Farfetch Tries to Reach a Little Further

The luxury clothing aggregator has hungry investors to please.

José Neves, CEO of Farfetch.

José Neves, CEO of Farfetch.

Photographer: Simon Dawson/Bloomberg

José Neves’s online retail company, Farfetch, connects tiny, ultrahigh-end clothing boutiques in 30 countries to shoppers around the world. Farfetch is the site to visit if you simply must have that $13,140 rainbow-patterned, sleeveless llama fur coat by Marni delivered posthaste to your yacht in Capri.

A $13,140 Marni coat.
A $13,140 Marni coat.
Source: Farfetch

As with any popular clothier, Neves’s challenge is to widen his business without losing the patina of relative exclusivity. (His site’s slogan is “Unfollow.”) In March, Farfetch announced $86 million in funding from the likes of Condé Nast and DST Global at a valuation of $1 billion. It’s spent the rest of 2015 pouring that money into expansion, adding 250 workers to its existing 750 to scout boutiques and business lines. Neves says his company will sell more than $500 million worth of clothes and accessories this year, up from $300 million in 2014.

“The flavor, the fuel of the brand, is a boutique feel. It’s all about uniqueness of expression, of individual taste,” Neves says, clad in a conservative black button-down at Farfetch’s London headquarters, a converted factory painted stark white, in the hipster-heavy Clerkenwell neighborhood. “But I don’t think that’s incompatible with big numbers.”

Farfetch indexes and promotes designs from tiny, tony shops that might stock a few dozen bold items each season for a cadre of loyal customers. (Think shiny, $2,000 “coated biker jeans” by Balmain.) In other words, it acts as a luxe ShopStyle for merchants who don’t want to build or run their own websites. Farfetch handles shipping and returns for boutiques from Mumbai to Memphis to Madrid and takes an undisclosed cut from each sale.

Founded in 2008, Farfetch distinguished itself by featuring high-end clothes typically too out-there for Barneys, made by designers well beyond New York and London—like a $6,800 Monique Lhullier silk evening dress modeled on the shape and pattern of an 18th century French jug. Online pioneers such as Gilt Groupe and Net-a-Porter specialize in slick, Web-savvy presentation and quick delivery of more mainstream, high-end items, such as a classic black wool blazer by Dolce & Gabbana for about $3,000, which was among the featured items in one of Net-a-Porter’s latest house magazines.

Farfetch is “not just selling things that you could find in the Main Street of a big town or a big city,” says Neil Saunders, managing director of retail consulting firm Conlumino. “They’re selling things that actually are a little bit edgy, things that have come from the runway.”

Like many sites operating in the $243 billion global luxury market, Farfetch isn’t profitable. To goose growth as it expands, the company has begun customizing shoes, sourcing clothes from boutiques in India and the Middle East, and offering a personal shopper service via e-mail, WhatsApp, or home visits. It’s also started contracting to build websites for fashion brands that have long shied away from selling online.

A $6,800 Monique Lhullier silk evening dress.
A $6,800 Monique Lhullier silk evening dress.
Source: Farfetch

To maintain its customer base, Farfetch will have to resist the temptation to offer less-exclusive brands or larger discounts, says Milton Pedraza, chief executive officer of the Luxury Institute, a consulting firm that works with Alexander McQueen, Burberry, and Hermès. Keeping customers coming back is a huge challenge for even the best-curated sites, many of which are overvalued, says Victor Basta, managing partner at investment bank Magister Advisors. That means businesses often “have to run to stand still,” he says. They have to “continually reacquire the customer through more marketing and repeated special offers.”

Neves says there’s plenty of opportunity for growth in markets such as China, India, and especially Russia, where he says Farfetch is growing by “triple digits” despite an economic crisis. He’s also diversifying with brick-and-mortar shops. In May, Farfetch bought Browns, a boutique in London’s Mayfair district credited with discovering McQueen and John Galliano, and Neves says Browns will start adding items from the site in December. He also says he’s planning to set up image-recognition software that can identify a customer entering the shop and glean from electronic records whether she’d like help, a dressing room, or a heads-up that a jacket she tried on a month ago is now on sale.

Although boutiques need to keep thinking more digitally, “the physical store won’t go away,” Neves says. “Fashion is not downloadable.”

The bottom line: Farfetch says it’s moving $500 million in goods this year, a 66 percent jump, as it expands and courts new merchants.

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