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Farfetch, Alibaba and Richemont form partnership to "accelerate the digitisation of the luxury industry"

Lauretta Roberts
06 November 2020

Global online luxury platform Farfetch has confirmed a strategic partnership with Chinese e-commerce giant Alibaba and Swiss luxury conglomerate Richemont to provide brands with access to the Chinese market and to "accelerate the digitisation of the luxury industry".

As part of the deal, Alibaba and Richemont (which is the parent of Yoox Net-A-Porter Group) will invest $300m each in Farfetch, the UK-based, New York listed business.

Farfetch will be launching luxury channels on Alibaba's Tmall Luxury Pavilion and Luxury Soho (an outlet destination within Tmall). The new channels will expand the reach of Farfetch’s global luxury platform to Alibaba’s 757m consumers, offering luxury brands a multi-brand solution through a single integration with Farfetch.

This move will provide luxury labels with the opportunity to elevate their brand awareness, while also significantly expanding their addressable market of luxury consumers through their participation on Farfetch’s global marketplace. For luxury consumers, this provides multiple ways to shop either through the Farfetch integration, or through the existing NET-A-PORTER integration on Tmall Luxury Pavilion.

As well as the investment in Farfetch, Alibaba and Richemont will also invest $500m ($250m each) in Farfetch China, taking a combined 25% stake in a new joint venture that will include Farfetch’s marketplace operations in the China region.

In addition, Alibaba and Richemont have an option to purchase a further combined 24% of Farfetch China after the third year of the joint venture’s formation. Alibaba and Richemont say they will also "explore additional opportunities to work closely with Farfetch to provide services to luxury brands".

Separately investor Artemis, which is the controlling shareholder of global luxury group Kering, has also agreed to increase its existing investment in Farfetch with a $50m purchase of Farfetch’s Class A ordinary shares.

Farfetch Alibaba Richemont

As a result of the £1.1bn deal Alibaba and Farfetch will be developing what they have dubbed the Luxury New Retail (or LNR) initiative, which will leverage the two companies' omnichannel retail technologies, to serve the needs of luxury businesses, including a full suite of enterprise solutions powered by Farfetch.

These solutions will serve both mono-brand and multi-brand distribution strategies for luxury brands, including fully-connected e-commerce websites and apps, omnichannel retail technology, and access to the Farfetch and Tmall Luxury Pavilion marketplaces via single integration.

Farfetch and Alibaba have also formed a steering group to further enhance the LNR initiative, which is aimed at leading the digitisation of the global luxury retail industry. Richemont Chairman, Johann Rupert, and Artemis Chairman, François-Henri Pinault, will join Farfetch and Alibaba on the LNR steering group as founding members.

Farfetch

José Neves

Farfetch chairman, CEO and founder José Neves said of the landmark deal: “This announcement is a major step in our mission to connect the curators, creators and consumers of the luxury fashion industry. The $1.15bn investment in Farfetch from Alibaba Group, Richemont, and Artemis is a strong validation of our position as the global platform for luxury.

"The new initiatives with Alibaba Group and Richemont extend Farfetch’s strategy to power the digital transformation occurring across the luxury industry, which has been accelerated by the unprecedented challenges resulting from the COVID-19 pandemic. The Luxury New Retail initiative will explore ways we can help the wider industry move forward and thrive in the post-COVID world.”

Daniel Zhang, Chairman and CEO of Alibaba Group, said: “This highly complementary partnership brings together some of the world’s leading luxury retail and technology platforms, representing another milestone in Alibaba’s strategy to meet the rapidly growing demand for luxury products in China.

"The Chinese luxury market – which is expected to account for half of global luxury sales by 2025 – consists of hundreds of millions of young, digitally-native consumers. By partnering with Farfetch and expanding our existing relationship with Richemont, we will accelerate the digitisation of the global luxury retail industry and transform the luxury shopping experience for consumers.”

Johann Rupert, Chairman of Richemont, which is also the parent of brands such as Chloé, Cartier and Dunhill, said: “Building on our successful joint venture with Alibaba, these developments represent a further meaningful acceleration of our journey towards Luxury New Retail. This initiative brings together a powerful combination of highly complementary strengths – notably with our Maisons’ luxury retail expertise and YOOX NET-A-PORTER’s deep brand partnerships, expert curation and exceptional customer care - that will help us deliver a seamless omnichannel experience to our discerning clientele.

"Partnerships make you stronger. I am delighted to partner with Daniel, José, and François-Henri to bring our shared vision to fruition, setting new standards for the future of luxury.“

François-Henri Pinault, Chairman, Artemis, said: “The growth potential of luxury e-commerce has never been so promising, and the importance of China for the luxury industry is only becoming more obvious every day. Thanks to the vision of José Neves, Farfetch played an important role in improving the omnichannel experience for luxury customers in recent years. The investment by Artemis demonstrates our belief in the future of Farfetch and I am personally looking forward to exploring the future of luxury retail with this group of visionaries and experts.”

The confirmation of the deal follows reports from earlier this week that Alibaba was seeking to invest in Farfetch, along with Richemont.

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