FARFETCH’s fall from grace has not only affected its position amongst the investors but it has also lost its mojo for the shoppers. 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 luxury goods were sold online in 2021, but in December 2023, it announced its acquisition by this Korean e-commerce giant. Although 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 things went, we cannot 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 as a result, the trading was halted on Monday.
So stick along while we unfold the potential reasons why FARFETCH seems to have lost his mojo!
It is no news that FARFETCH acts as a multi-million dollar platform 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 utilised to attract its customers. However, 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, minimising its chance to turn a profit. When premium brands like Louis Vuitton and Hermés refused to indulge with third-party retailers, it was also predicted that many other designers would soon follow this trend.
You can learn more about this seller through our FARFETCH vs Net-a-Porter blog!
In 2015, FARFETCH made a deal to buy New Guards Group for $675 million, which held the licenses for streetwear brands, and the most notable of them was Off-White. This sudden move made by FARFETCH stirred a debate about whether the brand is disciplined enough to handle its capital and invest in profit-making endeavours. As a result of this, FARFETCH lost more than $2 billion off its valuation the same day. It also acquired Browns Violet Grey to push up its retailing through brick-and-mortar stores in the same year. However, both of these acquisitions failed to give the much-needed boost to FARFETCH and ended up hurdling the cash flow with a loss of investments. Despite having a $4.1 billion sales figure, FARFETCH reportedly had an underlying loss of $98.7 million.
FARFETCH has its second largest market in China, and needless to say, the pandemic throttled sales to a great extent. The 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 the 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 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.
As per the insiders reports, FARFETCH went off the tracks after the pandemic as it started to expand its product range. They were so busy buying new brands and collaborating with new designers that they didn’t notice that their problems were mounting up. Not 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 of the deal later. This not only affected FARFETCH but also had a negative impact on Richmont shares.
It is worth mentioning that FARFETCH is not the only one that is struggling to stay afloat; in fact, there are several other e-commerce platforms that have been 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 the 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 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.
