Why FARFETCH has lost its Mojo? What went wrong?

FARFETCH’s fall from grace has not only affected its position amongst the investors but it has also lost its mojo for the shoppers.

Your fashion-favourite destination FARFETCH was worth around $23 Billion during the pandemic and now it has been acquired by Coupang, which apparently became the ‘white knight’ with a shining $500 million lifeline. This London-based tech-darling dominated how the luxury goods were sold online in 2021, but in December 2023 announced its acquisition by this Korean e-commerce giant. Although the some experts say that the signs of the downfall of this fashion giant have been apparent, it took the commoners by surprise

Well, if you are one of those who have missed the journey of FARFETCH going off-path, then you gotta stick with us till the end. We have rounded some of the factors that potentially prompted the downfall of this luxury fashion store and took away its mojo. Just to give you an idea of how bad the things went we cannot ‘not’ mention how its shares listed on the New York Stock Exchange saw a significant decline from their peak during the pandemic in February 2021, dropping from $73 to $1.60 by October 20, 2023. Subsequently, the price plummeted further to a new low of $0.64 on December 15, and a result the trading to be halted on Monday.

So stick along while we unfold the potential reasons why FARFETCH seems to have lost his mojo!

FARFETCH Business Model

It is no news that FARFETCH acts as a multi-million dollar platform that buys products from independent boutiques from all across the world. These boutiques dealt in luxury clothing, footwear and accessories and they were willing to offer the discounts that FARFETCH has utilized to attract its customers. But soon after the big brands cut off their supply to these boutiques to maintain control over their goods, FARFETCH was forced to deal with the brands directly, minimizing its chance to turn a profit. When the premium brands like Louis Vuitton and Hermés refused to indulge with third-party retailers, it was also predicted that many other designers will soon follow this trend.

You can know more about this seller through our FARFETCH vs Net-a-Porter blog!

Buying New Guards Group

In 2015, FARFETCH made a deal to buy New Guards Group for $675 million that held the licenses for streetwear brands and most notable of them was Off-White. This sudden move made by FARFETCH stirred a debate whether the brand is disciplined enough to handle its capital and invest in profit-making endeavors. As a result of this, FARFETCH lost more than $2 billion off its valuation the same day. It also acquired Browns and Violet Grey to push up its retailing through the brick-and-mortar stores in the same year. But both of these acquisitions failed to give the much needed boost to FARFETCH and ended up hurdling the cash flow with loss of investments. Despite of having a $4.1 billion of sale figure, FARFETCH reportedly had an underlying loss of $98.7 million.

Poor Performance of Chinese & American Market

FARFETCH has its second largest market in China and needless to say that the pandemic throttled the sale to a great extent. And Russia-Ukraine war added more trouble to it when Russia happens to be its third-biggest selling ground. Moreover, FARFETCH failed to achieve the numbers that it experienced in the early months of COVID-19 Pandemic. The sharp downfall in its share value and its refusal to release its quarterly financial results led to a lot of speculation about the company being bankrupt or going off the market. These reasons, collectively, led to FARFETCH losing value in the eyes of its investors and shoppers alike.

Weak Marketing by FARFETCH

Weak marketing efforts can certainly exacerbate identity crises by failing to effectively communicate FARFETCH’s unique value proposition, brand message, and differentiation from competitors. Without a clear and compelling brand narrative, consumers struggled to understand what sets FARFETCH apart from other luxury fashion platforms. FARFETCH’s dedication to support independent stores has brought their unique creations to the doorstep of the fashion-mongers. However, its attempt to acquire businesses rather confused the shoppers even further and FARFETCH lost its mojo as a luxury retailer.

Reckless Investments

As per the insiders’ reports, FARFETCH went off the tracks after the pandemic as it started to expand its product range. They were too busy buying new brands and collaborating with new designers that they didn’t notice that there problems are mounting up. Not a long ago in 2020, Richmont and Alibaba both invested $300 million. Now, with both being out of the picture, FARFETCH desperately needed another lifeline to keep going. Initially, Richmont, with its group of YNAP brands, was willing to adopt FARFETCH Platform Solutions but it pulled out the deal later. This not only affected FARFETCH but also has a negative impact on Richmont shares.

It is worth mentioning that FARFETCH is not the only who is struggling to stay afloat, in fact there are several other e-commerce platforms who have dealing with enormous losses. Most of them have resided to lay-offs to cut their losses. But when it comes to luxury shopping, people don’t associate it with practicality. Even the frequent availability of discounts portrays of message of its products ‘being accessible to all’ that doesn’t go well with the essence of luxury and rarity. Since FARFETCH has been caught up in the cobweb of financial turbulences, its reputation as a luxury store has been somewhat tarnished.

There has are various speculations about why FARFETCH has lost its mojo but after $500 million capital injection from Coupang – the Amazon of Asia, we are hoping that it works as an elixir and returns its magic.