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Farfetch IPO on NYSE. Photo courtesy of Reuters

How Has Online Fashion Powerhouse Farfetch Grown its Domination of the Luxury Goods Industry?

A Deep-Dive into Farfetch's Business Model and Expansion Strategy

Founded in 2007 by José Neves, Farfetch’s original aim was to revolutionise the e-commerce model for fashion specialty stores around the world by providing them with a global platform to sell their products. Today, Farfetch's evolution has led to the creation of three distinct business units, offering a truly unique proposition within the luxury industry. With remarkable international expansion, strategic partnerships, and notable acquisitions, such as the most recent Yoox Net-A-Porter one, the question arises: how did Farfetch ascend to become the leading global platform for the luxury fashion industry and the technological powerhouse it is today? 

More Than Just a Marketplace

Farfetch was conceived by José Neves with a fundamental mission: to empower small, independent boutiques by extending their reach beyond local boundaries while preserving their physical presence. The vision was to provide a platform for boutiques lacking an online footprint, equipping them with the resources and exposure that would be otherwise unattainable as individual entities. This concept materialised in 2008 as an e-commerce marketplace exclusively for luxury boutiques in Europe, commencing with 40 boutiques. 

Today, Farfetch has evolved into a multifaceted entity, encompassing marketplace, owned brands, and technology-driven prowess. Its diversified ventures include Browns, an iconic British fashion and luxury goods boutique; Stadium Goods, a sneaker and streetwear marketplace; New Guards Group, owner of international luxury brands; and Farfetch Platform Solutions, offering e-commerce and technological services for enterprise clients. Farfetch has also introduced innovative in-store technologies, such as the Farfetch Connected Retail suite, transforming the shopping experience. 

The Farfetch Growth Timeline

Farfetch’s disruption of the luxury fashion industry to become a leading player in e-commerce has been paved by a series of funding rounds, expansive international growth, strategic partnerships, and acquisitions.

  • 2008: launches as an e-commerce marketplace for luxury boutiques with 40 boutiques, in Europe. 

  • 2009: First international expansion to the US. 

  • 2010: Closes a Series A round, raising $4.5m, and invests in Brazil. 

  • 2012: Raises $18m from a Series B round for European and North American expansion and initiates growth efforts in the US, Brazil, and Asia. 

  • 2013: Condé Nast leads a $20m Series C round to fuel Farfetch’s entry to new markets while assisting growth in existing ones. 

  • 2014: Expands to China, Russia, Japan, and Australia, with a $66m Series D round for omnichannel development and engineering. 

  • 2015: Achieves a $1b valuation, earning the "Unicorn" title, and secures a $86m Series E round for global expansion; Acquires UK luxury retailer Browns; Develops white-label API-based Farfetch Platform Solutions. 

  • 2016: Closes a Series F round, raising $110m to continue the expansion of Farfetch’s technology platform. 

  • 2017: Acquires, the largest overseas investment by a Chinese e-commerce company. 

  • 2018: Goes public on NYSE, with an IPO raising $885m; Acquires Stadium Goods, a consignment streetwear marketplace, for $250m.

  • 2019: Acquires New Guards Group for $675m, operating brands like Off-White. 

  • 2020: Richemont & Alibaba jointly invest $600m in private convertible notes and $500m in Farfetch China, owning a combined 25% stake in a new joint venture that will include Farfetch’s marketplace operations in China. 

  • 2022: Acquires luxury beauty products retailer Violet Grey for $50m; Acquires a 47.5% stake in rival Yoox Net-A-Porter. 

  • 2023: The EU Commission approves the joint control of YNAP by Farfetch & Richemont. 

The Farfetch Business Model

The Farfetch Business Model encompasses three key pillars: the Digital Marketplace, Farfetch Platform Solutions, and the Brand Platform. Each of these business units collaborates to enhance the Farfetch Marketplace, elevating its value and appeal for sellers and consumers alike. 

Digital Marketplace

The Farfetch Marketplace serves as a dynamic bridge between global buyers and sellers. Similar to a traditional marketplace, Farfetch doesn’t carry its own inventory. Nevertheless, it offers a unique approach benefiting both brand partners and customers. While multiple sellers offer the same products with individual pricing, customers receive the most competitive rates based on their locations, with import duties included where necessary. Brands can host their e-commerce stock on Farfetch, offering an additional sales channel to a large and engaged audience. Additionally, Farfetch has been known to help small brands manage cash flow, encouraging them to invest more deeply in specific styles to foster growth on the platform. 

