After completing the agreement with Richemont to acquire Yoox Net-a-porter (YNAP), the future of Farfetch worries the market. Will founder José Neves be able to get back on his feet?
Richemont can now breathe a sigh of relief. After the European Commission’s Directorate General for Competition gave the green light to the deal at the end of October, which is intended to seal the future of Yoox Net-a-Porter (YNAP), the luxury group can complete a process requested by investors and deal the cards Redistribute e-commerce sector. YNAP was founded in 2015 by merging the digital activities of Richemont Net-a-Porter with the Italian online retailer Yoox. But the product never really came to fruition. The unit’s mixed results have weighed heavily on the Swiss group’s balance sheet. Depreciation for the 2022 financial year rose to 2.7 billion Swiss francs.
Selling YNAP to an industry expert therefore seems to be the best solution and Farfetch, founded in 2008 by Portuguese visionary José Neves, the best choice. The London-based company has revolutionized luxury e-commerce by presenting itself as a “relevant” alternative to its competitors — including Yoox and Net-a-porter, whose spending is colossal. This was possible thanks to its e-concession model, cutting-edge technology and multiple payment systems. This model attracted several investors, including Condé Nast International, which led to Farfetch becoming a unicorn in 2015, three years before it went public in 2018 with a €6.56 billion IPO.
Will the agreement between Richemont and Farfetch be renegotiated?
However, the reality is that the opportunities presented by e-commerce in luxury goods have not proven to be as beneficial as expected. And the current performance of the company led by Neves was considered disappointing. In recent years, Farfetch shares have not been attractive to investors suffering from the suspension of its Russian business and the never-ending trade restrictions in China as a result of Covid. The sales forecast for 2023 has been revised downwards. The CEO pointed to the slowdown in sales in the US, while experts pointed to the absence of factors that could give hope for an improvement in the macroeconomic outlook. Finally, some experts pointed to a lack of control over spending, citing in particular the $675 million acquisition in 2019 of the Italian company New Guards Group, which owns the Off-White license, as well as Palm Angels, Unravel Project or Ambush, as an example .
Can the crisis facing Farfetch jeopardize the deal negotiated with Richemont? On the surface, no. The Swiss group’s interest lies in clearly expressing the next phase of its digitalization strategy. However, the deal cannot be completed at any price. The first part of the deal approved by the authorities is based on an exchange: the luxury group will receive A ordinary shares in Farfetch, equivalent to 12 to 13 percent of the British company’s share capital, in return for 47.5 percent of its shares in YNAP. Given Farfetch’s poor performance in recent months, it is understandable that Richemont has a keen interest in renegotiating the terms of a deal that has become less financially attractive.
The future challenges of Web3
Aside from the value of the agreement, commentators – investors, but also fashion professionals who are watching with interest the future of young labels such as Jacquemus, Coperni and of course Off-White – are wondering what options are open to Farfetch. Will the London company be able to weather the storm with this acquisition? Many doubt that. But José Neves’ talent could be used by Richemont, whose chairman Johann Rupert repeatedly reiterates that he believes in online trading despite the current turbulence.
Farfetch also has exactly the right tools to successfully digitize the sales channels of the powerful group, whose star fashion houses such as Cartier and Van Cleef & Arpels are enjoying dazzling growth. Not to mention the technological advances that the London-based company aims to maintain by offering support in the form of an organized mentoring program to start-ups with ambitions to shape the future of e-commerce. This support is particularly focused on token-based loyalty and immersive experiences based on augmented reality.
For example, as part of a virtual ready-to-wear try-on (VTO) pilot this year, Farfetch partnered with Valentino to run a highly realistic second-generation VTO experience, designed exclusively for e-commerce and based on exclusive algorithms that were developed by Wanna, a company owned by the London company. By focusing on the fundamental challenges of Web3, Farfetch may not have said its last word yet.
This article originally appeared on FashionUnited.uk. Translated and edited by Simone Preuss.