Is Luxury’s Favorite E-Tailer About to Go Bust?

[Allisonfaye]

Looks like Farfetch is in pretty bad shape along with Realreal.

Is Luxury’s Favorite E-Tailer About to Go Bust?

For more than a decade, Farfetch has been a global retail powerhouse, selling billions of dollars worth of coats, shoes, handbags and other luxury goods. But in recent months, the online platform, which was valued at more than $20 billion at its peak in 2021, has been fighting for its survival...

www.yahoo.com

Is Luxury’s Favorite E-Tailer About to Go Bust?

For more than a decade, Farfetch has been a global retail powerhouse, selling billions of dollars worth of coats, shoes, handbags and other luxury goods.

But in recent months, the online platform, which was valued at more than $20 billion at its peak in 2021, has been fighting for its survival. Its share price has collapsed, rumors have been swirling that its founder is trying to take the company private and reports suggest it will need a lifeline of at least $500 million by the end of the year to prevent it from toppling into bankruptcy....

 

[S0nia]

This sector is so overblown, overinflated, overhyped etc. it is about time some components of it start collapsing...
I think we can add Rebag to the lot...
Allegedly!

 

[onlyk]

Looks like Farfetch is in pretty bad shape along with Realreal.

Is Luxury’s Favorite E-Tailer About to Go Bust?

For more than a decade, Farfetch has been a global retail powerhouse, selling billions of dollars worth of coats, shoes, handbags and other luxury goods. But in recent months, the online platform, which was valued at more than $20 billion at its peak in 2021, has been fighting for its survival...

www.yahoo.com

Is Luxury’s Favorite E-Tailer About to Go Bust?

For more than a decade, Farfetch has been a global retail powerhouse, selling billions of dollars worth of coats, shoes, handbags and other luxury goods.

But in recent months, the online platform, which was valued at more than $20 billion at its peak in 2021, has been fighting for its survival. Its share price has collapsed, rumors have been swirling that its founder is trying to take the company private and reports suggest it will need a lifeline of at least $500 million by the end of the year to prevent it from toppling into bankruptcy....

They have been done very well in their presentation, items sold higher prices than some other sites

 

[papertiger]

I think they overstretched, Covid figures may have given them a false sense of a growth prediction. It really shows that sometimes companies move too fast and in too many directions. I will feel terrible if they go bust, I heard FF is good to work for, flexible workplace, and they have recruited a really strong workforce - many from our favourite luxury brands.

FF also owns Browns Fashion, a very old and much loved London-based designer boutique, Stadium Goods (sportswear) too. They have partnership with Neiman Marcus, Ferragamo and Cartier,'s VCA's (+ 25 other companies' parent group Richemont for digital and they own almost half of YNAP too (NaP/Y00X/etc).

I bet LVMH are licking their lips! That's really bad for competition.

Their founder José Neves started in digital and has lots of digital projects going on. He can always go back to his keyboard, what about everyone else?

 

[880]

I know very little about Farfetch, and I have zero background in business, but my first thought would be that it didn’t have to purchase Browns Fashion or YOOX to obtain partnerships with them. Although Richmont is an investor in Farfetch, R has said that it won’t provide more capital, indicating a lack of confidence with respect to FF’s future profitability. But growth and overextension/acquisitions seem to be the problem with farfetch.

With respect to TRR, it seems as though investors might have had unrealistic expectations as to profitability bc of TRR‘s inability to quickly and accurately process and authenticate individual pieces. I read an article about the importance of developing AI to aid in this process (ideally a business should be able to scan an item and determine authenticity, and other conditions) in the future if a resale model like TRR were to succeed. Unfortunately, I don’t remember the specific article or source.

With respect to both, the patience that VCs or private equity have to wait for revenues to turn into profits seems to have waned. I’m thinking of the example of Amazon which didn’t turn a profit for years. So, a company doesn’t necessarily have to turn a profit in order to keep a high valuation and maintain share price.

 

[papertiger]

I know very little about Farfetch, and I have zero background in business, but my first thought would be that it didn’t have to purchase Browns Fashion or YOOX to obtain partnerships with them. Although Richmont is an investor in Farfetch, R has said that it won’t provide more capital, indicating a lack of confidence with respect to FF’s future profitability. But growth and overextension/acquisitions seem to be the problem with farfetch.

With respect to TRR, it seems as though investors might have had unrealistic expectations as to profitability bc of TRR‘s inability to quickly and accurately process and authenticate individual pieces. I read an article about the importance of developing AI to aid in this process (ideally a business should be able to scan an item and determine authenticity, and other conditions) in the future if a resale model like TRR were to succeed. Unfortunately, I don’t remember the specific article or source.

