Farfetch: Consultancy Report | Expansion into a New Market

Manasi Paradkar
Jun 25, 2021
14 min read

The surge in online shopping has led the online marketplaces to have a blockbuster year this time. One such e-commerce website that has stood out from the very beginning, in this overly crowded digital space is Farfetch. Founded in 2007 by José Neves, the mission statement of Farfetch reads, “FARFETCH exists for the love of fashion. We believe in empowering individuality. Our mission is to be the global platform for luxury fashion, connecting creators, curators and consumers” (farfetch.com). “The strength of Farfetch is the platform”,

explained Frederic Court (Investor, Member of the board of directors’ panel, Farfetch) in one of the seminars’ arranged by BoF. Their unique concept along with the inspired use of technology and logistics, is what propelled Farfetch’s success in this competitive world of

online shopping.

EXECUTIVE SUMMARY:

Farfetch is on the path of being the no.1 platform for luxury e-commerce. In order to do that, they need to consider all possible areas of expansion that will aid them with their primary goal. Recently, Farfetch launched a new mission statement by the name of, ‘Positively

Farfetch’. They aim is to be a more cleaner, conscious and sustianable platform for luxury

fashion (farfetch.com, 2021). In this report, I am going to explain why it’s going to be

beneficial for Farfetch to expand into the New Zealand market. The Kiwis are known for their sustainable ways, and have an untapped love and interest for luxury fashion. Through surveys, marketing tools and research, I am going map out the expansion possibilities for Farfetch in New Zealand, and how these will benefit them in achieveing their goals.

Positively Farfetch (farfetch.com, 2020)

ABOUT FARFETCH:

Farfetch is not just an e-commerce luxury platform, it offers so much more than that. Farfetch’s additional services include providing digital platform solutions to luxury brands, and they also invest in notable innovations like “Store of the Future”, which provides the

customers with the experience of augmented reality, and contactless shopping. With a team of just 5 people with him, José Neves launched farfetch.com on 9th Nov 2008. From having just 40 luxury boutiques on his website in the beginning, Farfetch went on to

having more than 1300 luxury brands and boutiques on his website with a gross merchandise value of $2.1 billion, and more than 2.5 million active consumers on his website. How did they get here? Farfetch has a very unique model that is technology enabled, and does not rely on owning stock. “Imagine a place with multiple floors, the best fashion products across multiple categories, infinite shelves but no own inventory” said Frederic Court (Court. F, medium.com, 2018). Their huge success can also be attributed to their carefully timed acquisitions and collaborations. As a part of their omni-channel growth strategy, Farfetch acquired Browns in May 2015. “I always say, Fashion is not downloadable”, Mr. Neves told BoF after the acquisition in 2015 (BoF, 2015). Physical experience of fashion is also going to be an important factor in the future. 2015 also marked the launch of Farfetch platform solutions. Then came the partnership with JD.com which helped Farfetch to expand their services, and hence their customer base in China. JD.com invested $397 million in

Farfetch in 2017, and now it’s one of the largest shareholders in Farfetch. In a deal that was valued at $250 million, Farfetch announced its acquisition with Stadium Goods in the December of 2018. This was their first acquisition after their partnership with CuriosityChina, a digital and technology business, in the July of 2018. Then came the most frowned upon acquisition, Farfetch x New Guards Group. New Guards group, a Milanese holding company which operates the street-wear sensation Off-White, was acquired by Farfetch at a total

value of $675 million. “They are absolutely best in class in terms of spotting the new stars of tomorrow.” said José Neves in efforts of backing up his decision (BoF, 2019). In November 2019, Farfetch announced that it will form a joint venture with China Tech giant Alibaba, and Swiss luxury group Richemont, thus strong holding it’s position as the leading platform for luxury e-commerce worldwide.

COMPETITOR ENVIRONMENT:

Luxury e-commerce is a booming business and there are bound to be many competitors. With most of these luxury platforms selling the same products for similar prices, standing out is a challenge. A space that was largely dominated by Net-a-porter at a time, is now flooded with niche challengers and dominant competitors like Farfetch, MyTheresa, MatchesFashion, and SSense. Farfetch whose shares were trading less than 40% of their IPO, was taking huge losses, and competitors were miles ahead (BoF, 2021). Then in 2020 Farfetch experienced a fast push, and their market capitalisation grew by a giant 475% in 2020! Farfetch was able to stand out because of it’s unique marketplace model and it’s technology investments. Inspite of all this, Farfetch still has a long way to go. Farfetch needs to improve more when it comes to maintaining customer relationships and consumer persona. Net-a-porter is looked at as a premium, high standard luxury fashion e-commerce platform, whereas Farfetch is somewhat perceived as a technology services retailer. Farfetch also needs to keep an eye for tech giants like Amazon trying to enter the market. Amazon is persistent on entering into the luxury market, and has reportedly gathered $100 million in funding for this operation (BoF, 2021).

