DUBAI — Farfetch signed a joint venture agreement Wednesday with Dubai-based Chalhoub Group to set up operations in the Middle East.
The luxury e-commerce platform will launch in Arabic in the first half of 2018 and will open offices in Dubai within a month. “We are hitting the ground running,” said José Neves, chief executive officer of Farfetch, in a phone interview with WWD immediately after signing the agreement. “It’s all about executing and delivering value to these customers.”
The partnership brings together Farfetch’s technology and global reach with the Chalhoub Group’s regional presence and market expertise. The Chalhoub Group, the region’s largest luxury retailer, operates more than 650 stores across 14 countries in the Middle East and has a workforce of 12,000-plus people.
Patrick Chalhoub, co-ceo of Chalhoub Group, said: “There is a huge gap in the market, which has to be serviced in the best way. From the first day José and I met, not only was it a good cultural fit, but we also had a common objective of how can we service our customers better. I think it’s a marriage made in heaven.”
The joint venture will give Farfetch’s Middle East customers more curated goods for local tastes and more personalized VIP service. “One of our strategic pillars is to be the most global local player in online luxury,” Neves said. “No international player has fully localized their service yet, and so the market remains largely untouched.”
Neves said his company’s edge over rivals — including Yoox Net-a-porter Group, which began ground operations in the Middle East last October — is the speed at which it plans to move ahead. “We have a DNA here at Farfetch of fast execution. We have a spirit of not just talking about it but actually doing it,” he said.
Farfetch’s marketplace business model enables it to partner with stores, without holding any inventory. It is a good combination with Chalhoub.
“With Chalhoub we have the ability to leverage their brick-and-mortar presence. They have some amazing own concepts. The combination of our omnichannel technology and Chalhoub’s brick-and-mortar retail footprint brings the best service level that anyone in the industry can offer,” Neves said. “Together we have a unique competitive advantage.”
The Chalhoub Group’s concept stores will be onboarded to Farfetch as partner boutiques. The first to join the platform will be Level Shoes, along with Level Kids and Tryano, giving those concepts a wider global audience.
The more than 700 boutiques on Farfetch will gain deeper access to the Middle East’s e-commerce market, which is projected to be worth $24 billion by 2022. “It’s an incredible opportunity given the Middle East has the highest smartphone penetration in the world. It’s an $8 billion luxury goods market, yet the penetration of luxury goods online is one-tenth that of the U.K. So you can see by the numbers there is a huge hunger and need for fully localized service and curation of merchandise, personalized and localized content,” Neves said.
For the Chalhoub Group, the partnership catapults them into the e-commerce space very quickly. “This partnership will be a huge acceleration for our transformation,” Chalhoub said. “With Farfetch’s technology and support we hope to be online faster to service our customers in the Middle East and all over the world.”
Rania Masri, who led the award-winning concept store Level Shoes for five years, was recently appointed the group’s chief transformation officer. She manages an internal team charged with leading the company’s digital transformation movement, called SHIFT.
Masri said: “Both customers and employees have evolved so much, are so connected online, as an organization we need to follow where the consumer is and bring the experience to their fingertips. It’s part of the natural evolution of the company from being a traditional distributor and retailer of luxury to a more hybrid approach, which brings luxury experiences to customers directly at their fingertips.”
The Chalhoub Group also plans to lean on Neves’ expertise in technology. “What is the fantastic opportunity for us is the access to the technology,” Chalhoub said. Neves added: “It will always be about the consumer and next big thing we can bring to them.”