With respect to both, the patience that VCs or private equity have to wait for revenues to turn into profits seems to have waned. I’m thinking of the example of Amazon which didn’t turn a profit for years. So, a company doesn’t necessarily have to turn a profit in order to keep a high valuation and maintain share price.

IMO, you''re right to think of FF's and TRR's problems as completely separate but in the end I think they tie together by risky over-expansion due to watching and reacting solely on data and not paying attention to humans (the invariable variable).

FF's have been overconfidence and overstretching. FF was never a retail company (online or B&M) it was an agency, a middle-business for other retailers. FF have no idea of their partners' retail data, they don't have to worry manufacture, quality control, mark-ups or downs, overstock or what to do about returns, and yet they call themselves retail experts and called new companies 'Luxury New Retail' and Platform Solutions and offer Replatform, E-concessions and inshore technology. FF is a tech company that cloaks itself as a luxury brand and that's why they needed Browns Fashion IMO, a niche concept store that supported up and coming and established British/World high-fashion for early adopters before designers went big-time (but strangely BF now models itself more as an LA lux indie boutique experience: expensive, international casual with a 'experiential' room). I can totally see why they bought Browns (Fashion).

I don't think Browns Fashion (also online and B&M) was a mistake, because I can see how they wanted their own multi-brand brand. FF (management) don't know about luxury retail, the model is more like like Ebay, they skim off the surface and provide a platform which looks like a shop - but it's not. They have no control over stock, the way it's packaged to be shipped (therefore lack of consistently). Browns run their own mini, multi-brand universe, and they can provide plenty of quantitive data acting as a sample for luxury in general and qualitative data from clients/staff.

Other buys (Off White license and Stadium Goods) are less understandable unless they were trying to build another global luxury parent company and want a slice of the sportswear pie (which all lux companies are doing in their own ways) but FF already had Swear (sneakers/trainers) so they already knew how fickle the sportswear scene is (sneaker-heads et al).

The buy-in to YNAP seemed like somewhere to park money they may not have had. YOOX is not doing well either! Single brands are not selling to them and third party stockists are not allowed to so they have to supplement with Cos and other middle market brands as well as buy new seriously-old stock (as in not last year's but 10 year's). NaP and Mr.P already has Outnet, but stock is seriously stale and mostly outlaying sizes. Millennials fuelled the digital growth of luxury but that's probably because they had no instant access to these 'magical' brands before. These companies also look like they're not riding high to the casual observer (check out the number of seasonal discounts and specials) I think a lot of people are shopped-out or luxury immune - and that's why luxury was hoping their growth will come from Gen Z, and hence perhaps the expansion into sportswear, lux outlets, pre-loved and grey market shopping, but there's no 'magic' in luxury names for Gen Z...another topic.

Did you know FF were after Conde de Nast at one point? Does a duck think he needs to buy a kennel? CdN is a shadow of its glory years but FF knows nothing about publishing. At least Kering, LVMH, Richemont and Prada Group etc know what they're good at. Good luck to Estée Lauder with Tom Ford, Balmain's haircare and Ferrari RTW catwalks.

FF Gold Access staff know about luxury retail - but that's because they were trained by other luxury retail companies. The first thing they are told to do is bring their VIP clients with them (recruit). One only needs to spend £10K a year for Gold Access, but the rewards are to buy more stuff or invites to a few pop-ups. The only way someone may prefer Gold FF over, say VIP/VIC Dior, Gucci or Celine is if they buy across ranges, brands and maybe for other family members too, and don't care about the single brand's exclusive products or services that being a VIP bring. FF tried to create a loyalty programme without understanding about loyalty.

TRR already have AI, they also have humans but they've still been caught out with fakes. If people think they have a fake they've bought from TRR, guess what, they're told to return it for a reauthentication (by TRR) I'm sure that inspires confidence (as in not).

The pre-loved market has been the hedge-fund manager's favourite tip for years - mostly because they have no idea about logistics, the expectations of luxury products/service/experience, they only know only money (figures). Tipping less commercially exploited markets the finance world has no idea about is dangerous because it's allowed companies to borrow too much money and inflated share prices (and predictions). The world loves a hot tip - until it blows-up 🚀 Like FF, TRR had a expand now and think later mentality. There are some good online preloved sites some run on the agency model and some buy-in, but they need to a very tight ship and be realistic about growth. Businesses are not (just) run on numbers they're built round knowledgable, experienced people. That's what sustainability is about not just the green washing BS companies trot-out.

 

[QuelleFromage]

The YNAP/Farfetch deal isn't actually done. Took a while (as per usual) to get EU antitrust approval and now of course Farfetch shares are down massively from when the sale was agreed.

YNAP, which has been leaking money at a rapid pace, has been a big drag on Richemont's share price and they were anxious to get it off the balance sheet. Now Richemont says they are "carefully evaluating" the deal.

