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After cancelling its earnings call last Wednesday amid rumours about CEO José Neves’s plans to delist the company, Farfetch is in a precarious position. Shareholders are wondering whether or not the Richemont deal will happen at all, and analysts are speculating over whether it’s too soon to run out of cash.
A lot is up in the air — including Farfetch’s position as a tech provider for the luxury industry. Its white-label tech offering, Farfetch Platform Solutions (FPS), offers e-commerce services for brands like Ferragamo, Balenciaga and Harrods. If Farfetch were to collapse or significantly rein in its business model, the fabric of luxury’s tech operations could change, marking a shift in how the industry approaches such partnerships in the future.
Last week, Richemont said in a statement that it “has no financial obligations towards Farfetch and notes that it does not envisage lending or investing into Farfetch”. This spells bad news, according to Seeking Alpha contributor Welbeck Ash Research: “With its key partner Richemont potentially retreating, we fear Farfetch has lost its final option,” read a 1 December note. “With debt markets restricted due to the macro environment, we are very concerned.” Neves is reportedly exploring other potential investors — as yet, to no avail. Farfetch declined to comment.
It’s not just the future of the YNAP deal that’s up for debate. Farfetch’s current predicament is a sign of the company’s inability to innovate as it once did, experts say. At launch, Farfetch was a standout in a relatively nascent online luxury retail space. “José Neves recognised that luxury needed to move towards digital sales solutions and, in effect, converge with the rest of the retail market,” says Bryce Quillin, founder of brand strategy agency It’s A Working Title. “José was trying to disrupt the luxury business — and he did that,” Jessica Ramírez, senior analyst at research firm Jane Hali & Associates, adds.
Since then, the industry has moved very quickly into digital commerce. The pandemic accelerated this adoption, driving brands into the digital sphere, Quillin says. “Today, the luxury market has a very different relationship with digital commerce,” he says. “They have evolved from laggards to leaders.”
As players like Mytheresa and Ssense push ahead in the increasingly crowded luxury e-commerce space, Farfetch is feeling the heat. “Farfetch has always had a pretty high cost base, and when this coincided with a slowdown in the luxury market, the results have not been pretty,” says Neil Saunders, managing director and retail analyst at analytics firm Globaldata. Since its 2018 IPO, the company has lost over 90 per cent of its value (the company was valued at $6.3 billion at the time).
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