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What Farfetch's IPO Filing Says About The $300 Billion Luxury Fashion Industry(Forbes)

August 28, 2018

 

The article first appeared on the Forbes.

 

Online luxury fashion marketplace Farfetch said Monday that it plans to go public, seeking to capitalize on the fact that the luxury fashion industry is grappling with the same issues also facing its commodity grocery and many other retail industry counterparts: how to respond to consumers’ increased comfort with buying online and their growing demand for instant gratification.

 

Farfetch is just the most recent example of a business benefiting from the luxury industry's need to crack the code on today's high-end consumers. Just look at Swiss luxury goods giant Compagnie Financière Richemont’s purchase this year of the rest of Yoox Net-A-Porter Group that it didn’t already own, in a deal that reportedly valued Yoox, a Farfetch rival and online luxury fashion retailer, at more than $6 billion. Different from Yoox Net-A-Porter, Farfetch is primarily a marketplace and doesn't stock its own fashion inventory.

 

Here are five industry trends to take away from London-based Farfetch’s F-1 filing (equivalent to an S-1 filing but for a foreign issuer). Farfetch, seeking to be listed on New York Stock Exchange under the ticker symbol FTCH, is reportedly valued at up to $5 billion. Its investors include Condé Nast parent Advance Publications and China's e-commerce giant JD.com.

 

1. By 2025, luxury fashion e-commerce will have a quarter of the industry's market share. 

 

In a storyline familiar across pretty much all the retail sectors, a growing number of luxury consumers are showing they no longer need to be pampered in a physical store or to see and touch a product before they shell out big bucks. For instance, 10-year-old Farfetch’s active consumers, or those who have made a purchase within the past 12 months, rose 44% to nearly 935,800 at the end of 2017 from 2016 and more than doubled from just 416,000 in 2015. The total value of products purchased on its site climbed 55% to $910 million last year.

 

Industrywide, online’s share of the personal luxury goods market is expected to rise to 25% by 2025 from about 9% last year as the entire market pie will see 45% growth to $446 billion over the same period, from $307 billion last year, Farfetch said in the filing, citing a Bain & Co. study.

 

Some retailers look to be responding to the trend faster than others. For example, U.S. luxury fashion retailer Nordstrom last week reported a 23% jump in Q2 online sales, catapulting online to 34% of its total business, up from 29% a year earlier.

 

2. Yes, credit or (blame) Millennials, and soon Gen Z.

 

Nodding to the importance of Millennial consumers, Farfetch mentioned the word "Millennial" 13 times in the filing and defined it as "a person born in the years 1980 to 1994.” Citing data from Bain, Farfetch said the online spending power of Millennial and Gen Z consumers, or those born between 1995 and 2009, together represented about 85% of the growth in luxury fashion sales last year. By 2025, the two groups combined, mostly led by Millennials, will represent 45% of total luxury spending. That will beat the 40% share expected to be held by Gen Xers, or those born between 1965 to 1979 — currently the biggest luxury-fashion buyers.

 

Read more on the Forbes.

 

 

 

 

 

 

 

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