Farfetch founder and chief executive José Neves outlines why he believes platforms will emerge as the leaders in luxury fashion, as his company announced its intention to float on the New York Stock Exchange today.
I dreamt of Farfetch for the love of fashion.
When I was eight, I was given a computer for Christmas. It came with no video games, just a programming manual. I started coding and found my first passion: creating software.
In 1993, when I was 19, I started my first business. It was a “software house,” creating software for businesses and, being from the north of Portugal and with a family with a history of shoemaking, fashion companies eventually became my clients. That’s when I found my second passion: fashion.
Eventually, I became a shoe designer, a boutique owner, a trade show organiser, a bit of everything in fashion. I fell in love with the industry – I was swept away by its people, places, chaotic creativity. Fashion is all about craftsmanship, creativity and great design. It celebrates beauty in every form. But it’s not art. It’s supposed to be worn, but more than that, as you wear it, it changes the way you feel that day and helps you to project how you want the world to see you.
Fashion – especially for the Millennial generation – empowers people and is one of the most important ways to manifest one’s individuality. People want to feel unique and that means finding that product that maybe only exists in very limited quantities on the other side of the world. This is why I believe Farfetch empowers individuality.
A 10-year journey to build the platform for luxury fashion
By 2007, the internet was booming and gaining a foothold in every part of our cultural, creative and commercial lives. The clash between fashion, driven by creativity and emotion, and the internet, driven by speed and data, set the stage for a revolution in this industry.
As both a designer and technologist back in 2007, three things were clear:
|•||First, the internet was going to dominate fashion, too. It was inevitable.|
|•||Second, the luxury fashion industry needed a platform. This is a key tenet of the internet. People need a destination that curates, aggregates and provides seamless service, connecting them to the thousands of independent creators and curators of fashion around the world.|
|•||Third, the established ecommerce marketplaces and platforms are consumer-centric but in a price-driven way. This is the antithesis of luxury fashion, which is driven by emotion, individuality, uniqueness, personality – not just convenience. Curation, not user generated reviews. Creativity, not price.|
This was my rational side speaking, but my heart also spoke. My love for the designers, the boutiques, the people who love fashion all around the world was, and is, extremely strong. The idea of an unrivalled, inclusive, inspiring destination where the whole world of fashion would meet – creators, curators and consumers, all united for the love of fashion – was the vision that is at the heart of Farfetch today.
This 10-year journey, which started in the middle of a global financial crisis, was far from easy!
The luxury industry has many peculiarities. It is mostly composed of family-owned businesses. Even the largest conglomerates, with few exceptions, are controlled by families, and the vast majority of brands and retailers are family run. Relationships are paramount, and relationships take time to build.
Most of the major decisions that determine the ebbs and flows of the industry are made in Europe, where a large number of the largest luxury brands are based. This meant that most of my early conversations were in Italian and French, frequently involving the grandparents, parents, sons and daughters in the same room and often turning into family quarrels! Decisions are not just about business and are never short term. The reputation of the brand, the retailer and the family business are at stake. You need to build deep relationships that are based on a feeling of trust from all of the family.
I vividly remember those first meetings with retailers and brands back in 2008, the year we launched Farfetch to consumers. The idea of a platform connecting inventory sitting in disparate physical stores to one single, global ecommerce website, in real-time, was completely new and, for an industry that saw the internet as a threat or some sort of heresy, the Farfetch concept was mind boggling.
Slowly, over the course of a decade, we built relationships by proving we were not there to destroy luxury’s heritage and its “unspoken codes of conduct,” but actually to protect them and enable this industry to thrive. We were fashion insiders, and we just happened to be coders, too! For us it is not a zero-sum game. It always has to be a win-win, where we protect what is sacrosanct in our beautiful industry and use technology to enhance the experience.
Farfetch had to be built as a platform, curating and controlling every single step of the seller and consumer experience with a deep sense of love for fashion. Every single aspect of our platform was built from day one for the love of fashion and deep knowledge of technology. That’s, in short, our “secret sauce.”