4P's OF MARKETING MIX:

Q. What country did I choose for Farfetch to expand into?

ANS: NEW ZEALAND

Q. WHY?

PESTEL Analysis of New Zealand:

Political:

- New Zealand is a constitutional monarchy with The Queen as Sovereign.

- Their current Prime Minister is Jacinda Ardern. She brought in a lot of changes like standing up for LGBTQ Community rights, standing firmly against Racial Discrimination as a result of attacks in March 2019 on Muslim place of worship , providing free sanitary napkins for school girls, normalising paternity leaves and so on.

- New Zealand has a very simplified commercial and tax law system for new businesses.

- A lot of International brands have their flagship stores in New Zealand.

- New Nealand has a very low corruption rate.

Economic:

- New Zealand is a very developed and wealthy nation. Their economy is expected to achieve real GDP growth of 5.7% in 2021-22, to reach $259.6 billion (Ibis World, 2020).

- They are a strong advocate of free trade.

- Their economy has surged out of recession thus making a wonderful recovery. New Zealand job market has bounced back close to pre-pandemic levels.

- New Zealand has a relatively simple tax system in place.

- Their unemployment rate is as low as 5.3% (Ibis World, 2020).

Social:

- New Zealanders are curators, collectors and appreciators of Arts. Opera shows and Art gallery exhibitions give rise to the need for luxury fashion.

- It’s a culturally diverse nation.

- New Zealanders love sports such as rugby, field hockey, etc. They have a huge tourism industry, but because of the pandemic there have been restrictions on that.

- They are supporters of movements like LGBTQ rights, Black Lives Matter Movement, #MeToo Movement and so on.

- They give importance to Health, wellbeing and sustainability.

Technological:

- New Zealand is a Tech loving country. They adapt to technological reforms very quickly.

- They took help of technology to overcome the difficulties of the pandemic. For eg: PLAY NZ(Explore NZ via video games), Scan&Go and Crypto Currency for vending machines (Contactless Shopping), and so on (Mintel, 2020).

- New Zealand has a very advanced and progressive Tech sector that’s constantly looking for making new innovations.

Environmental:

- New Zealand is very well known for their tourism industry.

- They have an abundance of adventure and nature related activities.

- New Zealanders are very serious when it comes to protecting the Environment. They have multiple initiatives set up for a more Sustainable Living. For eg. Foodwaste to Bioenergy, Mindful approach to meat eating, Sustainable clothing options, etc. (Mintel, 2020).

Legal:

- NZTE i.e New Zealand Trade and Enterprise, helps with maintaining and increasing their business overseas by attracting new businesses to set up in New Zealand, and by increasing trade.

- NZ has set up very simple laws for Foreign Investors, which makes it very easy for them to do business in New Zealand. (Mintel, 2020).

This is a SWOT Analysis of the current state of Farfetch in New Zealand. This analysis, will point out the shortcomings of Farfetch in NZ, and steps to be taken to improve upon those can be discussed. This will also point us towards the new risen opportunities that Farfetch can take advantage of.

NZ MARKET OVERVIEW:

There was a time when New Zealand’s economy was largely based on producing primary goods , with a focus on practicality rather than premium and luxury. But, somewhere during 1988, a new breed of luxury and premium New Zealand brands started to emerge (Viva NZ, 2019). “The number of wealthy New Zealanders worth more than $50 million grew by nearly 20% in just one year last year. This is massive growth and if you consider its implications in a consumer driven context, you quickly appreciate the evolving dynamics of this industry, especially in New Zealand.”, says Sofia Ambler (The Luxury Network, New Zealand, 2017). But, luxury in New Zealand dosen’t just signify a $3000 Chanel handbag, they also care about the environment. A usual purchaser of luxury products in NZ is a high net worth individual (HNWI), with a good educational background, awarness to social and environmental issues, appreciator of arts and an overall community person. The market drivers of luxury goods always differ from place to place, and sustainability is a huge market driver when it comes to the NZ market. The influence and the rise of millenials has been a critical factor in shifting consumer patterns and market demands (The Luxury Network, New Zealand, 2017). The Millenials and the Gen Z’s are a large part of the luxury and the sustainable market in New Zealand.

According to figure. nz, an average New Zealander from bigger cities like Wellington and Auckland, tends to spend somewhere around $50 weekly just on clothing and

footwear. This gives them an average spend of $2,500 yearly. These figures have gone up during the pandemic period, as there was a huge surge in online shopping.

TREND ANALYSIS:

Macro Trends:

Sustainable solutions: “In an important milestone in 2018, 12 international and several local businesses gathered with environment ministers to make a joint declaration committing to use 100% reusable, recyclable or compostable packaging in their New Zealand operations by 2025 or earlier.”(Mintel, 2020). Sustainability has always been a way of life for The Kiwis.

