The timing is perfect. By revealing its IPO project on Monday, Farfetch wants to take full advantage of the fad markets for the online sale of luxury items. Because for millennials, and especially young Chinese, this way of buying has become inevitable. Even if the shopping experience remains essential.
Ten years after its founding, the British marketplace for high-value articles announced an IPO project on Wall Street Monday by the end of the year. It is more than a year since rumors were about this project. " The luxury market is flourishing, and Farfetch needs money to finance its development ", sums up Arnaud Cartigny, vice president responsible for Retail and Luxury activities at CGI Business Consulting.
A valuation of 5 billion dollars
According to Bloomberg, the company strives for a valuation of $ 5 billion, in line with that of its rival Yoox-Net-à-Porter, which was withdrawn from the Milan Stock Exchange in June after the acquisition by Richemont. Except that the Italian turnover in 2017 amounted to 2.1 billion euros for 18.6 million net profit. The sale of Farfetch was $ 386 million. Since its founding, the company is in the red, with losses that have increased further. In the first half of 2018, they were $ 68 million (59.5 million euros), compared to $ 29 million a year ago.
A shortage in connection with his investments. " The marketplace model must quickly become profitable because it entails little costs. A marketplace does not hold the goods, Arnaud Cartigny resumes. In this niche, where there are few competitors, Farfetch has to gain market share by developing its presence in emerging countries. And by strengthening the control over logistic flows, delivered by partners, through technologies or skills. Hence these investments.
The site is experiencing a very strong acceleration, with a jump of 59% of its activity last year, and 60% in the first half of 2018. And the prospects are there. According to the founder, José Neves, " this industry is still in its infancy. Only 9% of luxury sales are online and the 91% that goes offline are still as if we were in the nineties! Bain experts expect this share to rise to 25% by 2025.
Chanel and Eurazeo capital
Farfetch has already convinced a number of investors with references in luxury. Chanel entered the capital of the site a few months ago, after a collaboration with Burberry. For them, during fundraising of $ 110 million in 2016, Eurazeo participated in the tour de table, up to 20 million, in addition to the Singapore fund Temasek.
Because the platform, which works with nearly a thousand independent stores and supplies them with logistic services, is recognized for the quality of its services. The staging of the articles is also welcome. In 2017, the start-up has reached a decisive milestone and it has joined forces with JD.com, the Chinese Amazon region. A gateway to the Asian market, which remains the main engine for the luxury market. Especially because the site is also accessible via the mobile WeChat application, which is used by more than 900 million Chinese. A serious asset to occupy the place. Nowadays Farfetch, translated into 12 languages, is present in 190 countries.