In return for these benefits, Farfetch collects a 30% commission from merchants on the total sale price, granting them access to an exclusive integrated system for inventory management, a global customer base, invaluable data insights, and cutting-edge technological tools to enhance sales. Additionally, it charges an 8% fee for fulfilment services, encompassing item delivery, return processing, and refund management. 

Building an e-commerce site is easier than it has ever been with companies like Shopify, but building a successful commercial operation is harder than it has ever been.” – José Neves, Founder 

Farfetch ticks the box with an approach that mixes curation with a constant supply of revolving stock, an API-based technology that links the platform to the inventories of the partners, and the best logistics rates and service levels. 

Connecting buyers and sellers without inventory ownership brings a multitude of advantages to all stakeholders involved: 

  • This model allows Farfetch to offer products in a scalable manner, significantly reducing overhead costs. 

  • For brands: the marketplace gives brands access to a global audience, and control over pricing and identity while ensuring a consistent shopping experience across boutiques. It eliminates the complexities of establishing and managing individual e-commerce platforms, offering the added benefits of cost-effective international shipping rates and a standardised return policy 

  • For customers: the global marketplace is customer-centric, setting new industry standards, with personalised customer relationships and service perks. It offers an omnichannel experience, boasting an extensive and diverse supply that positions it as the ultimate one-stop destination for all luxury shopping needs

Collage of Farfetch's home screens. Image courtesy of OFS digital

Farfetch Platform Solutions

Farfetch Platform Solutions is a white-label, Software as a Service (SaaS) designed for brands looking to boost audience engagement. It offers a suite of commerce solutions, including marketing, global payments, logistics, in-store technology, and inventory management, which brands can customise individually or as a bundled package for a comprehensive e-commerce experience. This gives partners access to Farfetch’s marketplace capabilities and scalability, enabling them to craft their unique online presence. Furthermore, it seamlessly integrates with the marketplace, enhancing inventory allocation, expanding marketplace offerings, and enriching the shopping experience with a wider product selection.

Brand Platform 

Farfetch has developed a collection of original-content, first-party brands, setting itself apart from traditional luxury houses like LVMH and enhancing its unique value proposition. 

  • Browns: A renowned British fashion and luxury goods retailer that serves as a testing ground for Farfetch's "Store of the Future." This digitally enabled in-store customer experience provides invaluable insights into the world of brick-and-mortar boutiques, serving as a valuable feedback loop for Farfetch's technological advancements. 

  • Stadium Goods: A consignment streetwear marketplace boasting four physical stores. This strategic acquisition allowed Farfetch to venture into the luxury streetwear category and tap into the booming secondary market for collectible sneakers—a realm largely unexplored by major retailers. 

  • New Guards Group: Specialised in launching and nurturing culturally relevant and emerging fashion brands like Off-White, positioning Farfetch to offer exclusive products from brands highly sought after by millennials and Gen Z, effectively cornering the market on haute couture hype. 

  • Violet Grey: An upscale beauty retailer that expands Farfetch's offerings into the Beauty category, complete with access to exclusive beauty brands. 

Now it’s time to become culturally relevant as a brand, not just as a transactional platform.” – José Neves, Founder 

By assuming control of these entities, Fartfetch has elevated its strategy, by leveraging exclusive releases and driving organic traffic and engagement to the marketplace. Additionally, it profits through the wholesale distribution of products from these brands. With Browns, it acknowledges the importance of ‘phygital’ innovative retail solutions, and ultimately, owning the New Guards Group brands and having access to exclusive sneakers or beauty products furthers Farfetch’s mission to be the global platform for luxury. 

Final Takeaways

Ultimately, Farfetch boasts a clear value proposition and unique offering that has attracted specialty boutiques, the attention of global shoppers, and big names in the luxury space through scale, a global presence, strategic partnerships, and acquisitions. Today, Farfetch is not just an online marketplace – its additional business units work to make the platform more valuable and attractive for both sellers and consumers all over the world. 

Farfetch Platform Solutions home page. Image by in.Parallel

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