Farfetch, the UK based luxury-fashion ecommerce marketplace is planning to go public this year. We analyze here some of its key strengths and threats for brands that are approaching the service: strongest growth among competitors, flexible buying structure, access to a growing panel of emerging and big brands but loose pricing and promotion discipline on the other side.
Catching up on Net-A-Porter
Farfetch main competitor, Net-a-porter (YNAP:IM, MktCap 5Bn EUR) has long led the high-end fashion ecommerce. The 10-year progression of web searches shows how important the consumers interest on Farfetch has grown.
The growth in Internet searches was driven by rise in the variety of offering on the new etailer: If we consider last 12 months alone, SKU on shelf have risen by 58% and brands by 23% (compared to a +5% in both cases on net-a-porter).
… And on Department Stores
The scenario looks similar when we shift the focus from digital competitors to good old luxury department stores. Search interest, once polarized, now looks at reach. There is still a lot of work to be done by department stores to reverse the course of history. Trends are clear.
Strengths: rapid intercept of emerging trends
With more than 700 boutiques affiliated to Farfetch, the British etailer can count on all of their buyers (!) that compete for visibility on the platform, continuously searching for emerging trends. In the chart below we can see how Farfetch outrunned other platforms by intercepting the rising street-wear brand Off White in early stages (note: Off White’s hype started august 2017: Farfetch was ready to welcome the mass of customers with their products)
Downsides: price and promotion discipline
A potentially infinite availability of products run by a potentially infinite number of sellers (AKA boutiques) doesn’t come without compromises: The strongest lever that pushes brands to a direct partnership with Farfetch is that this could be the only way to control what boutiques are doing with their products. There is a rising issue of pricing discipline (which undermines brands marginality in retail stores due to geo pricing nightmare) and a promotion chaos (literally).
The difference between a disciplined etailer (net-a-porter) and the soon-to-be-listed Farfetch is beyond obvious, if we look at how promotions are handled.
See our analysis on Tods Group for a clearer example of what kind of perils Brands are exposed to.