FF also recently announced they were considering selling the Browns brick&mortar play, and they have floated prices to a few buyers already, which also has not been good for their share price.

 

[Joeli7]

Meanwhile, German off-price platform Bestsecret has hired buyers from YNAP and opened offices in Milan and Paris.

 

[papertiger]

The YNAP/Farfetch deal isn't actually done. Took a while (as per usual) to get EU antitrust approval and now of course Farfetch shares are down massively from when the sale was agreed.

YNAP, which has been leaking money at a rapid pace, has been a big drag on Richemont's share price and they were anxious to get it off the balance sheet. Now Richemont says they are "carefully evaluating" the deal.

FF also recently announced they were considering selling the Browns brick&mortar play, and they have floated prices to a few buyers already, which also has not been good for their share price.

Thanks QF! Apologies, I thought the deal was done, someone must have jumped the gun on Wiki, it's listed as a YNAP parent co.

Seems the media is still saying the deal could go ahead and keeping the ball in the air (NYT 16.12.23). Personally, I think it would be crazy for either (parent) company to go ahead now, the fixing needs to start with the micro(s).

 

[QuelleFromage]

Thanks QF! Apologies, I thought the deal was done, someone must have jumped the gun on Wiki, it's listed as a YNAP parent co.

Seems the media is still saying the deal could go ahead and keeping the ball in the air (NYT 16.12.23). Personally, I think it would be crazy for either (parent) company to go ahead now, the fixing needs to start with the micro(s).

The subtext seems to be that Richemont was at one point in the process considering investing in or creating a deeper partnership with Farfetch, beyond the YNAP acquisition ; they’ve now said they will not do that. Still, the deal appears to still be on and seems unlikely that YNAP can survive without a sale.

From my perspective there’re multiple problems here - the fundamental lack of understanding of the luxury market that you’ve called out and also a macro situation of vastly overvalued companies across the board in so many industries.

 

[papertiger]

The subtext seems to be that Richemont was at one point in the process considering investing in or creating a deeper partnership with Farfetch, beyond the YNAP acquisition ; they’ve now said they will not do that. Still, the deal appears to still be on and seems unlikely that YNAP can survive without a sale.

From my perspective there’re multiple problems here - the fundamental lack of understanding of the luxury market that you’ve called out and also a macro situation of vastly overvalued companies across the board in so many industries.

ITA 100%

 

[880]

IMO, you''re right to think of FF's and TRR's problems as completely separate but in the end I think they tie together by risky over-expansion due to watching and reacting solely on data and not paying attention to humans (the invariable variable).

FF's have been overconfidence and overstretching. FF was never a retail company (online or B&M) it was an agency, a middle-business for other retailers. FF have no idea of their partners' retail data, they don't have to worry manufacture, quality control, mark-ups or downs, overstock or what to do about returns, and yet they call themselves retail experts and called new companies 'Luxury New Retail' and Platform Solutions and offer Replatform, E-concessions and inshore technology. FF is a tech company that cloaks itself as a luxury brand and that's why they needed Browns Fashion IMO, a niche concept store that supported up and coming and established British/World high-fashion for early adopters before designers went big-time (but strangely BF now models itself more as an LA lux indie boutique experience: expensive, international casual with a 'experiential' room). I can totally see why they bought Browns (Fashion).

I don't think Browns Fashion (also online and B&M) was a mistake, because I can see how they wanted their own multi-brand brand. FF (management) don't know about luxury retail, the model is more like like Ebay, they skim off the surface and provide a platform which looks like a shop - but it's not. They have no control over stock, the way it's packaged to be shipped (therefore lack of consistently). Browns run their own mini, multi-brand universe, and they can provide plenty of quantitive data acting as a sample for luxury in general and qualitative data from clients/staff.

Other buys (Off White license and Stadium Goods) are less understandable unless they were trying to build another global luxury parent company and want a slice of the sportswear pie (which all lux companies are doing in their own ways) but FF already had Swear (sneakers/trainers) so they already knew how fickle the sportswear scene is (sneaker-heads et al).

The buy-in to YNAP seemed like somewhere to park money they may not have had. YOOX is not doing well either! Single brands are not selling to them and third party stockists are not allowed to so they have to supplement with Cos and other middle market brands as well as buy new seriously-old stock (as in not last year's but 10 year's). NaP and Mr.P already has Outnet, but stock is seriously stale and mostly outlaying sizes. Millennials fuelled the digital growth of luxury but that's probably because they had no instant access to these 'magical' brands before. These companies also look like they're not riding high to the casual observer (check out the number of seasonal discounts and specials) I think a lot of people are shopped-out or luxury immune - and that's why luxury was hoping their growth will come from Gen Z, and hence perhaps the expansion into sportswear, lux outlets, pre-loved and grey market shopping, but there's no 'magic' in luxury names for Gen Z...another topic.

