When Coupang swooped in at the eleventh hour with a $500 million bailout and a plan to save Farfetch from bankruptcy in December 2023, it was an unexpected white knight.
Coupang, which is sometimes known as South Korea’s answer to Amazon, mostly sells low-priced everyday goods, while Farfetch carries in-demand luxury labels like Rick Owens and Brunello Cucinelli.
Farfetch’s new owner quickly set about transforming the London-based e-tailer from a perpetually unprofitable company with shrinking sales and a jumble of tenuously related business lines into a hyper-efficient marketplace that could sustain itself without further injections of cash. (Over the span of its 17 years in business, Farfetch raised $1.5 billion, including its IPO in 2018, according to PitchBook data.)
As Coupang tells it, that’s exactly what it has done. The company has streamlined Farfetch’s complicated and costly logistics and shuttered faltering side businesses, including a loss-making unit that provided white label e-commerce for retailers that Farfetch founder José Neves once hailed as the “global platform for luxury.” Beauty retailer Violet Grey and the streetwear labels Palm Angels and Off-White were sold off.
In November, Coupang reported that Farfetch reached near breakeven on its earnings before interest, depreciation and amortisation in its latest quarter, a feat that Farfetch struggled to achieve as an independent company.
“We’re proud of the speed and especially at scale and the discipline with which the team has executed so far this year,” Bom Kim, Coupang’s founder and chief executive, said on an earnings call last November. “There’s still more work to do there, and our goal is to finish the job of stabilisation through the remainder of the year.”
But in cutting the fat, Coupang has sliced away much of the muscle that enabled Farfetch to become the biggest player in online luxury retail, according to seven current and former employees who spoke to The Business of Fashion. These sources pointed to drastic cuts to key parts of the business that may help Farfetch’s balance sheet look better in the short term, but will undermine the retailer’s credibility with wealthy consumers and brands in the long term.
“There was a certain customer obsession [at Farfetch],” said a person with direct knowledge of the matter. “Now it’s cut costs at all costs.”
In addition to selling off fading streetwear brands and underperforming software units, Coupang axed teams that woo Farfetch’s top-spending customers with personalised services, and slashed budgets for VIP events from $2 million annually prior to the acquisition to $80,000 last year, according to a person with direct knowledge of the matter.
Relationships with luxury brands have also deteriorated. Under Coupang, Farfetch has stopped letting top brands have a say in pricing, a concession routinely offered by many retailers that reassures image-conscious labels that their products won’t be deeply discounted. As well-known brands, including Gucci and Celine, have pulled inventory, Farfetch has begun listing those same items from other sources — a grey market tactic more commonly associated with discount retailers such as T.J. Maxx, Walmart and Shein.
It remains to be seen whether shoppers will care whether Gucci had signed off on the Jackie bags for sale on farfetch.com, or that they won’t be invited to dinner at Chef Yann Nury’s invite-only New York restaurant no matter how much they spend.
But it’s the opposite approach that luxury e-commerce’s winners are taking. Amid a global slowdown in luxury spending, where the rich keep spending and aspirational shoppers trade down, Farfetch’s competitors are focusing on ultra-wealthy clients and curated assortments. German e-tailer Mytheresa’s sales grew 13 percent and its adjusted EBITDA profits doubled in its fiscal second quarter that ended in December by selling a tight edit of products from top brands like Brunello Cucinelli and Loewe and offering elite, in-person events for its highest spending customers. In its fiscal year that ended last June, Mytheresa generated 39 percent of its gross merchandise volume — a measure of goods sold on the platform — from the top 4 percent of its clients.
There are signs Farfetch’s new direction is alienating at least some shoppers. While Coupang has focused on the marketplace’s profitability, it has been less forthcoming about sales growth, even in internal meetings, according to people familiar with the matter. Coupang reported Farfetch’s revenue totalled $439 million in the third quarter, a 26 percent decrease from the same period in 2022 (the company cancelled the release of third-quarter 2023 results amid the acquisition). Sales dropped 5 percent in the quarter that ended in December, according to US credit and debit card data by analytics firm Earnest Research. Global luxury sales dropped 1 percent to €1.48 trillion ($1.53 trillion) in 2024, according to estimates from Bain & Company. Coupang is scheduled to announce its fourth quarter results on Tuesday.
