As Farfetch unveils a new “strategic partnership” with iconic department store Harrods, we ask if the tech platform is the new Ocado of fashion.
Most may think of Farfetch as the Asos of the luxury world – a one-stop shop to buy upmarket fashion. But the business – which refers to itself as a tech platform rather than a retailer – has a fast-growing white-label business that builds websites for many luxury brands.
Late last month department store giant Harrods inked a strategic partnership with Farfetch, which will see the fashion marketplace’s white-label arm Farfetch Black & White build and manage Harrods’ new platform, which will launch in 2020.
Harrods joins a roster of 17 luxury brands that includes DKNY, Manolo Blahnik, JW Anderson, Emilio Pucci and Christopher Kane, which are growing ecommerce businesses on Farfetch-built websites.
From retailer to tech colossus
Farfetch is aping that other retailer-cum-tech-partner Ocado.
Ocado made its name as an online grocer, selling Waitrose products, which will soon be replaced by those of M&S. But in recent years, its Ocado Solutions business, which offers ecommerce services to retailers, has been the growth engine of the company.
Retailers including Morrisons, French supermarket Casino and the US’ second-biggest grocer Kroger have signed deals to harness Ocado’s technology in a bid to emulate its success in the online world.
Retailers can choose for Farfetch to build specific products or services, or can sign up for a full end-to-end ecommerce solution
When Ocado unveiled the Kroger partnership, its biggest to date, last year, its shares surged 44% in one day, illustrating how important its technology platform division is to the overall business.
With Farfetch, luxury brands can choose to simply sell on Farfetch’s retail platform or opt to take advantage of its ecommerce excellence and sign up to Farfetch Black & White to have their own website built and managed externally.
The white-label solutions are built on Farfetch’s platform, and provide brands with the same capabilities and scale as Farfetch’s own website. This means brands benefit from the improvements to and innovations on Farfetch’s website.
Retailers can choose for Farfetch to build specific products or services, or can sign up for a full end-to-end ecommerce solution.
Harrods chose the latter. Farfetch will be responsible for ecommerce management, operations support, international logistics and technical support, while Harrods will continue to oversee trading on the site as well as marketing, brand relationship and product strategy, all creative and editorial content, and customer services.
Helping David take on Goliath
Harrods is one of the biggest partners that Farfetch Black & White has signed up. Unlike Ocado, Farfetch’s primary aim with Black & White has been to help smaller businesses compete against ecommerce giants, says Accenture senior advisor Suzy Ross.
“Over the next 10 years, the luxury industry is expected to grow to an estimated $500bn, and online sales will potentially grow to represent an incremental $100bn opportunity”
José Neves, Farfetch
Harrods may not be a small player, but compared to YNAP and Amazon it is a relative minnow online. And with ecommerce the big growth driver in luxury over the next decade, Harrods is right to bring in experts to help it seize the opportunity.
Farfetch chief executive and co-chair José Neves says: “Over the next 10 years, the luxury industry is expected to grow to an estimated $500bn, and online sales will potentially grow to represent an incremental $100bn opportunity.”
Even for big businesses like Harrods, building a successful online business that can compete with YNAP takes sizeable investment, says Ross.
“On the technology front, data and analytics require such enormous investment,” she explains
And brands must keep up with rapid technology changes and new innovations to compete online, which means constant website updates and the expertise to know which investments to make.
Farfetch has that expertise and its state-of-the-art platform is proving a hit with shoppers. The retailer revealed that gross merchandise value surged 54% to $1.4bn in 2018.
By relying on Farfetch’s technology expertise, luxury retailers such as Harrods can focus their efforts on what they do best, which Ross says is buying, brand building and creating a great experience in-store.
The future of Farfetch
Growth at Farfetch’s Black & White business is accelerating. In the fourth quarter alone, it launched six new brand sites.
Like Ocado, could the future of Farfetch be more white-label website provider than retailer?
Ross believes that Black & White is only going to grow; however, she also thinks there is ample growth to come from Farfetch’s retail marketplace, which she believes will be “a high value, and high potential, part of the business model going forward”.
She says: “I still think that there is enormous value in Farfetch as a marketplace for smaller retailers. I feel much more confident as a consumer purchasing from Farfetch than I would a small specialty retailer that I had potentially never heard of.
“As a brand promise and a business proposition it stands equal with other luxury players like YNAP and MatchesFashion.”
With growth to grab as both retailer and tech provider, the future looks bright for Farfetch.
Retail Week Live 2019
Kerem Atasoy, commercial director, Black & White, Farfetch is speaking at Retail Week Live on March 27, at London’s InterContinental O2 hotel.
To check out the packed programme, and book your tickets, click here.