Alibaba and Richemont make $1.1 billion luxury investment in Farfetch
Luxury brands once shied away from ecommerce, but in China, they are embracing it, as shown by this new tie-up between China’s biggest ecommerce company, a Swiss luxury group, and a British online retailer.
Chinese ecommerce giant Alibaba and Swiss luxury group Richemont will invest a combined $1.1 billion in U.K.-based online luxury retailer Farfetch, in a move that aims to capitalize on China’s growing luxury-goods market.
- Richemont (the company founded by a South African who owns Cartier) and Alibaba are each investing $300 million in Farfetch.
- The two companies will also each invest an additional $250 million in the newly launched joint venture Farfetch China, which will manage Farfetch’s operations in China. (Farfetch’s current Chinese website is here.) Alibaba and Richemont will own a combined 25% stake in the venture.
- Alibaba will feature Farfetch shopping channels on the luxury platform of Alibaba’s Tmall online marketplace.
- Through the new partnership, Farfetch will be able to reach Alibaba’s 757 million customers.
Chinese tech firms are eager to meet China’s demand for luxury goods as brands seek customers online. With travel bans from the COVID-19 pandemic limiting shopping-driven tourism in Europe and the United States, Chinese consumers will likely look to domestic and digital avenues to purchase luxury goods.
- “If luxury brands are able to serve their customers in China with the same service level and offer the same experience (that they would be normally offering abroad) then they can recover the bulk of what they are losing in terms of Chinese tourists no longer shopping in Europe or the U.S.,” a Bain partner told Reuters.
- During China’s recent annual Singles’ Day online shopping event on November 11 — during which ecommerce platforms rake in tens of billions of dollars each year — Alibaba sold a record-breaking 498.2 billion yuan ($75.66 billion) worth of goods.
The news of Alibaba’s Farfetch investment comes just days after the highly anticipated initial public offering (IPO) of Ant Group, an Alibaba affiliate that was co-founded by Alibaba founder Jack Ma (马云 Mǎ Yún), was abruptly suspended by top financial regulators in China. The IPO, valued at more than $310 billion, would have been the largest one in history.
In 2017, JD.com — Alibaba’s biggest ecommerce rival — invested $397 million in Farfetch. In 2019, Farfetch merged its China operations with the platform run by JD.com. With the recent investment from Alibaba and Richemont, Farfetch will reportedly terminate operations with JD.com, according to Reuters, although JD.com will continue on as a Farfetch shareholder.