Farfetch didn’t provide a comment for this story.
The future of Farfetch has repercussions far beyond its customers, or even its roughly 3,000 employees.
Since its launch in 2008, Farfetch built its business around connecting independent retailers around the world with an equally global audience of fashion-curious online shoppers. While that mission was diluted over the years by acquisitions and strategic pivots, hundreds of small boutiques and independent labels still count on the platform. The failure of Matchesfashion in March 2024 triggered a wave of closures at independent brands; analysts say something similar would almost certainly happen if Farfetch were to decline under Coupang.
“Retail has not been easy, period, and for some of these specialty retailers, having a platform like Farfetch is beneficial,” said Robert Burke, a New York-based luxury consultant. “They reach a much broader audience that way. If Farfetch didn’t exist, it would be a difficult thing for the multi-brand stores.”
Conflicting Visions
After completing the acquisition in January 2024, Coupang executives told Farfetch senior leaders they had no intention of putting more cash into Farfetch beyond an initial $500 million rescue fund, according to a person with direct knowledge of the matter.
There was plenty of fat to cut. Farfetch made seven acquisitions in less than a decade, including the secondhand sneaker retailer Stadium Goods, streetwear brand incubator New Guards Group and some small technology start-ups like virtual try-on software provider Wannaby. Farfetch sold Wannaby to technology firm Perfect Corp in December, but it still owns Stadium Goods and New Guards Group.
One of Coupang’s first steps was to shake up Farfetch’s leadership ranks, starting with founder and former chief executive José Neves, who departed last February, along with the marketplace’s chief financial officer, chief product officer, chief operations officer and chief marketing officer. The rank and file came next: in the past year, Farfetch’s headcount contracted from over 6,000 to around 3,000, according to a person familiar with the matter.
There was a culture clash from the get-go, several current and former employees told BoF. Farfetch leaders, like many technology start-ups that came up in the 2010s, told staff they valued open communication and collaboration across the organisation as they pursued their goal of becoming the leader in online luxury. Coupang, by contrast, has been more hierarchical and surgical in tackling Farfetch’s problems.
In meetings, Coupang’s chief executive Kim would frequently mention that Coupang became the official distributor of Apple products in South Korea by being known for providing customers with services like fast delivery, according to a person familiar with the matter. Coupang’s thinking is that getting Farfetch to that place would also help it win over luxury consumers, the person said.
“Coupang’s strength is in the backend,” said a person familiar with the matter. “They do not have a sense of what it is like to be the face of luxury.”
A Not So Luxurious Experience
While Coupang’s focus on driving efficiency has reduced Farfetch’s losses – Coupang has, as promised, not injected more cash into the business – it is hampering Farfetch’s relationships with customers, according to current and former employees.
Last year, Farfetch cut teams of fashion advisors in London, New York, Hong Kong and Shanghai that worked exclusively with VIP customers, who represent about 30 percent of annual sales, according to two people familiar with the matter. This team would liaise with top spenders on everything from looking into shipping delays to manually creating personalised shopping lists on the site. A similar team remains in Dubai to serve the Middle East, one of the people said.
Coupang invested in automating curated lists, which the company told staffers leads to higher conversions. Top clients are now directed to a general customer service team in Portugal for questions about their orders, the person said.
After Coupang slashed the client development budget, Farfetch went from inviting its highest spending clients to fashion week dinners in hotels and private clubs around the world to hosting them in its office spaces in London and Dubai, according to a person with direct knowledge of the matter.
Coupang also made logistics changes that saved millions of dollars but added friction for customers. In May, Farfetch switched its shipping provider from DHL and UPS to FedEx, according to three people familiar with the matter. The change has resulted in delays in delivery times for packages and refunds, one of the people said. Fast shipping is paramount for top shoppers who expect premium service. It’s also important for retailers to get returned items back into inventory quicker and avoid losing potential sales.
