A winding down of the post-pandemic spending frenzy is hitting European luxury companies, but none more than Farfetch, an e-commerce pioneer. One of the few global online retailers of high-end merchandise from a range of labels is Farfetch. Diesel, Balmain, Lanvin and Balenciaga are some of the smaller brands that have discounts of up to 45 percent off on their clothing and accessories. The company's shares plummeted after postponing its quarterly earnings report.
On Tuesday, Moody's put the company on review for a further cut, citing its poor financial position. The longer-term challenge is a drive among labels to seek greater control of their products, usually at their own retail boutiques, a strategy aimed at avoiding discounts that third party retailers like Farfetch rely on to attract shoppers. Dior, Louis Vuitton, and Chanel are some of the powerhouse brands who have taken charge of all aspects of their products. In the first half of the year, it opened 33 stores. The trend is that brands prefer to control their own distribution. Reyl said that the high-end brands control everything through shop-in-shop agreements in department stores. When asked about the change in distribution trends, Farfetch declined to comment. The Daily Telegraph reported that the founder of Farfetch is considering taking the company private.
Richemont entered an agreement with Farfetch to eventually take control of YNAP, which is facing the same challenges as Net-a-Porter. Farfetch is more than an online marketplace, it is a tech company that powers e- commerce for high-end UK and US stores. Richemont said it would not inject cash into the company. Farfetch and Net-a-Porter offer exclusive offers from brands, with Farfetch recently offering early access to pre-spring looks like a 1,950$2,105 floral print dress from Dolce & Gabbana and Net-a-Porter selling a limited edition The fear of cheapen their image remains a key draw for shoppers of online marketplaces. Bernstein predicted in a note to clients that leading brands will be reluctant to engage as they strive to implement high price discipline and stay away from promotions. The acquisition of New Guards Group was a part of Farfetch's strategy of buying brands and licences to distribute them. It added a licence deal to distribute Reebok products and expanded into beauty with the purchase of Violet Grey, though it has since retrenched from beauty and said in August that it was considering options for Violet Grey. Slowing demand for luxury products in China and the United States made it difficult to turn a profit. A consultant at Alix Partners said that when a retailer is under heavy sales pressure, it could be tempted to raise discount levels, but that can become a vicious circle. Abtan said that peak seasons don't help a company improve, but tend to increase the decline.