This is an excerpt from a Business of Fashion article that discusses the unique approach of Farfetch:
While Asos, Yoox and Net-a-Porter found success by replicating a traditional wholesale model online, Farfetch has taken a fundamentally different approach, rooted in platform thinking and the connective tissue of the web. “I didn't want to be another retailer with a traditional model. I wanted to do what no-one had done,” explained Neves.
Like most pre-Internet business models, the traditional wholesale model is a linear process. Firms buy merchandise, which they push out and sell to customers. Value flows in one direction much like water through a pipe. Net-a-Porter is a pipe. So is Yoox. These businesses take on significant inventory risk and have
Also at the heart of the company’s vision is what retail strategists call ‘
“We fundamentally do not believe in making a specific order for the online channel, sending it off to a remote warehouse in the middle of nowhere and shipping it from there to the world,” added Neves. “That is the old e-commerce model. We believe that's finished. It's not the model of the future. The model of the future is distributed stock. The new inventory is made up of dozens — hundreds, in our case — of micro-warehouses.” Indeed, for Farfetch, the warehouse is everywhere, distributed across its global network of stores.
This has enabled the company to deploy services like ‘click and collect,’ which allows customers to buy items from any Farfetch boutique and pick them up, try them on and return them over the counter at any store in the network. Using the same backbone, Farfetch is also planning to deploy same-day delivery across multiple cities. “We want to do this in New York, LA, Milan, Paris, London. No-one does it yet in five cities. The maximum is two or three. That’s because the old e-tail model depends on where your warehouse is situated. If your warehouse is in London, you can service London. If it's in LA, forget it. With this new
As online and offline commerce continue to merge, physical stores are becoming increasingly wired. “Stores are going to be completely different from what they are today,” predicted Neves.
“From day one, we were in stores with software that
It’s a bold vision and executing towards it has required Neves to build a team that’s equally rooted in fashion and technology. “It's the secret sauce of the business. If you look at our team, everyone comes either from a fashion background or a tech background. It's balancing the left-brains with the right-brains,” he explained. “I think maybe in a more usual retail environment, there would be a tech team and a brand team. Here it's just one seamless team.”
Major fashion incumbents, like LVMH or Kering, which each own big stables of luxury brands, have largely failed to innovate at the scale of Farfetch. “I think there’s a DNA factor. These companies are built on craftsmanship and the creative side of things,” said Neves. “I always say that if e-commerce is one percent of a business, it will be one percent of the brain space of your CEO. So the digital guy sitting there in the corner? ‘You’re worth one percent, we'll deal with you later.’ It's a vicious circle. Because it's small, digital doesn't get the care and the patience it needs. So it remains small.”
“We have a hundred engineers. We will have 200 by the end of this year. It's a huge investment. No brand can convince the CEO to hire 200 engineers. If you're on the $1 billion mark, you can do it, but it takes commitment and many of these companies are publicly traded. How will the market react when they say they will have two quarters of negative results because they plan to invest heavily online?”