The luxury ecommerce war escalates

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According to Mr. Cohen, the brand had received “messages from customers asking why such expensive pieces were selling on Amazon.”

However, going it alone is also increasingly untenable. LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury group, has publicly rejected the idea of ​​working with Amazon, but even its proprietary solution – the 24 Sèvres wholesale platform, created in 2017, with an exclusive agreement with Dior and Céline – a has not gained significant traction with consumers and continues to lose money. (The group also made a multi-million dollar investment in Lyst in 2018.)

“The term ‘platform’ is intoxicating at first glance, but second, it’s a license to spend tens of billions of dollars before seeing any return,” said Galloway, a professor at the New York University.

Enter the Farfetch Alliance.

Farfetch, which went public in 2018, has a business model that includes an e-commerce marketplace for physical stores and works directly with brands on their technology and back-end logistics. It also owns direct ownership of the brand through a $ 675 million acquisition of New Guards Group, which manufactures and distributes brands like Off-White and Palm Angels. This month, the company also had a record quarter. The value of goods sold reached $ 798 million in the three months ending September 30, a 62% increase from the same period a year earlier. Gross profit rose 82%, which led the 13-year-old company to profitability in 2021.

Farfetch’s Neves acknowledges that Amazon is his main competitor in the race for luxury e-commerce supremacy, so it makes sense that he teamed up with his biggest international rival, Alibaba.

Richemont-Alibaba’s new investment in Farfetch shows how Alibaba has been able to get around some of the issues luxury brands are having with Amazon. Its luxury Tmall pavilion has managed to attract nearly 200 high-end names to its site by promising a highly polished and controlled customer experience and a crackdown on counterfeit products.

It also comes after new restrictions on international travel, which means Chinese consumers – McKinsey predicts they will account for $ 178 billion in luxury spending by 2025 – who were splurging on luxury shopping at home. foreigners now buy them from their homes. Alibaba and Richemont will invest $ 300 million each in Farfetch itself and $ 250 million each in a new joint venture called Farfetch China. They will own 25% of the Chinese entity and have the option to purchase an additional 24% in about three years.

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