Online marketplace Farfetch has set out its vision of the future luxury retail market as it plans its flotation on the New York Stock Exchange.
The 10-year-old London-based company, which has set up a holding company in the Cayman Islands ahead of its planned New York listing, predicts, in its prospectus to investors, filed this week as an F1 registration statement, with the US SEC, a future of growing global demand from younger customers that is well-served through a marketplace model.
Already, it says in the filing, “Farfetch is the leading technology platform for the global luxury fashion industry. We operate the only truly global luxury digital marketplace at scale, seamlessly connecting brands, retailers and consumers. We are redefining how fashion is bought and sold through technology, data and innovation.”
Farfetch operates in a personal luxury goods market that it says was worth $307bn in 2017 and, according to a Bain & Co report, Luxury Goods Worldwide Market Study (Fall-Winter 2017 and the Spring 2018 update), will be worth $446bn by 2025. Farfetch says it is “redefining commerce” for luxury sellers, and helping them to access a customer base that is steadily taking its business online. It cites Bain & Co figures that suggest millennial and Generation Z online shoppers accounted for about 85% of growth in luxury fashion sales in 2017. By 2025, it says, these customers are expected to make 45% of luxury fashion purchases at a time when it expects demand from emerging markets including China, the Middle East, Latin America and Eastern Europe, to “significantly” drive growth.
At the moment, it says, larger luxury brands reach those customers through their own stores and through department stores, while emerging brands “typically have no route to the global market,” with distribution limited to wholesale distribution to independent fashion boutiques. “As a result,” Farfetch says in its filing, “luxury fashion inventory, from both larger and smaller brands, is distributed across a highly fragmented network of luxury sellers” and tends to sell less online. Farftch cites Bain figures that suggest 9% of luxury retail sales took place online in 2017, a figure that it expects to reach 25% by 2025.
Farfetch says that at December 31 2017 it had 0.9m active customers, a figure that was up by 43.6% since the same date a year earlier, and its revenue came to $386m in 2017 (+59.4% on 2016), on gross merchandise value of $909.8m (+55.3% on 2016). As of June 30 2018 it had 989 luxury sellers on its marketplace, including 614 retailers and 375 brands. Currently, it says, it operates the “only global marketplace at scale to match demand for, and supply of, personal luxury goods” in a “both global and highly fragmented” market. Through the site, it says, it delivers a “consistent, high-quality experience” that includes a personalised and localised customer experience and, in 18 cities around the world, same-day delivery as well as the ability to deliver to the door within 90 minutes from certain brands. In 2017, it says, 91% of orders were cross-border.