It’s now official. While rumors have swirled for several days, Chinese e-commerce giant Alibaba, Swiss luxury group Richemont and British online sales site Farfetch are unveiling joint retail perspectives.
The goal is to better meet the exponential demand for exceptional products in China, especially online. “The luxury market in China should account for half of the sector’s sales by 2025 and concentrates hundreds of millions of young digital native consumers” explains Daniel Zhang, CEO of Alibaba to support this strategic merger in favor of digital retail while Alibaba and Richemont will each invest $ 300 million – in the form of convertible private bonds – in Farfetch Ltd.
At the same time, Alibaba and Richemont are also announcing the creation of a Chinese joint venture with Farfetch. The two groups will each invest 250 million dollars and will own 25% of this structure, which will include Farfetch’s market operations in China. They will also have the option of taking an additional 24% stake, three years after the launch of the joint venture. Artemis – the holding company of the Pinault family – is also expected to invest $ 50 million in this project.
Within a few weeks, the Farfetch offer should therefore be launched on the various luxury sales channels operated by Alibaba, such as TMall Global or Luxury Pavilion, which already included in 2019 the catalog of retailer Net-À-Porter, owned by Richemont. This merger also includes the provision of the Farfetch offer on Luxury Soho, the new offprice platform launched by Alibaba last May.
“These investments place Farfetch at the center of a common Luxury New Retail strategy in China” underlines the trio in a press release highlighting “e-commerce sites and applications as well as omnichannel retail technologies” which should enable luxury players to optimize their brand (s) distribution strategies, in particular with millennials and Chinese GenZ. “The type of consumer we face in China is an extremely young consumer,” explained Alexis Bonhomme, Vice President Greater China and Asia of Farfetch, at the Salon du Luxe Paris online. For Farfetch, he’s probably the youngest consumer in the world, with an average age of around 30-31.
He is also the most expensive consumer and one of the most sophisticated in all markets. This profile is extremely qualitative for the Luxury Industry! A key finding at a time when luxury in China could experience growth of +20 to + 30% by the end of the year, in an international context yet weakened by the Covid-19 crisis .