Tech Lovers: New Zealand is considered unique in it’s approach to technological innovations. From touch- less shopping experiences and tourism video games during the pandemic, to artificial intelligence, flight tracking apps. and sobriety bots to control drunk

driving, New Zealand has got it all. They have always made the use of technology and innovation to solve social, environmental and

economical crises (Mintel, 2020).

Micro Trends:

Shift from physical retail to e-commerce: With the global pandemic forcing people to close shop, Kiwis started their shift from physical retail to online e-commerce within the first few months of the lockdown itself. “A Microsoft survey from October 2020 found that 62% of NZ organizations were accelerating their digitalization in response to the COVID-19 lockdowns.” (CDO Trends, 2021).

Vocal for Local: As the world went into lockdown, and restrictions were imposed on import export activities, New Zealanders came together and started supporting the local businesses to stop them from going out of business. According to the Xero Blog, “A new global study shows New Zealand small businesses had the most positive outlook during COVID-19, thanks to the support from their communities.” (Xero Blog, 2020). There was a huge surge in digital business platforms like “Manaaki”, “Delivereat”, and Facebook groups like “SOS Business” which connected the Kiwis with local businesses in their communities. (Xero Blog, 2020).

MARKET SEGMENTATION:

In order to understand the market segmentation clearly, and to build a customer profile, I created an online survey specefically for the people of New Zealand. The results displayed that more than 55% of the customer base falls in between 18-24 age range. More than 55% of Kiwis prefer to buy luxury fashion only once a year. Almost 39% people prefer to shop for luxury fashion online, and 33.3% prefer online and in-store both. In terms of luxury e-commerce platforms, Net-a-porter was shopped from, or heard of by 83.3%, Farfetch by 66.7%, MyTheresa by 27.8% and SSense by 16.7%. Net-a-porter is the most popular platform with the Kiwis currently. When asked about the sustainability factor, more than 83% New Zealanders voted that they care about sustainability in Fashion.According to this survey, the Millenials and Gen Zs are the highest purchasers of fashion in the NZ market, and they are going to be the ones influencing the growth of Farfetch in this market. The Kiwis also want and enjoy the experience of

in-person shopping now more than ever, along with online shopping. Sustainability is clearly a very important factor for the Kiwis , and it decides the fate of any fashion brand in New Zealand.

TARGET CONSUMER:

Amelia Singh

32 year old woman

Entrepreneur

Has her own organic skincare line

Based in Wellington, New Zealand

Married

Our target consumer lives in big 2-bedroom row house with a huge backyard, near the Ngakau Civic Square. Her skincare line brand is quite settled, and is doing well. Due to the pandemic, online orders were doubled and she was also able to launch the mobile app. of the brand. She takes weekends off and loves to take part in outdoor activities around the city with her husband. She is a fitness freak and also has her own healthy eating food blog. She loves going to opera shows and art gallery openings, interest for which she got from her sister who owns her own art gallery.She mostly has to shop for luxury products online, as there aren’t a lot of flagship stores where she lives. She is looking for a luxury fashion

website that has a good personal shopping experience and pre-purchase trial options available. She loves to shop online, but wishes there was a better luxury store experience available where she lives. She is a conscious buyer, and always takes the sustainability factor into consideration when buying. She is a appreciator of technology, and is always excited to try new systems and initiatives.Living in New Zealand, she has always favoured environmental initiatives above all other. She prefers to buy products that are clean, organic and sustainable and is willing to pay a higher price at the cost of the environment.

KEY FINDINGS:

- Sustainability is going to be a very important and determining factor in the fashion industry in the coming years. “Consumers will be expecting companies to build back better from the crisis, with more sustainable and equitable systems that are building towards a positive future” (WGSN, 2021). Farfetch’s sustainability initiative is very important to keep Farfetch at the position it is, and even to push it further up on the scale.

- Apart from countries like China that make for the largest portion of the luxury buyers in the world, Farfetch also needs to concentrate on countries like New Zealand that will help them build and develop upon their sustainability initiatives. Percentage of luxury fashion buyers has increased alot in the past few years in NZ, and Farfetch needs to take advantage of this growth.

- As the world will slowly recover from the pandemic, people are going to want to have a physical shopping experience which might lead to Farfetch online sales dwindling. “Consumers will be on a mission in 2021, shopping with purpose both in-store and online for a faster, more streamlined experience” (WGSN, 2021). “The Store of the Future” is going to provide the customers with just that. Augmented reality and new in-store technology is going to provide for a more streamlined, quicker, safer and a touch-free way to shop. NZ a place that thrives upon technology, can be great place for this set-up.

- There’s always a looming threat of dozens of competitors and even giants like Amazon trying to enter the market, but as long as Farfetch continues to provide “value” to its consumers through positive and clean initiatives, customers will keep on choosing Farfetch.

