Struggling luxury e-commerce platform Farfetch – which transformed the digital landscape of luxury fashion before almost collapsing into bankruptcy – has found a white knight in Coupang, an e-commerce giant dubbed the ‘Amazon of South Korea’.
Coupang will extend a $500-million lifeline to the London-based Farfetch, which connects shoppers to boutiques and also provides back-end technology to larger brands and retailers. The rescue deal gives Coupang a foothold into the luxury goods industry – and a route into the vast U.S. market.
Once a disrupter, Farfetch struggled as luxury brands caught up to digital commerce
When it launched in 2007, Farfetch – an online marketplace for customers buying goods from brands such as Balenciaga and Gucci – was hailed as part of the revolution in bringing luxury fashion into the digital age. It was among the big winners from the pandemic, catering to an online audience with disposable income to spare. But as luxury brands – once rooted in bricks-and-mortar stores and slow to convert to e-commerce – eventually caught up, they wanted customers to visit their own online stores, not a third party’s. “They have evolved from laggards to leaders,” one brand strategist told Vogue Business. Farfetch began to struggle, with its share price plummeting 97% since it listed in 2018, and its valuation cratering from $24 billion in 2021 to around $220 million, the FT said.
It’s part of a broader reckoning in online luxury fashion
Farfetch isn’t the only company that may be forced to find a new owner thanks to a painful slowdown in global luxury goods -- just three years after the pandemic sales boom. Luxury clothing site Matchesfashion is in talks to be bought by British retail tycoon Mike Ashley’s Frasers Group, Sky News reported, with its private equity owner expected to suffer heavy losses. While the rescue bid by Coupang will give Farfetch time to recover, the South Korean giant has little expertise in the luxury market, with Business of Fashion noting that it specializes in selling “wool-blend overcoats for as little as $20, not $16,000 Brunello Cucinelli cashmere jackets.”
The ‘Amazon of South Korea’ doesn’t deliver in the U.S. – yet
The Farfetch deal offers the South Korean company a path into the U.S. – where it is already listed on the New York Stock Exchange, and where it is headquartered, having moved its main office from Seoul to Seattle last year. Currently Coupang’s platform allows U.S. sellers to connect to online shoppers in South Korea, where its “rocket delivery” sees goods delivered in as little as six hours – like Amazon, but faster, as one executive told the Seattle Times. Having a toehold in the high-end luxury market would set it apart from competitors such as Shein and Temu, which have “exploded” in the U.S. in recent years selling lower-priced goods online, Business of Fashion noted.