Fartetch stock has fallen nearly 98 percent from its peak, with its valuation declining from US$26 billion in January 2021 to the current US$600 million.
Photo provided to Jiemian News
By CHEN Qirui
Online fashion boutique Farfetch is planning for a stock buyback and will not release its Q3 financial report, said José Neves, the founder of the company.
Fartech is reportedly in talks with stockholders Richemont and Alibaba on the privatization, but discussions have not gone well. Back in 2020, Alibaba, Richemont and Farfetch founded a joint venture in China.
Richemont, the fashion conglomerate that owns Van Cleef & Arpels and Cartier, released a statement saying it has no intention of coming to Farfetch’s aid and would launch an investigation on Farfetch’s acquisition of another luxury e-commerce site YNAP. Then on November 30, J. Michael Evans, president of Alibaba Group, quit the Farfetch board.
Fartetch’s stock price has plummeted nearly 98 percent from its peak, and its market value has evaporated from US$26 billion (190 billion yuan) in January 2021 to the current US$600 million. Accompanying this decline are debts and layoffs. Farfetch carries a burden of US$1 billion in long-term loans and convertible bonds, a deterrent for any potential investor. In 2023 alone, around 800 employees were laid off.
Farfetch went public in 2018, achieving operational profitability only in 2021. The disruption in consumption during the pandemic initially led to a surge in sales that began reversing from Q3 of 2022. In Q2 this year, revenue declined again, widening losses from US$68 million million in the same period the previous year to US$280.
The Chinese and American markets have performed poorly. GMV in these two major markets fell rapidly and Neves stated that investment in under-performing markets would be reduced.
Established in 2008, Farfetch quickly rose to prominence with its asset-light model. It avoided inventory responsibilities and solely provided digital solutions to offline boutiques and department stores worldwide for online sales. This approach reduced financial pressure and risks, and soon attracted investment from Chanel, JD.com and Tencent.
Like most e-commerce platforms, once established, Farfetch was no longer satisfied with being just an intermediary, dreaming of becoming a large group with extensive influence in the luxury industry beyond an e-commerce platform. But as luxury brands launched their own e-commerce platforms, supply decreased and costs increased.
Farfetch acquired boutique brand Browns, operated its brands through subsidiary New Guards, and bought beauty-collective store Violet Grey. But the brands have all but disappeared, The beauty business, after less than two years, is closed, and Violet Grey is up for sale. With rumors of privatization surfacing, Browns may be next.
These projects not only failed to provide growth but constricted sales and cash flow. Expansion has led Farfetch far from its core business, transforming it from an exemplar of light-asset operations into a cumbersome heavyweight.
Farfetch is not alone in its challenges; many luxury e-commerce platforms are facing difficulties. Ssense, smaller in scale and more refined in product selection, announced layoffs in early 2023, the first job cuts in 20 years.
True consumers of luxury goods are not so concerned with practicality, and practicality has never been the essence of luxury goods. Frequent discounts tarnish the image, but without discounts, it's hard to attract new customers, a dilemma faced by most luxury e-commerce sites.
