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Last month, Farfetch quietly announced that it would be discontinuing Farfetch Platform Solutions, marking a turning point for luxury fashion and the way it operates in the e-commerce age. The move is an effort by new parent company Coupang to focus on the Farfetch marketplace after buying it out of near bankruptcy last December. Brands and retailers who relied on Farfetch Platform Solutions (FPS), which offered services including running brand e-commerce sites and fulfilment, are compelled to transition to other providers, despite Farfetch not yet specifying a timeline.
It’s the end of the road for Farfetch founder José Neves’s vision for the future of luxury. FPS, launched in 2015, was the backbone. He called it “luxury new retail”, and the mission was to be the global platform for the industry — selling “picks and shovels” to luxury players instead of mining for gold. As brands grew, so would their needs for services. FPS clients have included Manolo Blahnik, Harrods, Balenciaga, Saint Laurent, Paul Smith, Roberto Cavalli, Balmain, Pucci, Sergio Rossi, Marc Jacobs and Philipp Plein, with access to a menu of services such as inventory integration, global logistics and fulfilment, global payments systems, the running of e-commerce sites, in-store apps and other “connected retail” services, as well as selling brands directly on the Farfetch marketplace. At its peak, Farfetch was investing $200 million a year in technology and employed 1,000 engineers as it pursued what Neves considered a “very, very large opportunity”. “What we want to do is be the platform that people can build upon so that people don’t have to reinvent the wheel,” he told Vogue Business in 2021.
Farfetch Platform Solutions is now profitable, but can it become luxury e-commerce’s go-to technology? As talks with Richemont’s YNAP progress, Farfetch CEO José Neves talks strategy to Vogue Business.
It’s a model that worked for Amazon (via Amazon Web Services), and this applied a uniquely luxurious slant, building on what Farfetch’s marketplace knew about selling online to global luxury consumers at a time when high-touch tech was also expensive and time-consuming to engineer. Competitor Yoox Net-a-Porter (YNAP) had also long played in the space: introduced in 2006, YNAP’s Online Flagship division at one time powered e-commerce for at least 30 brands, including Moncler, Valentino and The Row, in addition to seven Kering brands. Services included monobrand e-commerce logistics, spanning on-model photography, customised packaging, some omnichannel services and ‘omnistock’, meaning the ability to sell the same pool of inventory across multiple sites and locations.
But e-commerce today is less of a mystery to most luxury brands, with many having found it more beneficial to bring operations in-house. Client lists have dwindled for both FPS and YNAP: Kering discontinued its joint venture with YNAP in 2020 to bring its operations in-house, while Stone Island brought its operations in-house under new parent company Moncler (which also used to be a YNAP client). It’s unclear how many brands still use YNAP, which didn’t respond to requests for comment. Farfetch clients now have no choice but to move on. Most of the brands that Vogue Business contacted declined to share details or did not respond to queries on how they are making the transition. Harrods, after five years of trading with FPS, confirmed that it would be transitioning to other providers starting 25 October.
“For any brand, especially in the luxury sector, re-platforming from Farfetch Platform Solutions isn’t just a simple e-commerce migration. It’s a fundamental shift in how the business operates,” says Negin Yeganegy, former executive director of group e-commerce and chief digital officer of YNAP, who co-founded fashion-tech consultancy StudioThree with former Farfetch executive Carol Hilsum.
The challenge of investing in replacement technology and partnerships, Yeganegy says, is particularly daunting for brands without in-house tech teams or the relevant expertise, because FPS provided comprehensive services that extended from back-end tech and omnichannel retail integration to global supply chain management and logistics. “Moving away from this system, depending on how deeply embedded into the business operations, means replacing or rebuilding entire operational infrastructure — not just e-commerce functionality,” she says. For smaller, digitally native brands, she adds, there might be a silver lining, as moving away from FPS could offer opportunities to innovate.
Personal control and luxury consolidation
As the importance of e-commerce sales has increased, so too has the risk of relying on external platforms. Brands want more control. “Brands increasingly want to own their digital storefronts and manage supply chains independently,” Yeganegy says. “This shift has significant implications for how brands scale and operate globally. While services like FPS provide a streamlined, fully managed service, they can limit a brand’s ability to innovate at the pace required in today’s e-commerce landscape.”
When the share of e-commerce businesses reached about 10 per cent of sales, brands started seeing the value of internalising that channel, says Bain & Co partner Stefano Fenili. “This was not only to directly control a relevant portion of the sales, but also to directly control what has become one of the first and most relevant touchpoints with end consumers.”
The role of websites has shifted from making sales to being destinations for loyal customers to spend time and learn about the brand. In its shift to in-house e-commerce, under new parent Moncler, Stone Island’s website now houses archival insights and brand storytelling, with the goal of not only aiding sales, but in inviting customers to spend time and return to the site, Stone Island CEO Robert Triefus recently told Vogue Business.