Did you know FF were after Conde de Nast at one point? Does a duck think he needs to buy a kennel? CdN is a shadow of its glory years but FF knows nothing about publishing. At least Kering, LVMH, Richemont and Prada Group etc know what they're good at. Good luck to Estée Lauder with Tom Ford, Balmain's haircare and Ferrari RTW catwalks.

FF Gold Access staff know about luxury retail - but that's because they were trained by other luxury retail companies. The first thing they are told to do is bring their VIP clients with them (recruit). One only needs to spend £10K a year for Gold Access, but the rewards are to buy more stuff or invites to a few pop-ups. The only way someone may prefer Gold FF over, say VIP/VIC Dior, Gucci or Celine is if they buy across ranges, brands and maybe for other family members too, and don't care about the single brand's exclusive products or services that being a VIP bring. FF tried to create a loyalty programme without understanding about loyalty.

TRR already have AI, they also have humans but they've still been caught out with fakes. If people think they have a fake they've bought from TRR, guess what, they're told to return it for a reauthentication (by TRR) I'm sure that inspires confidence (as in not).

The pre-loved market has been the hedge-fund manager's favourite tip for years - mostly because they have no idea about logistics, the expectations of luxury products/service/experience, they only know only money (figures). Tipping less commercially exploited markets the finance world has no idea about is dangerous because it's allowed companies to borrow too much money and inflated share prices (and predictions). The world loves a hot tip - until it blows-up 🚀 Like FF, TRR had an expand now and think later mentality. There are some good online preloved sites some run on the agency model and some buy-in, but they need to a very tight ship and be realistic about growth. Businesses are not (just) run on numbers they're built round knowledgable, experienced people. That's what sustainability is about not just the green washing BS companies trot-out.

Agree 100% and loved your post, thank you

 

[S0nia]

I think a lot of people are shopped-out or luxury immune

Everywhere you turn, everyone is snapping the purse shut for the foreseeable future... Except the legendary and mythical 1%, we are told, who are supposed to ride in on rainbow unicorns to save the luxury day...

- and that's why luxury was hoping their growth will come from Gen Z, and hence perhaps the expansion into sportswear, lux outlets, pre-loved and grey market shopping, but there's no 'magic' in luxury names for Gen Z...another topic.

Gen Z are notoriously broke and woke. Plus aren't they the ones flexing fakes to stick it to the man...?
I will be impressed if luxury brand somehow finds a way to transcend that and bring this generation in, in the same proportions as the previous ones.

The pre-loved market has been the hedge-fund manager's favourite tip for years - mostly because they have no idea about logistics, the expectations of luxury products/service/experience, they only know only money (figures). Tipping less commercially exploited markets the finance world has no idea about is dangerous because it's allowed companies to borrow too much money and inflated share prices (and predictions). The world loves a hot tip - until it blows-up 🚀 Like FF, TRR had a expand now and think later mentality. There are some good online preloved sites some run on the agency model and some buy-in, but they need to a very tight ship and be realistic about growth. Businesses are not (just) run on numbers they're built round knowledgable, experienced people. That's what sustainability is about not just the green washing BS companies trot-out.

Smells like the dot.com bubble all over again...
Only Ebay and Amazon made it.

 

[QuelleFromage]

Farfetch to be acquired by Coupang (FT link, paywalled, sorry - so for non subscribers I will try to summarize) with help from Greenoaks Capital Partners (an investor in Coupang).
Net net: Coupang is paying off most or all of the debt owed to the existing investors involved in the term loan that was looming - this includes a $500mn bridge loan to keep FF default alive - but lots of folks won't get their investment back, including Richemont probably losing all of its original stake.
José Neves will stay (probably because he retains such a large ownership stake).

YNAP deal is off, so probably a fire sale there. They are frantically looking for another buyer (that's not in the article, but literally everyone in the luxury investment space has gotten a call).

 

[papertiger]

Farfetch to be acquired by Coupang (FT link, paywalled, sorry - so for non subscribers I will try to summarize) with help from Greenoaks Capital Partners (an investor in Coupang).
Net net: Coupang is paying off most or all of the debt owed to the existing investors involved in the term loan that was looming - this includes a $500mn bridge loan to keep FF default alive - but lots of folks won't get their investment back, including Richemont probably losing all of its original stake.
José Neves will stay (probably because he retains such a large ownership stake).

YNAP deal is off, so probably a fire sale there. They are frantically looking for another buyer (that's not in the article, but literally everyone in the luxury investment space has gotten a call).

Huge news, thank you QF