Last week, luxury platform Farfetch made its boldest move yet.
Following up its jaw-dropping Thursday announcement revealing $1.15 billion in investment from Alibaba, Compagnie Financière Richemont SA and Pinault-owned investment firm Artemis, the company laid out its vision for the future in a Friday call with investors.
As founder, chief executive officer and chairman José Neves simply put it, “Our mission is to be the global platform for the luxury industry.”
Lofty words, but there’s also a plan, an infrastructure and plenty of investment to drive it. Much of this mission hinges on “Luxury New Retail,” a key initiative for the partners that seeks to digitize the global luxury business. LNR is more of a strategy than a new platform, broadly referring to an approach that brings together the tech prowess, market reach and luxury expertise of Farfetch, Alibaba and Richemont.
“Luxury New Retail is not a specific technology product or solution,” Neves clarified to WWD. “It’s the division and also the full suite of solutions that we can offer brands that are completely connected. Because everything we offer brands is completely integrated and connected.”
For instance, its marketplace is connected to Farfetch Platform Services, a multichannel suite of e-commerce services. FPS is connected to the company’s Store of the Future, the execution of its “augmented retail” strategy that brings a deep set of digital and intelligent features to in-store environments. And Store of the Future, in turn, is connected to the marketplace, broadly or in China.
“Everything is the same API, everything is the same data architecture and data layer,” said Neves. APIs, or application programming interfaces, are developer tools that allow different kinds of software to work together or, in some cases, share data. “Obviously we segregate data when it’s confidential for specific brands,” he added. “But it’s essentially one single platform, one single API powering all of this.”
What that means is LNR is no reset or pivot from Farfetch’s “augmented retail” concept, but rather, its spiritual successor. And the benefit of launching off of its existing ecosystem is that it’s informed by the company’s expertise and past experience.
It sounds circular, but the strategy brings a level of interconnectedness that allows a shop to serve its patrons based on a comprehensive view of the individual’s tastes, preferences, buying or browsing habits, blurring the line between online e-commerce and offline retail. It all becomes a cohesive — or in oft-used retail parlance, an “omnichannel” — environment designed to take care of the customer.
Farfetch’s Store of the Future illustrates that well. Shoppers can use digital check-ins at a store and add to their online wish lists as they physically peruse product and even receive personalized recommendations, use smart fitting rooms decked out in data-driven mirror displays or check out using mobile payments.
The company’s partnership with Chanel on its “boutique of the future” offered clientele that futuristic luxury retail experience in Paris, and its continuing partnership will roll out in more destinations. But with Chanel’s exclusivity expiring now, the door is open for other luxury maisons.
All sorts of retailers, in grocery to athletic goods, integrate technology in their physical spaces. But the Chanel experience is distinct and informs Farfetch’s approach.
“In luxury, it’s not about people grabbing a Chanel handbag and walking out of the door, without seeing or talking to anyone or paying. Chanel does not want that. You don’t want that with luxury,” said Neves. “Luxury is about enhancing the human factor, making sure that the adviser can focus on doing things that only humans can do — which is storytelling, which is inspiring customers, which is being creative and putting looks together and offering, on the fly, very personal recommendations to customers. And this is what our technology really focused on.”
Store of the Future, as part of the Luxury New Retail initiative, will soon reveal its second iteration through Browns, the British fashion and luxury goods boutique bought by Farfetch in 2015 as a sort of retail testing environment. For now, Neves is mum on what Store of the Future, version 2.0, will entail. But the company is clearly not resting after the frenzy of its announcement last week.
That’s just one part of the new initiative. According to the company, LNR will serve both monobrand and multibrand distribution strategies for luxury brands, covering e-commerce web sites and apps, in addition to such omnichannel retail technology. It will allow access to the Farfetch and Tmall Luxury Pavilion marketplaces through a single integration.
For Neves, this is a vision of retail that may seem rather futuristic to some Western audiences, but it has become common for consumers and retailers in places like China.
“In China, you have mom-and-pop shops, like convenience-store independents. This has been around for maybe for two generations. They’re connected to Tmall, which sends them data-driven recommendations, ‘You should have this shampoo, because there’s five people in your quarter that buy the shampoo online, and you should have it on your shelf.’ That’s the level of sophistication they’re in,” Neves said.
Now Farfetch is not only banking on the combination, and interconnection, of its efforts to bring such intelligence to the luxury experience. It also has new partner Alibaba’s considerable technology might behind it.
“That’s why the partnership with Alibaba is so exciting, because they created this,” the ceo continued. “Amazon, I think, is a few years away from Alibaba, in terms of sophistication or of integrated omnichannel retail. I think Alibaba is definitely better than anyone in the world.
“And, therefore, having them say that Farfetch is the right one to do this for luxury, and to prove this globally, was a huge stamp of approval for us,” he said. “But also, we will learn so much.”
And, of course, Farfetch will have the immediate benefit of extending its reach to Alibaba’s 757 million consumers. The two companies will also form a steering group for the LNR initiative, alongside Richemont chairman Johann Rupert and Artemis chairman François-Henri Pinault, who also is chairman and ceo of Kering, who will act as founding members.
The timing for this initiative, perhaps, couldn’t be better. The coronavirus pandemic has created a roiling 2020 for the luxury sector, making technologies and retail platforms geared specifically for this industry into essential tools. While this scenario didn’t drive Farfetch’s investment or partnership plans, it did create a sense of urgency, Neves admitted.
“The time when brands need access to that luxury customer, who is no longer traveling, is now,” he said. “The time when brands need to have fully connected stores, and really maximize the visibility of their inventory and the quality of the online and offline experience, is really now.”