Consolidation has made this process easier. Parent companies can build their own processes at the group level, creating approaches that maximise the economy of scale without venturing past their own moats. Stone Island, for example, used the playbook of sister brand Moncler who previously went through a similar process. “E-commerce has now reached a scale where it is more feasible for larger brands to run their own operations, and this gives them the flexibility to conduct business as they wish,” says Globaldata managing director and retail analyst Neil Saunders.
Consolidation is only intensifying; Tapestry Group (parent of Coach, Kate Spade and Stuart Weitzman) is working to acquire Capri (parent of Versace, Jimmy Choo and Michael Kors). HBC, the parent company of luxury retailer Saks Fifth Avenue, is acquiring Neiman Marcus Group, including retailers Neiman Marcus and Bergdorf Goodman, with Amazon and Salesforce among investors.
A few platforms that stand to gain
The difficulty in pivoting from FPS is its “deeply integrated nature”, Yeganegy says, spanning supply chain and inventory management, warehousing and fulfilment, global distribution and returns, and customer service; they can also extend to omnichannel services, marketplace interaction and marketing. “A brand using FPS for both its online store and marketplace integration would need more than just a new e-commerce platform. They’d also need a network of third-party logistics and perhaps new enterprise resource-planning systems to manage inventory and supply chain. These aren’t easy shifts to make, especially without disrupting day-to-day operations, she says. For many, a phased approach, rather than a “big bang cut-over”, could mitigate some risk — but this may not be feasible, depending on Farfetch’s timeline.
It takes about six months for brands to onboard to Scayle, a “composable” e-commerce tech provider, which means that services are modularised. That’s considered relatively fast. “There’s a lot of frustration with platform providers whose systems are either too rigid, too complex, or are no longer adapted to new market standards,” says Tobias Ring, managing director of commercials at Scayle.
While there are other end-to-end white-label service providers, none are as tailored to luxury fashion as the YNAP and Farfetch offerings, Yeganegy says. There are a number of companies who provide some similar services, such as Shopify (used by Oscar de la Renta, Nina Ricci, Shiseido and Moda Operandi), BigCommerce (used by Badgley Mischka and The RealReal), Salesforce Commerce Cloud and THG’s Ingenuity (specialising in beauty, health and wellness), Global-e (which specialises in cross-border commerce, used by Marc Jacobs, Ralph Lauren and Hugo Boss) and Scayle (specialising in e-commerce operations for multi-brand, multi-country or multi-channel businesses). Alternatives still require customisation for luxury brands and generally don’t provide the same end-to-end logistics and global infrastructure as FPS, Yeganegy adds, and brands would need to combine these platforms with other services, such as logistics partners.
For smaller brands, the most difficult and costly integration point is the logistics portion, Fenili says. Brands need to set up business-to-consumer logistics operations, which are typically very different from and more expensive than business-to-business logistics. Carrier costs might also rise, compared to the larger volumes associated with larger companies and multi-brand providers. That’s on top of the ongoing costs of running operations, such as content production.
The high-end brands among StudioThree’s clients are increasingly gravitating toward in-house operations using what is called ‘headless’ commerce, a modular approach that separates the front-end presentation from the back-end e-commerce functionality. Because of the requisite investments in talent, technology and infrastructure, some brands still opt towards external tech partners.
After Farfetch’s challenges, “there is probably also some nervousness around using white-label services”, Saunders says. “Essentially, brands don’t want to put all of their eggs in someone else’s basket. That doesn’t mean that white label [tech] won’t play a role — it still offers convenience, flexibility and simplicity for minimal capital outlay — but there will be a lot more pickiness from brands.”
What’s next for Farfetch
Farfetch didn’t break out figures for FPS in its earnings calls, but it reported that FPS was profitable as of November 2021. When Coupang acquired the company, it seemed like its logistics capabilities, which include sophisticated robotics and AI, were a natural fit — perhaps enabling FPS to become an even more competitive arm of the business. While it’s understandable that Farfetch’s additional businesses, such as New Guards Group and English retailer Browns, might now be up for sale, its tech services seemed less at risk.
But Farfetch instead is going back to its origins, with its parent company seeing the most opportunity in, of all things, multi-brand luxury e-commerce. This could be a tough sell, as FPS onboarded a number of brands into the Farfetch marketplace, and the wider struggles at the company have led to brands discontinuing their relationships.
In a statement, a Farfetch spokesperson said: “Our disciplined investment and operational excellence enable us to deliver exceptional shopping experiences to our customers, providing them with the best selection, service and savings. With our focus on the Farfetch marketplace, we will continue building the best luxury experiences for customers, brands and boutiques.”
It turns out that, even for a company hoping to be seen as a global luxury savant, simply selling luxury fashion online was a tough nut to crack.
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