chasers they are always quite passionate and interested in the deep concept and
back stories of each different brand and designer, and therefore by offering loads
of information about boutiques and designers included on the site to customers,
Farfetch is able to help customers get a real sense of where and who they are
buying from. And eventually, customer loyalty is increased with the help of such
sense of connection between buyers and boutiques.
Second, Farfetch’s worldwide shipping guarantees that it will deliver
anywhere in the world mainly using DHL Express. For most of the U.S. and
Europe, it only takes 2 to 4 days. Moreover, the site generally offers promotion
code for free shipping for customers no matter where they are and where they are
buying.
Typically, products on Farfetch are under certain discount from 30% to even
70%, which is quite high with regard to luxury brands. In other words, customers
are likely to save over hundred or even thousand dollars for just one item. For
those who are interested in high-end designers but lacking sufficient budget,
Farfetch manages to offer them gorgeous designer with reasonable prices.
Marketing
Farfetch is using affiliate marketing as one of the key marketing channels for
acquiring new customers on a global basis and increasing their total online
revenue. It has launched affiliate programmes with Rakuten LinkShare UK, US
and Australia for global coverage. Initially, it launched with Rakuten LinkShare in
the UK and enjoyed both a close relationship with the UK team and immediate
success in terms of revenues and brand exposure. Then Farfetch expanded the
relationship to Rakuten LinkShare’s US and Australian networks, which
contributed an additional 80% in YOY revenues. The Rakuten LinkShare affiliate
programmes will account for 22% of Farfetch’s global revenue in 2013. This
cooperation comes to the results that there is 91% lift in affiliate revenue and 349%
growth in partnerships globally, traffic from over 187 countries. Rakuten’s
LinkShare’s international footprint has allowed them to build partnerships and
acquire customers through their Australian, UK and US programmes. The
network’s acute understanding of luxury guidelines ensures their Network
Development team are always introducing them to the most relevant, on-brand
and scalable partnerships.
Conclusion
Farfetch, as the online hub for independent boutiques, its new retail plan
could revolutionize how E-commerce and traditional retail work together. At
present, they are the only network with both big websites and physical stores and
they are utilizing this advantage combined with advanced technology to launch
their market on a global level.
References
Farfetch. (n.d.). In Wikipedia. Retrieved February 14, 2016, from
https://en.wikipedia.org/wiki/Farfetch
Lauren Sherman. (2013). Farfetch’s New Retail Plan Could Revolutionize
E-commerce. Retrieved from
http://fashionista.com/2013/04/farfetchs-new-retail-plan-could-revolutionize-e
-commerce
Lauren Sherman. (2014). Like A High-Fashion Etsy, Farfetch Puts The World’s
Rarest Fashion At Your Fingertips. Retrieved from
http://www.fastcompany.com/3029848/like-a-high-fashion-etsy-farfetch-putsthe-worlds-rarest-fashion-at-your-fingertips
Rob Price. (2015). Fashion startup Farfetch is London’s latest $1 billion unicorn.
Retrieved from
http://www.businessinsider.com/farfetch-fashion-startup-london-raises-86-mil
lion-1-billion-valuation-2015-3?r=UK&IR=T
Suzy Menkes. (2013). Conde Nast Invests in E-commerce. Retrieved from
http://www.nytimes.com/2013/03/04/fashion/conde-nast-invests-in-e-commer
ce.html?_r=1