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Farfetch plans to go public as luxury e-commerce grows
FARFETCH offers the latest Gucci items delivered to your door in 90 minutes, has distribution deals with brands like Nike and TAG Heuer, and recently started an Arabic-language site to cater to the tastes of wealthy Middle Eastern shoppers.
Now the company is turning its attention to the appetites of a new client: Wall Street. The London-based online luxury marketplace formally unveiled plans on Monday for an initial public offering (IPO) on the New York Stock Exchange, the latest sign of growth in a booming global fashion e-commerce space flooded with cash and sky-high valuations.
A platform for 500 independent luxury boutiques and 200 brands, Farfetch was founded by José Neves in 2007 and is now one of a handful of technology companies in Europe with a valuation of more than US$1 billion.
The move by Farfetch to go public has been long anticipated, underscoring shifting shopping trends as high-end e-commerce continues rises. That stands in contrast to a wider retail industry outlook worldwide, shaped by the shuttering of established chains, changing consumer habits and the ever-present threat of Amazon.
Shoppers who are money-rich but time-poor have been increasingly looking to buy from online fashion players rather than traditional boutiques. As a result, Farfetch and rivals like Yoox Net-a-Porter - which owns and operates internet retailers like Net-a-Porter, Mr Porter and the Outnet - have been growing, and both companies have been spending large amounts of cash to expand rapidly.
Yoox Net-a-Porter, for example, recently ramped up its offerings of US$15,000 Chopard and Piaget watches, and expects to generate 100 million euros (S$157 million), in revenue from high-end jewellery and watches by 2020.
Luckily for them, investors have jostled to get in on the act.
After a fierce bidding war in September, the private equity firm Apax Partners spent about US$1 billion to take a majority stake in Matchesfashion.com, a British luxury e-commerce group.
Later in 2017, Moda Operandi, a New York-based high fashion e-commerce site, announced it had secured US$165 million in a round of funding. And this year, Yoox Net-a-Porter was taken private by a Swiss luxury goods group.
Farfetch has come a long way in the 11 years since its founding. It was initially built by Mr Neves, a former shoe store owner in Portugal, to be a platform to help smaller stores enter the digital world. He took a commission on each purchase, freeing himself of the need to build up major inventories or the capital requirements of a traditional retailer.
Backed by Chinese e-commerce giant JD.com, which will maintain its stake after the listing, Farfetch now has almost a billion active consumers, can ship to 190 countries and has created an infrastructure platform that luxury brands can use to develop their own e-commerce businesses. "What makes us different is that everyone else is operating on a retail model, but we are a platform, not a shop, an enabler not a competitor, and are reaping all the advantages that such a position entails," Mr Neves said in December. "We believe we are the only global luxury platform at scale."
But while a push to grow has prompted a hunt for new revenue streams, and drove sales growth of 59 per cent last year to US$386 million, the company has not turned a profit since its creation. As investments and costs have increased, losses grew to US$68 million in the first half of 2018, compared with US$29 million in the same period in 2017.
Farfetch said in the filing to announce the public offering that the losses were a result of the costs of entering new markets, as well as adding new brands and partnerships. Those pressures are far from unique. Stitchfix, a popular San Francisco personalised clothing subscription service, has had a bumpy first nine months as a public company. High-profile flops like that of Style.com, a shuttered e-commerce venture backed by the media company Condé Nast, also serve as reminders that things can easily go wrong.
There are, however, positive trends. For one, demand for trend-driven apparel and accessories does not appear to be going anywhere. The global personal luxury goods market is poised to grow by 6 to 8 per cent this year, according to a recent report from Bain & Co, and is expected to reach US$446 billion by 2025.
Farfetch filed registration documents with the Securities and Exchange Commission saying it wanted to raise US$100 million, a placeholder figure that will likely change. It plans to list with the symbol FTCH. Although the company did not specify a date for its IPO, it is expected to be this year. NYTIMES