Digital platforms in the luxury goods industry are grappling with significant challenges marked by financial struggles and strategic shifts. London-based Farfetch has opted to sell a majority stake to Coupang, often referred to as the Korean Amazon, to avoid bankruptcy. The acquisition of Coupang, known as an “every” store known for selling more affordable clothing in the $20 range than $2,000 dresses, means Farfetch's value will rise from its 2021 peak of $21 billion. Illustrating its recent decline to just $250 million last week.
Matchesfashion, originally a small boutique business in south-west London, faced a similar fate. Valued at around £800m when acquired by Apex Partners in 2017, it is now expected to be acquired by Frasers Group for less than £100m, resulting in Apex incurring significant losses. It turns out.
Richemont-owned Net-a-Porter has struggled to achieve profitability throughout its history as an online luxury pioneer with more than 20 years in the industry. A planned merger with Farfetch last year proved too complex to be viable, and Richemont abandoned the partnership, although it is actively seeking “new management responsibilities.”
Mytheresa, another player in the online luxury goods space, witnessed a dramatic phenomenon with its stock price plummeting 70% this year. Battling falling profits and “continued weakness in demand,” chief executive Michael Kriger said the company's net loss for the quarter to September 2023 was 11 million euros, down from 380 million euros in the same period a year earlier. It reported that it had almost tripled from 10,000 euros.
Luxury conglomerate Kering reported a 30% drop in online sales for its brands in the third quarter. Luxury brands with physical boutiques have the advantage of being able to offer a more immersive in-store shopping experience, but platforms without a brick-and-mortar presence face a clear future.
diminishing returns
Farfetch is counting on a new $500 million cash injection from its new owners as it looks to establish a lifeline. But deeper concerns loom over how online luxury platforms will compete for the attention of aspiring shoppers who are now cautious about their spending.
As the Wall Street Journal observed, among this demographic, “purchasing luxury goods online has become obsolete.” The changing landscape is prompting a rethink of strategy and the exploration of innovative approaches to reignite the appeal of online luxury goods in a market facing changing consumer behavior and economic uncertainty.
