LONDON: Farfetch, Alibaba Group and Richemont announced a global strategic partnership to provide luxury brands with enhanced access to the China market as well as accelerate the digitization of the global luxury industry.
Leveraging each company’s respective expertise and extensive reach, the partnership will bring luxury retail to the next generation by seamlessly integrating the digital and physical realms.
Farfetch will launch luxury shopping channels on Alibaba’s platforms, Tmall Luxury Pavilion and Luxury Soho, China’s premier luxury and luxury outlet destination within the Tmall marketplace, as well as Alibaba’s cross-border marketplace Tmall Global.
The new channels expand the reach of Farfetch’s global luxury platform to Alibaba’s 757 million consumers, offering luxury brands a multi-brand solution through a single integration with Farfetch.
This will provide luxury labels with a unique 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 for their favorite brands either through the Farfetch integration, or through the already highly successful NET-A-PORTER integration on Tmall Luxury Pavilion.
As part of the global partnership, Alibaba and Richemont will invest $600 million ($300 million each) in private convertible notes issued by Farfetch Limited. Alibaba and Richemont will also invest $500 million ($250 million 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 will also explore additional opportunities to work closely with Farfetch to provide services to luxury brands.
The investments by Alibaba and Richemont in Farfetch China and the establishment of the joint venture are expected to be completed during the first half of calendar year 2021, subject to the satisfaction of closing conditions.
Separately, Artemis has also agreed to increase its existing investment in Farfetch with a $50 million purchase of Farfetch’s Class A ordinary shares.
Luxury New Retail (LNR) is a visionary initiative, which will leverage Farfetch’s and Alibaba’s state-of-the-art 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 a single integration.
Farfetch and Alibaba have also formed a steering group to further enhance the LNR initiative, which is aimed at leading the digitization 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, bringing their combined decades of industry leadership and expertise.
José Neves, Farfetch Founder, Chairman and CEO said: “This announcement is a major step in our mission to connect the curators, creators and consumers of the luxury fashion industry. The $1.15 billion 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 digitization of the global luxury retail industry and transform the luxury shopping experience for consumers.”
Johann Rupert, Chairman of Richemont, 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.”
Goldman Sachs International acted as Lead Financial Adviser and Allen & Company LLC acted as Financial Adviser to Farfetch.
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