Farfetch, a fast-growing global online marketplace for independent fashion boutiques which launched in 2008, racked up its first $1 million sales day in early November 2012. To date, the company, which splits its headquarters between Portugal and England, has raised a total of $24 million in funding from Advent Venture Partners, Index Ventures, and eVenture Capital Partners. It is currently present in 15 countries and plans to add new languages and new localized services, namely in Asia, in 2013. The company also plans to start rolling out an omni-channel strategy, which founder and CEO José Neves says he sees as the big underlying trend in retail for the coming years. Neves recently outlined Farfetch’s strategy in an interview with Informilo’s Jennifer L. Schenker.
Q: Very few e-commerce companies have successfully gone global. Farfetch has. What are some of the challenges of expanding internationally?
A: When I came up with the concept, it was clear to me that we had to have a global mindset. Thanks to the evolution of the web and the social media revolution, fashion is now much more global than before. There is a global fashion community out there, and a global zeitgeist. Farfetch would not be relevant if it did not recognize this phenomenon because our mission is to be a catalyst of this revolution.
Q: How long did it take before you expanded internationally?
A. From day one we were a global company. We launched with boutiques in five countries and we opened offices in the U.S. and Brazil even before we had our first round of VC funding.
Of course this increases hugely the complexity of the project, but it’s something we were ready to accept and actually excited about from the beginning. It’s easier when you start global to become a global business, it is much more difficult to start with a local DNA and then a few years after find out that you need to expand, because by then you have built a team who maybe does not adapt to a global mindset.
Q: What is hardest and most costly? Customer acquisition?
A: Of course not having inventory makes us much more capital efficient and able to grow faster than pure e-tailers. But it also has its challenges as we are not in control of what we “stock.”
The hardest for us was to solve the typical marketplace “chicken and egg problem.” Attracting enough buyers to make the marketplace attractive for the best stockists is key, but that only happens if you already have a great product offering, so how do you solve this conundrum? We had many balancing acts (and still have), making sure we build supply and demand at the same time, as both are critical.
Q: What, in your mind, is the draw for customers? A wider choice then they would find in bricks and mortar stores or other online sites?
A: Definitely a wider choice. We stock 75,000 highly-curated products; Net-A-Porter — for example — stocks 15,000, but fundamentally a differentiated selection is the big draw. Fashion is extremely long tail, and the buyers from our independent boutiques have a very different approach even when buying the same labels as the super e-tailers and the department stores. This means you will find pieces from luxury global brands in Farfetch that you cannot find anywhere else — online or offline. Not to mention hundreds of quirky high-fashion designers that the big sites won’t stock as they are too small.
Q: Who do you regard as your biggest competitor or competitors?
A: We have a completely differentiated business model, and our biggest advantage is the complementary nature of our product offering. So I would say that we are complementary to the department stores and pure e-tailers such as Net-A-Porter, as we really provide access to product that they do not stock and a very different viewpoint in fashion. Of course one could argue that we all compete for the same eyeballs (and wallets), so in this sense our biggest competitors are the large pure e-tail web sites and department stores, globally.
Q: How do you see e-commerce evolving?
A: The behavioral big trend is propelled by the millennial generation. For them, their mantra is simple: “what’s available somewhere is available anywhere.” They live online. But they absolutely crave physical retail experiences too. Look at Apple’s retail success. For them the world is a seamless place where online and offline merge. In terms of retail this is the new world of omni-channel. Shops are fast becoming showrooms, but also service points. This means people use shops to then buy online, but also use online to then go and buy in stores.
Q: What does this mean for the fashion industry?
A: I can only see high-end designer fashion actually being an industry where the omni-channel path will not only evolve very fast, but in fact be an exacerbated trend. Fashion cannot be downloaded, unlike books or music. High-fashion products change every six months; therefore there is no stable catalog and touching and trying the product remains key to the experience and decision.
Q: What are the implications for independent retailers?
A: If they are able to unite to create omni-channel platforms, they will be able to change the way people shop for fashion.
No one else can do it. The largest luxury department stores are domestic – based in the U.S. — and count dozens, not hundreds, of locations. In the UK they are pretty much a London thing. Even the half a dozen super-brands which went vertical and started opening stores around the globe won’t have thousands of locations. Farfetch today already has over 1,000 locations. They are not pick-up points. They are Aladdin’s caves, located in central places, sometimes stunning historical sites, and — most importantly — they are the workplace of extraordinary fashion professionals, with great style advice and immaculate service. We believe Farfetch will be a pioneer in creating an omni-channel high-end fashion experience. And that will completely change the way people shop for designer fashion.”