José Neves’ Connected Retail Vision Is Taking Shape

·5 min read

José Neves is ramping up the next revolution — truly connected retail.

Already Neves, founder, chairman and chief executive officer of Farfetch, is one of fashion’s premier multitaskers, pursuing a vision of becoming “an operating system” of the $300 billion luxury industry.

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But now, with closer ties to Alibaba and the support of luxury giants such as Johann Rupert and François-Henri Pinault, Neves is expanding Farfetch’s efforts to plug in stores.

“It’s not just the vision from geeks like me, that get really excited about gadgets,” Neves told WWD. “It’s a vision that is really based on the love of fashion as well.

“I’m a technologist by vocation,” he said. “I love revolutionary technology and I love innovation. I can’t help it. It’s like a kid in a candy store.”

Much of the here and now at Farfetch is about the company’s digital business and the expansion to Tmall in China. “The marketplace business is on fire,” Neves said. The company reported first-quarter results to Wall Street Thursday, revealing a 46.4 percent revenue gain, a faster start than projected, and a better outlook for the year.

Longer term, more of the action might be in stores.

Neves said there was a “huge online opportunity” as digital evolves and makes up 35 percent to 40 percent of sales.

“This industry will be a $500 billion industry in the next five years,” he said. “You have $150 billion give or take in online luxury opportunity. But that means 65 percent, give or take, of sales are going to be offline.”

And it’s a world still ripe for revolution.

“Right now, the offline experience hasn’t evolved much,” Neves said. “You have maybe a better credit card machine if you’re lucky.”

Retailers, by and large, don’t know who customers are when they walk into stores, what they have been searching for online, what they take to the fitting room and so on.

Farfetch is working to bring that type of online understanding offline. The company developed its connected retail approach with Chanel and is now rolling it out to other retailers and teaming with Alibaba, which has pursued its own brick-and-click vision, to supercharge the effort.

The company has been courting top executives and using its Browns Brook Street location in London as a testing ground. It also opened its third boutique with Chanel, in Monaco, and signed Printemps in Doha, which will use Farfetch’s technology in its new 300,000-square-foot flagship. The company is also partnering with Cidade Matarazzo complex in Brazil to create a technologically advanced luxury retail village.

And Farfetch and Alibaba plan to launch a retail innovation lab in China.

Neves has some practice at this.

The company bought the Browns boutique five years ago in London and charged up the business with tech.

“Browns went from being a very small retailer to a multihundred-million pounds retailer in five years with a new brand positioning leading the industry in terms of independent retail,” Neves said.

Browns is just a small part of the still-rapidly evolving picture.

Farfetch gained more ground in the first quarter.

The luxury platform’s revenues for the three months ended March 31 increased to $485.1 million from $331.4 million a year earlier. The gross merchandise value of sales on the platform grew 50 percent to $916 million.

(Farfetch also boosted its annual GMV estimate to growth of 35 percent to 40 percent, up from the 30 percent to 35 percent previously projected. That would put the platform growth of as much as 98 percent over two years).

Adjusted losses before interest, taxes, depreciation and amortization improved to $19 million from $22 million a year ago.

After-tax profits for the quarter were an accounting aberration and tallied $517 million, including a $660 million non-cash benefit from “items held at fair value and remeasurements.”

While Farfetch owns some brands, such as Palm Angels in its New Guards Group unit, the company is primarily a connector.

Lately, Neves has been making some pretty big connections, such as the deal to put Farfetch on Tmall, which was made possible through a mega partnership with Alibaba and Rupert’s Compagnie Financière Richemont (an agreement that also received some buy in from Pinault, managing partner of Artemis, which owns another luxury giant, Kering).

Farfetch’s roots are in its platform, a digital space where commerce happens and the company can sell its services to merchants a la carte.

In tech terms, that’s a scalable business model — some new capability can be invented once and then sold many times over, producing larger and larger profits along the way at little additional cost.

While that has helped whet the appetite of Wall Street, investors seem to run hot and cold on Farfetch. The stock traded as high as $73.87 in February and closed down 4.4 percent Thursday to $37.03, giving it a market capitalization of $13.1 billion. Following the quarterly update, the shares slipped 1.2 percent in after-hours trading.

Farfetch is in some ways still developing in the old-fashioned manner as well with category expansion.

Next year, it plans to launch into the beauty category with an eye toward presenting consumers with a whole look.

While many big beauty names — protective as always of their brand names and positioning — have been shy about digital platforms, some fashion brands that are fans of Farfetch might see it as a good home for their beauty products as well.

The company could also seek to build or buy other bridges to beauty. WWD reported last month that Farfetch had held talks with Cassandra Grey’s luxury beauty firm Violet Grey for a potential acquisition or partnership.

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