- New Zealand is a country that’s high on it’s values and principles. They love a good tech improvement, which is what helped them recover from the pandemic so quickly. Their new found stability in this whirlwind, is going to attract a lot of new businesses to the country.

Q. What is the Business Strategy for Farfetch to expand into New Zealand?

Q. Why?

The biggest obstacle Farfetch would face with expanding in NZ is, local brands not signing up on the platform, and Kiwis not buying from the platform, because they don’t consider Farfetch as a platform for sustainable and conscious brands, which inturn defines all the buying decisions of a New Zealander.

Kate Sylvester is a New Zealand based ethical fashion brand. “At Kate Sylvester, our approach is slower, smaller and simpler”, says Kate about her sustainable clothing brand (katesylvester.com). This brand makes made-to-order pieces each season and does not

produce more than 100 units in any style. This brand aims to create modern yet timeless pieces that will last a lifetime. “We believe in mindful, careful consumption” , is their primary mantra (katesylvester.com). Kate sylvester has come up with various techniques in order to waste as less raw material as possible during their production processes. They work with various industries to repurpose and reuse any scrap they produce. From fabric cutting to packaging for their finished products, Kate Sylvester has found a way to make each step of the way more cleaner, conscious and sustainable. Kate Sylvester is also a member and the co-founder of a NZ based initiative called “Mindful Fashion”. This initiative aims to strengthen the local fashion industry by promoting sustainability and responsible and conscious business practices (katesylvester.com).

A Farfetch x Kate Sylvester collaboration ensures positive growth for the sustainability initiative of Farfetch. Kate Sylvester is a very well known brand in New Zealand, and a collaboration with them could also ensure passage to the NZ “Mindful Fashion” initiative. Farfetch being linked with such an initiative adds value to the brand and their methods and, this also solves the problem of Farfetch not being seen as a platform holding conscious brands, in the eyes of many, including the Kiwis.

FARFETCH WEBSITE MOCK-UPS:

MARKETING & BUSINESS STRATEGY:

- As I have mentioned before, New Zealand thrives on Sustainability and Technology. Farfetch’s collaboration with Kate Sylvester provides just that. Farfetch could launch a new “Store of the Future” in partnership with Kate Sylvester in Auckland, NZ. Launch of this store is guranteed to attract all those physical shopping experience hungry Kiwis. This Store will allow the buyer to see the entire sustainable journey of the garment they’re about to purchase in form of a short video in the “smart mirror”. This store can also act as a drop location for customers to drop off their pre-owned luxury items. The Store design can be a mixture of natural and tech, and the smart mirrors can keep displaying information about “Positively Farfetch”.

- Collaborating with a famous local sustainable brand such as Kate Sylvester, also gurantees the attention of cities other than Auckland, which weren’t as familiar and hooked onto Farfetch, as they would be after this collaboration.

- Kiwis love their outdoor lunches under the sun. Farfetch x Kate Sylvester can have a Pop-up Barbeque inviting the bloggers, brand owners and elites of New Zealand. The Pop-up can be a great way to make this collaboration widely known, even in cities other than Auckland and Wellington. Pop-up events are a way of engaging the customers emotionally with the brand and the product (WGSN, 2019).

- The Kiwis are very active on social media. In order to attract the Millenials and the Gen Zs, Farfetch can come up with a new instagram page, “Farfetch NZ”. Social media campaigning for this collaboration can be done on all of Farfetch’s channels i.e, Instagram, Facebook, Linkedin, Youtube and Twitter. Paid collaborations with sustainable fashion bloggers and influencers will help to promote this collaboration more. A video advertisement on youtube or an instagram reel, that heroes ethical fashion and explains this collaboration can make a huge impact.

- Jose Neves and Kate Sylvester can do interviews about their new collaboration with relevant companies like Vogue Business and Business of Fashion. This collaboration will go a long way in proving Farfetch’s dedication to take on conscious brands on their platform.

CONCLUSION:

“POSITIVELY CLEANER”, “POSITIVELY CIRCULAR”, “POSITIVELY CONSCIOUS”, and “POSITIVELY INCLUSIVE”, are all 2030 goals under the “POSITIVELY FARFETCH” initiative. Farfetch’s expansion into New Zealand, and their collaboration with a conscious fashion brand like Kate Sylvester, will get them several paces closer to achieving their 2030 goal (farfetch.com).

- The Business strategies proposed are based on a detailed and thorough analysis of the country, as well as of the company. All these implementations will help in overcoming the current shorcomings of Farfetch in New Zealand, and also help in setting and achieveing new goals to conquer the Kiwi market to it’s highest potential.

- This expansion will also provide the under representated, and unknown Kiwi brands, with a huge global platform that will help them spread this environment consciousness not only in New Zealand, but worldwide.

Download the full report from here.

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