The Luxury E-Commerce Wars Heat Up

According to Mr. Cohen, the brand had received “messages from customers asking why such expensive pieces were selling on Amazon.”

Yet going it alone is also increasingly untenable. LVMH Moët Hennessy Louis Vuitton, the largest luxury group in the world, has publicly rejected the idea of working with Amazon, but even its proprietary solution — the wholesale platform 24 Sèvres, created in 2017, with an exclusive arrangement with Dior and Céline — has not gotten meaningful traction with consumers, and it continues to lose money. (The group also made a multimillion-dollar investment in Lyst in 2018.)

“The term ‘platform’ is intoxicating at first blush, but at second, it’s a license to spend tens of billions of dollars before you see any return,” Mr. Galloway, the New York University professor, said.

Enter the Farfetch alliance.

Farfetch, which went public in 2018, has a business model that includes an e-commerce marketplace for brick-and-mortar boutiques, and it works directly with brands on their back-end technology and logistics. It also has direct brand ownership thanks to a $675 million acquisition of New Guards Group, which manufactures and distributes brands like Off-White and Palm Angels. This month, the company also reported a record quarter. The value of goods sold reached $798 million in the three months ending Sept. 30, a 62 percent increase from the same period a year earlier. Gross profit was up 82 percent, edging the 13-year-old company toward profitability in 2021.

Mr. Neves of Farfetch acknowledges that Amazon is his leading competitor in the race for luxury e-commerce supremacy, so it makes sense that he would team up with its greatest international rival, Alibaba.

The new Richemont-Alibaba investment in Farfetch underscores how Alibaba has been able to circumvent some of the issues that luxury brands have with Amazon. Its Tmall Luxury Pavilion has successfully lured almost 200 high-end names onto its site by promising a highly burnished and controlled customer experience and a clampdown on counterfeit products.

It also comes after new restrictions on international travel, which means that Chinese consumers — the consulting firm McKinsey & Company predicts they will account for $178 billion in luxury spending by 2025 — who used to splurge on luxury purchases abroad are now buying them at home. Alibaba and Richemont will put $300 million each into Farfetch itself and another $250 million each into a new joint venture called Farfetch China. They will own 25 percent of the Chinese entity and have an option to buy another 24 percent in about three years.

source: nytimes.com