José Neves, founder, CEO and member of the board from Farfetch, is considered by the company as a risk to … the company itself. According to documents filed by Farfetch to the American regulator in preparation for the IPO that is expected to take place later this year, Portuguese is one of the risks that the company presents to potential investors.
"Our CEO, José Neves, has a significant influence on many business issues, especially because he is the owner of the company. [Classe A e Classe B] will affect you [dos acionistas] ability to influence management issues and discourage others from looking for changes in control that our Class A shareholders consider useful, "the company claims, and further emphasizes the role of the founder in the creation, construction and growth of Farfetch.
"We depend on highly qualified personnel, including senior management and technology professionals, and if we are unable to retain or motivate key employees, employ, retain and motivate skilled workers, our business may suffer", explains Farfetch in the paper. . The company therefore believes that success depends and the future depends on the efforts and talents of the area of business management, "particularly from José Neves, our founder and CEO." "Our future success depends on continuing to attract, motivate and retain highly qualified employees", the company added.
With 3,009 employees worldwide, in June 2018, 37% of Farfetch's human capital works in the field of technology. That is why the future is also highly dependent on continuing to attract and retain talent "including engineers. software, data scientists "and other professionals tech, "The key to designing, maintaining and creating code and algorithms needed" for business.
In addition to human resources, the company emphasizes other risks in the business and luxury sector, which go through company culture, general economic factors and natural disasters.
The success of Farfetch depends, like any other, on the evolution of the market. According to the company, the customer resistance Online purchases of luxury goods can condition the growth of the company and therefore pose a risk to the growth of Farfetch.
In the document, the company admits that one of the risks relates to growth and revenue targets, which may not be enough to generate. cash flow to make the company sustainable. "We can not assure you that we can generate enough revenue to cover the maintenance costs of the platform and allow the company to grow further." The unicorn, founded by José Neves from Portugal, reported losses of $ 68 million in the first half of this year and warned that after the stock market does not intend to pay dividends.
Growth management can be another risk factor, the company says. "We may not be able to manage growth effectively, just as too rapid a development can affect the corporate culture," the report said.
Another of the guarantees offered by the company is the evolution of the partners' market – Farfetch sells more than 3,200 luxury brands online through its marketplace. "We depend on the number players retailers and brands to support the products available from our platform. (…) We can not guarantee that these retailers and these brands will always choose us marketplace to sell their products, "says Farfetch, noting that the contracts made with the brands that the company operates with are normally one year long.Another warning regarding the company's partners is the price determined by the brands, that the products are made available to customers.These figures, Farfetch believes, may be "detrimental" to the company.
One of the risks that can have an impact on the evolution of the company's activities and consequently on the investors is the dollar. Farfetch's activities, as well as all financial information relating to the company, are presented in dollars, a currency that differs from the currency that was originally used in the various subsidiaries of the group. "At the level of the subsidiaries, we are also exposed to exchange rate risks because we have income and expenses in various foreign currencies," explains Farfetch.
By working in a highly advanced technology sector, Farfetch understands that technology is another factor that can be considered a risk in the process of opening up capital to new investors. "We depend on the use of advanced technologies and systems, including technology and systems used for websites and apps, consumer attention, communication, fraud detection," among others. And so Farfetch's future depends on our ability to customize our services and infrastructures to quickly deliver trends and needs that improve the platform's performance. " But these developments, the company believes, can also make life easier for competitors.
The fact that some of the company's servers and services are also owned by third-party vendors may entail risks for users, something that has happened in the past.
Farfetch also notes that security problems may be another drawback for potential investors in the company. According to the document submitted in preparation for the IPO, our mistakes or errors by third parties to protect our sites, networks and systems against security problems or, on the other hand, protect our confidential information, damage our reputation and brand and our results. "
"We are subject to government regulations and other legal obligations regarding privacy, data protection and information security," said the company. That is why legislative changes relating to all these issues are one of the guarantees for the growth of the company. "We collect information that personally identifies our consumers and prospects, and we use this information to deliver relevant services and products to our customers, to support, expand and grow our business, and to design sales and publicity ", he explains, with cases such as the new RGPD legislation, which came into force in Europe on 25 May.
As a multinational company in the United Kingdom, the document also warns of the future implications of Brexit for the company's activities. "These developments, or the realization that some of them can act, have and continue to have a material adverse effect on global economic conditions and the stability of financial markets around the world", which may also have negative consequences for costs, sales and retention of qualified personnel.
"Failure to control the risks associated with payment methods, credit card fraud or other consumer fraud can damage our reputation and brand, and our business and operations also suffer," explains Farfetch. The company warns that, in contrast to current credit card practices – allowing the company to effectively protect transactions without having access to the cardholder's signature – that scenario may change as the company continues "global expansion."
Generating revenue from innovation
Another of the risks associated with the technology sector is the inability to capitalize novelties on the innovation created within the company. "We continuously develop innovative technology such as initiative FarfetchStoreofthe Future. Our ability to leverage these technologies and other new business lines to make them sustainable depends on a number of factors, many of which are beyond our control, "he says.
The active presence of the company in social networks, e-mails and SMS messages can also have a less positive effect on the investment, mainly because of the exposure. "
"We use social media, e-mails and text messages as part of our omnicanal marketing. As laws and regulations change rapidly, our failure by our employees or third parties can damage our reputation or penalize us for a number of sanctions, "the company acknowledges, and further emphasizes the possibility of" improper use "of these laws platforms.