How Does Farfetch Work?

Farfetch has really taken the online world by storm. It’s one of these success cases that just started rolling and all of a sudden, everyone was hooked. If you’re reading this blog you’re like me, looking for affordable luxury fashion online, and you have probably bought something from Farfetch.

It is, after all, the “world’s largest digital marketplace for luxury”, as Farfetch describes itself. The website has clothes from a gigantic library of different brands and labels. At this point, more than 3,500. Of those, famous brands such as Gucci, Prada, Saint Lauren and small brands such as Etsy.

They are able to do this by not having any stock. It is rather a neat business model that makes them have all the available items from so many different brands.

They are offering something called Farfetch Platform Solutions which is a platform that allows each brand to enable its own store built on top of Farfetch’s infrastructure. When a sale happens the store will ship to the customer themselves, leaving Farfetch to be without any risk of having inventory.

The company’s revenue has been growing and growing, enabling them with acquisitions of brands such as Browns, the old London boutique brand, Stadium Goods, a marketplace for resales of sneakers, and New Guards Group, a group that is specialized in launching and developing new fashion brands.

The revenue keeps growing, almost 50% every year, both in terms of total merchandise sold through Farfetch’s platform.

For every sale that is made on Farfetch’s platform, they will gain a commission, a type of kickback for providing the brand with its sales channel.

To summarize, Farfetch is a platform that enables other boutique and large luxury brands to sell their items through Farfetch. It’s a centralized platform where customers can buy items from thousands of brands, however, Farfetch doesn’t hold any inventory.

Thereby lowering the risk of losses, but at the same time, enabling e.g. small boutique luxury brands to reach a vast part of luxury shoppers in one place. The participant brands pay a commission on each sale, i.e., a % of the total sale amount.

Farfetch’s competitors

Farfetch is of course dealing with intense competition from both traditional brands and newer solutions such as Shopify stores that sell new luxury fashion. Some of the traditional players have developed their own platforms, such as Yoox Net-a-Porter Group.

It’s really a tech giant that challenges Farfetch on their own game. Other platforms such as SSENSE and traditional department stores such as Bloomingdale’s will challenge the giant Farfetch.

There is also a growing trend to sell direct-to-consumer, which will be a challenger for both platforms and department stores where consumers can buy things straight from the brand. Brands would, of course, prefer to own the customer and the data on their own website, if they can.

The question is what we costumer prefer. If I can do all of my shopping and get great discounts due to smart algorithms based on data from millions of users, then I would probably go for that alternative.

It’s also preferable to do all shopping in one place, rather than buying items from five different websites.

The Affordable Luxury Digital Future

The new way of buying affordable luxury online through digital channels has been a slow-developing way. We, customers, have changed our behavior and the brands haven’t had any choice to change their game to follow our behavior and expectations.

With the pandemic things have also accelerated, meaning that we can expect an even more increasing competition between brands and platforms, leaving great opportunities for us consumers to find great offers at affordable prices.

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