Is the Farfetch sales model beating the crisis?

Retailers are amongst the hardest hit sectors in the current crisis. Store closures and social distancing has had an unprecedented impact on companies operating bricks and mortar. Many will not survive. And while no industry is immune to a global pandemic, some are sailing through surprisingly unscathed.

Take Farfetch, a company which owns no inventory and operates as a platform for over 700 boutiques, many of which are the aforementioned, struggling fashion retailers. In the first quarter of 2020 Farfetch estimates a gross increase in merchandise volume between 43 percent and 46 percent, a surprising uplift when most brands are facing dire sales.

“When a consumer chooses a product on Farfetch, 85 percent of the time the product is available from multiple sellers, it can be shipped from different locations, often from different countries. This makes our business model more resistant than physical retail in the current situation. It also means that we are well prepared to operate in this type of context, unlike what happens to other luxury e-tailers, which generally depend on a limited number of distribution centers,” said Farfetch founder and CEO José Neves.

Resilience in crisis

At a time when e-commerce is also struggling to manage the unprecedented situation, Neves is betting on the resilience of his platform with over a billion dollars in revenues booked in 2019.

In a letter sent to shareholders, Neves explained Farfetch has “thousands of inventory points in more than 50 countries, with products being shipped to customers from 190 different countries.” In terms of supply chain and logistics, the luxury e-tailer would therefore positioned to better manage the shocks caused by the Covid-19 pandemic.

Among the various factors that contributed to its growth include the acquisition of New Guards Group (NGG), the streetwear platform which operates Off-White, Palm Angels and Marcelo Burlon County of Milan.

Founded in 2008, Farfetch sells approximately 3,000 brands on its website. A customer who places an order does it directly from the seller and delivery is made by the single shop, registered on the marketplace. Surplus stock is therefore a non issue for Farfetch, although it is to its clients. Farfetch manages payment, customer returns and the back office policy, all centralized via its offices in London and Porto. Customs fees are pre-calculated and stores can easily integrate into Farfetch’s online platform. Once aligned, their products have immediate international visibility.

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Image via Farfetch

 

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