On Wednesday, Farfetch announced that it inked a deal with Middle Eastern luxury retailer Chalhoub Group to set up e-commerce operations in the region.
Farfetch’s goal is to become the biggest luxury online marketplace in the world, and setting up operations in the Middle East fulfills a regional white space. Now, the company has a localized retail site in the top luxury markets in the world, including North and South America, Europe, China and Japan. It also put the company in a prettier position ahead of its rumored forthcoming IPO, which reportedly should take place in September of this year. Having raised a total of $721 million in funding, Farfetch’s valuation is expected to exceed $5 billion.
While Farfetch CEO José Neves said the rumors of the IPO are unfounded, the potential exit is the year’s biggest anticipated IPO for an e-commerce company. It’s coming as competition in the online luxury retail space is intensifying. Specialty retailers like Yoox Net-a-Porter, MatchesFashion and Moda Operandi are all targeting the same customers’ online dollars; individual luxury brands are prioritizing building out their own e-commerce sales over partnering with third-party retailers; and global e-commerce marketplaces like Amazon, Alibaba, Zolando and JD.com are all working to elevate inventory and reach a higher-spending customer.
Neves is preparing for a banner year, and his priorities center around growing internationally as fast as possible, building a testing ground for the Farfetch Store of the Future platform that will serve as a template for more stores down the line, and advancing a personalized, customer-focused e-commerce experience that’s concentrated on mobile.
What it all comes down to, according to Neves, is speed.
“This industry is moving at the speed of the internet, the speed of electricity. And that’s the speed we need to move at as we execute. It’s about quality at speed. We don’t talk about things, we move on them.”
When Farfetch announced its deal and investment with JD.com to build up its logistics and operations in China last July, the company acted quickly to get the local site up and running a few months later. By October, the site was fully operational, and the company began building out customer profiles with JD.com and WeChat data to flesh out its data-driven marketing and inventory strategies for the region, something Neves said has seen great results so far.
The company plans to take the same approach in the Middle East, by working closely with its partner, Chalhoub Group, to quickly launch its Arabic site in under six months. Already, the company has chosen who will lead its local efforts in the region and plans to have the full team in place in a matter of weeks.
Localized partners like Chalhoub make entering a foreign market more seamless than going it alone, meaning things get done a lot faster.
“That was the point of doing this with Chalhoub. They’re the biggest luxury retailer in the division, they have long-term relationships with luxury labels and they know their customer,” said Neves. “We’re executing very quickly.”
Store of the Future
This year will mark another milestone for Farfetch, as it launches its first testing ground for its Store of the Future concept, a tech-driven operating system for in-store retail that the company announced last year.
The company acquired Browns, a London-based retailer, in order to have a physical chain of stores in which it can test out in-store technology before rolling it out to other luxury brands. For Neves, the focus on what the stores will look like is around making it more personalized and enabling data collection from physical interactions with product.
“As you personalize the experience, you collect data at the same time. When a customer shops in store, you’re picking up signals: what they tried on, what sizes. But all of this data is not captured right now,” said Neves. “If this is happening offline and you capture zero data, that’s crazy. In a nutshell, our vision is consumer-centric. If we’re not solving a problem the user has, we won’t do it. It needs to be no gimmicks.”
Neves said the goal is to launch the in-store technology with outside brands by 2019. Hand-in-hand with its in-store strategy is a mobile-first strategy, which connects the online and offline experiences.
“We’re leveraging mobile technology, to make sure that we are personalizing the experience. The reason the industry must do this is because consumers are now used to these experiences. You open Instagram, and your Instagram is different than mine,” said Neves. “The algorithm’s serving you and striving to personalize the experience through recommendations, delivery, services. All of these are about creating a unique personalized experience. This is the world we live in, and expectations match. People won’t start to expect less, so retail needs to change.”