“It’s very hard to regain a luxury customer after you’ve disappointed them,” Burke said. “They have other ways of purchasing products.”
Burning Brand Relationships
Perhaps Farfetch’s most precarious relationship is with luxury brands, which along with independent retailers supply inventory to the site.
In February 2024, Kering cut ties with Farfetch, deciding to cease selling its brands — which include Gucci, Saint Laurent and Bottega Veneta — directly on the platform. Others, including Celine and Alaia, have followed suit, while Prada and Dolce & Gabbana are among the labels that remain, according to a person familiar with the matter. At one point, Kering contributed more than $100 million annually to Farfetch’s gross merchandise volume, BoF previously reported.
Farfetch has also done away with guidelines that allow staffers to give top brands more control over how their products are sold on the marketplace. Gucci, for instance, could ensure that Farfetch’s pricing matched its own stores across different markets. Farfetch has long priced its goods to rival its competitors, even if that meant selling at lower prices than brands or retailers wanted, but even its best-selling brands are no longer in a position to combat that practice.
Then there’s Farfetch’s embrace of the grey market. Last year, the company created a programme called “sold by Farfetch” to sell products from brands it no longer has direct relationships with, according to two people with knowledge of the matter. In this programme, Farfetch lists goods from brands like Gucci, Celine and Alaia through its boutique partners, but instead of disclosing which retailers are responsible for the listing, as it does with most of its offering, it simply puts “sold by Farfetch” so brands can’t identify where the product is coming from.
Instead of shipping those goods to customers directly from the boutiques, the retail partners send the items to Farfetch’s warehouse in Amsterdam to repackage the product so it doesn’t reveal the boutique it came from, adding around five days to shipping, despite the delivery window being listed as two to five days, one of the people said.
This practice has allowed Farfetch to maintain its vast selection despite brand defections. The company’s stock of the top 1,000 brands on its UK website increased 3 percent year over year to 616,400 in January, according to data from the retail insights firm Edited. But Farfetch is burning bridges with the biggest labels in the industry. A retailer’s willingness to nurture its relationships with brands can directly impact its growth. Mytheresa, for instance, has seen a consistent uptick in sales by creating exclusive capsule collections with high-profile brands like Gucci, Saint Laurent and Loewe.
Regaining Market Share
E-commerce is poised to account for as much as 33 percent of all luxury sales by 2030, up from 20 percent in 2024, according to estimates from Bain & Company. In theory, that leaves plenty of market share for Farfetch to take.
The e-tailer has a few elements working in its favour. Firstly, it has name recognition and may at least be top of mind for a cohort of consumers that prefer to buy luxury goods online, said Mario Ortelli, luxury advisor at Ortelli & Co. Farfetch is also “linked to the majority of the interesting retailers in the world,” Ortelli added.
The company appears to at least be trying to strengthen its relationship with boutiques, an essential part of its core marketplace model. Farfetch has been introducing a new fee structure for some of its retail partners, according to one retailer that sells on Farfetch who spoke with BoF on the condition of anonymity. Farfetch currently takes a commission on top of other payments like credit card and shipping fees. This year, the company’s been working with select retail partners to move to a flat rate, in which retailers can decide the commission for the items they plan to list on the platform, the person said. The change could possibly help Farfetch get access to the best of its retail partners’ inventory. For example, the retailer that spoke to BoF said they are likely to list their best items on Farfetch if they can pay a lower commission.
The approach is far from perfect. It’s not clear which retailers are eligible to negotiate fees or why they are chosen to engage in this tactic. Still, it’s a start as Farfetch struggles to retain its relationships with brands and customers. How well it can maintain its dynamic with its retail partners could determine its survival. Farfetch’s ability to connect consumers with independent boutiques is its defining feature and one that can be a viable line of defence amid a broader luxury slowdown.
“To the extent that they can still drive the connection with the boutiques, that still is a pretty nuanced and differentiated type of offering,” said Brian Ehrig, a partner in the consumer practice of management consulting firm Kearney. “When new competition entered and when the market dynamics changed, they didn’t adapt fast enough, but they still could do that because it sure feels pretty wide open in the luxury e-commerce space.”
