Farfetch's relationship with luxury brands is under threat following its acquisition deal by South Korean e-commerce company Coupang.
This month, Kering will allow brands such as Gucci, Balenciaga and Saint Laurent to list select products on the e-retailer's marketplace and have customer orders shipped directly from the brands' warehouses, according to people familiar with the matter. The Farfetch contract has been terminated. Kering plans to phase out the brand in the second quarter of this year, the people said.
As a workaround, Farfetch plans to sell high-end brands on its own site without dealing directly with the brands, according to an internal document seen by BoF. According to the documents, the company works with a wider range of third-party boutiques to upload their inventory to Farfetch, in exchange for “complete anonymity” to avoid influence from luxury brands. They say they are trying to access brands such as Lowe. . This includes hiding boutique information from customers and guaranteeing returns through indirect return solutions.
Luxury conglomerate Kering has historically contributed more than $100 million a year to gross merchandise sales, a measure of products sold through Farfetch's marketplace, from which it receives a commission, according to people familiar with the matter. , Kering's move will result in huge losses. Founded in 2009, Farfetch typically connects the inventory of multi-brand luxury boutiques to its e-commerce site, but for years it has also partnered directly with brands to sell products from its warehouses. .
But for Kering, the loss may not be as great as it doesn't consider Farfetch to be an important part of its online business. “About 12% of our sales last year were e-commerce. Farfetch has always been a small player in that. It's our partners above all. Our exposure to Farfetch is very small,” said Kering's deputy chief executive. , Jean-Marc Dupré said during Thursday's earnings call. He added that Farfetch was “not a strategic partner.”
“We continue to work closely with thousands of brands and boutiques around the world to deliver elevated online luxury experiences to millions of customers,” a Farfetch spokesperson said in an emailed statement. ” he said.
Kering is not the only luxury partner to distance itself from Farfetch. Neiman Marcus Group on Wednesday said it would use Farfetch Platform Solutions, Farfetch's e-commerce software division, which provides online shopping tools for companies such as Harrods, Chanel and Thom Browne, to buy Bergdorf. Goodman announced that it has abandoned plans to revamp its online storefront and app.
Kering and Neiman Marcus Group's decision to abandon Farfetch's marketplace signals increased caution about the e-tailer's future under Coupang's ownership. Coupang is South Korea's answer to Amazon, selling low-priced items in a wide range of categories including food, clothing, and electronics.
Luxury brands are increasingly investing in their own e-commerce sites, where they can control pricing, product assortment and collect customer data. Major e-tailers such as Farfetch, Net-a-Porter and Matches experienced double-digit declines in U.S. sales in 11 of 12 months in 2023, according to data compiled for BoF by Earnest Analytics.
Additional reporting by Robert Williams.