Today, Farfetch is the only at-scale, global technology platform for luxury.
For brands and boutiques, we are an innovation partner, as well as a plug-and-play global amplifier, making them available to more than 2 million customers all around the globe, in a direct-to-consumer business model. For our consumers, we allow them to find the specific item they love from anywhere in the world, that they couldn’t find in their own city or anywhere else online.
Building a platform is hard. Building a platform for the luxury fashion industry was almost impossible. But, I knew that only by taking the more difficult path would we be able to seize upon a world of opportunities and many years of continued growth and innovation.
Despite all this growth, this industry is still in its infancy. Only 9% of luxury sales happen online, and the 91% that happen offline are still conducted as if we were in the 1990s! Physical retail, not just online, will need to reinvent itself, and we want to be the champions of that revolution too.
Whether future consumer channels will be dominated by voice-enabled interfaces, augmented or virtual reality, or the Internet of Things, our API can seamlessly plug into any of these technologies, the same way we have already integrated with conversational ecommerce apps and launched a full-catalogue WeChat store in China. We believe our API-enabled platform makes our marketplace core business truly future-proof.
We ask ourselves: “How will the world shop for fashion in five, 10, 20 years?”
We believe the world will continue using physical retail stores. Fashion cannot be fully digitalised, unlike music or video. There is something magical about the physical retail experience. As a boutique owner 20 years ago, I discovered the interior design, the scents, the ability to touch the fabric and try on the clothes and, most importantly, the human touch and storytelling that digital will never completely replace.
Today’s digital-first customers have, however, been exposed to ultra-personalised experiences. Our favourite apps and internet companies know us and our preferences, and give us an experience that is truly personalised. It is what consumers expect and demand. Offline retailers know nothing about us and learn nothing about us when we come in and after we leave. This will not last long, and we foresee a revolution in retail, powered by ultra-personalisation via digital technologies.
This is what our Augmented Retail vision, our Store of the Future, is all about: a seamless convergence of mono-brand, multi-brand, online and offline, delivering amazing user experiences in all touchpoints with the consumer.
We plan to continue investing aggressively in R&D. That, and growing our brand across geographies and categories, will be the focus of our investments in 2019 and beyond.
The opportunity & promise
It is my belief that we have only just started.
Even when we look back at the 10 years since we launched and see so many incredible achievements, we know this is just day one and the very beginning of a thrilling journey.
The size of the opportunity is far larger than what Farfetch is today. The luxury industry has been consistently growing at a 6% compound rate for the past 20 years, which means – if we assume the same pace of growth – in the next 10 years, it could reach well over $450bn. By then, 25% of sales are expected to happen online. We believe the 75% of sales still happening in physical retail in 10 years will be revolutionised by digital technologies. In fact, the distinction between offline and online retail will vanish, as consumers will not be able to tell where one started and the other finished. This is what we call at Farfetch “Augmented Retail”.
If one believes in the same pattern of disruption happening in music, travel, transportation and more, then the leading player will be a platform, not a retailer, brand or conglomerate. This leading player will have a significant market share, since we believe category leaders in other digital industries typically command over 60% market share and will bring players together in one place: curators, creators and customers.
I believe a single company will orchestrate this revolution in the conversion of offline and online luxury retail because, even if multiple retail-tech vendors emerge, the new technology will have to be adopted both by retailers and consumers. We believe consumers will always gravitate to one single app, forcing vendors to gravitate to one single platform, most likely a platform that has already built consumer-side critical mass and benefits the entire ecosystem. This all translates into a potential $450bn addressable market for Farfetch, which, as the operating system for luxury, we want to transform, empowering individuality for consumers, curators and creators of fashion.
Our promise to our investors is a boundless dedication to our consumers, restless innovation and to focus on achieving sustainable, continued growth.
Our promise to our Farfetchers is to continue to be a mission – and values-driven business and a great employer that fosters happiness at work.
Our promise to our consumers, retailers and brands is to keep amazing them, every single day, to the best of our human ability.
For the Love of Fashion.