ChicGeek Comment Is Farfetch a Worthy Investment?
As luxury online marketplace, Farfetch, debuts on the New York Stock Exchange, I ask, is it a worthy investment?
This isn’t particularly scientific, but, recently, I was looking for a particular AW18 Dries Van Noten jacket I’d seen, in store, in Selfridges. It wasn’t on their website, so I tried Mr Porter. Nothing. So, then I thought I’d search FarFetch. With over 600 boutiques said to be affiliated to their network, and 375 luxury brands, you’d expect a decent selection to come up. Nothing again.
Left - Is Farfetch high on the list of your luxury searches?
Dries Van Noten isn’t the most ubiquitous of fashion brands, but without a large network of own brand shops, it is usually sold wholesale to designer boutiques and is found in the majority of luxury department stores. It’s big enough. It felt strange nothing was on Farfetch. This isn’t the first time this has happened and the reason why it wasn’t my first place to search.
Farfetch just had its valuation lifted and is set to be valued at between $4.9bn and $5.5bn in its initial public offering in response to investor interest in technology stocks. The shares have a price range of $17 to $19, according to an updated regulatory filing published this week. The original range was $15 to $17.
Joseph Wong, an investor in luxury fashion stocks such as Burberry, ASOS, Bvlgari and Mulberry, says “Farfetch assimilates some of the best independent boutiques into a common platform. What’s valuable is the technology and the list of stores they represent. For that diehard enthusiast, he/she can do a quick search for that elusive Off-White piece or vintage Chanel piece, with a click to buy option.”
The majority of IPOs are often overpriced. They are filled with hot air to give healthy profits to the founders and early investors. Not to mention the fees to the money men to maximise the price and get the listing on its way. Farfetch, established in 2007, is being marketed as more of a tech company, where the prices are higher, rather than a retail marketplace model which takes a percentage from each transaction sold through its website.
The most recent Farfetch results show revenues of $267.5m in the six months to June 30, 2018, and losses before tax of $68.4m. Farfetch had total revenues of $910 million last year.
To put this in the context of the market, Yoox Net-a-Porter (YNAP), which was acquired by luxury conglomerate Richemont recently, valuing the business at €5.3 billion, and matchesfashion.com was sold to private equity firm Apax for over $1 billion last September. In the 12 months ending Dec. 31, YNAP saw year-end preliminary sales reach 2.1 billion euros ($2.5 billion). Matchesfashion.com recorded group revenue of £293 million ($393 million) to 31st Jan 2018.
“From our research of the luxury fashion market, FarFetch led in terms of traffic capture between 2015 and 2017, and maintains a good reputation. It has a sound business model, good commercials and no flagged operational or customer issues.” says Fleur Hicks, Managing Director of onefourzero, a data analytics and digital research agency based in London.
“It is an ambitious listing price, but in the context of the growing luxury fashion market, this could see returns within the next months and years, depending on how ambitious your investment strategy.” she says.
The global fashion industry is, according to a 2017 McKinsey report, valued at $2.4 trillion. If it were ranked, alongside individual countries’ GDP, it would represent the world’s second largest economy. From 2014 to 2018, the luxury fashion industry was expected to grow from 3% to 17% of the total fashion market. Annual online sales growth was expected to be 17% in the US, 18% in the UK, 12% in Germany and a whopping 70% in China, according to the report.
“It’s a good business model within a growing marketplace.” says Hicks. “The return risks of minimised stock and holding outlays look to outweigh the risks associated with reliance upon 3rd party operations, such as delivery. It averages a 30% mark up and thus a 50-odd% margin on operations. Incredible for the fashion industry. Also, the growth rate - 60% this year - is impressive.” she says.
Right - Is the value in Farfetch in its tech?
“Of the competitor set we analysed, Farfetch represented 3.8% of the captured online traffic market, representing the market lead. This competitor set only represented 17% of the potential traffic available (based on digital demand and traffic) and therefore the headroom for brand and revenue growth is huge.” says Hicks.
Farfetch’s future growth is potentially going to come from its ‘White Label’ service supporting brands such as Manolo Blahnik, Christopher Kane, DKNY and Thom Browne in their e-commerce offerings.
Farfetch have announced many strategic partnerships recently to further enhance the value of the company. These include Chanel, Chalhoub Group, one of the biggest distributors of fashion and luxury goods in the Middle East and the modesty luxury retailer, The Modist. They have also partnered with brands such as Harvey Nichols and Burberry. This is spreading their risk and also leveraging their technical expertise. It’s what Ocado has done in food.
Wong says, “You also need to consider what they will be using the cash raised from the flotation for. When Prada was listed, it was to relieve the billion Euro debt, open more stores and provide an exit plan for the founders.”
Farfetch are investing heavily in technology and this does explain some of the losses. They hope they will be able to charge other brands handsomely for this and the ever important 'big data'.
Are there any potential waves on the horizon? “Digital commercial disruptors are most likely to threaten large behemoths like Farfetch.” says Hicks. “This would most likely come from Amazon or AliExpress fashion lines and/or new ways to purchase fashion in a more interactive way. It’s unlikely that this will be a quick transition, so if FarFetch remain on pulse with technological change and consumer movements then they should be agile enough to move with the technical and operational trends as well as fashion trends.” she says.
Wong says, “Businesses are keen to connect directly to consumers, and cut the middlemen: think Kylie Cosmetics, Pat McGrath. This is happening to media industry too: Netflix originals instead of via Sky or Virgin Media. Not sure if Farfetch have addressed such concerns before.”
“There is also the downside for retailers: I once noted a £1500 price difference on a stunning new season McQueen coat: the result of a weak sterling and import taxes levied by a store from the Far East.” he says.
According to Bain & Company, the luxury goods market reached a record high of €262 billion in 2017. Online sales jumped by 24%, reaching an overall market share of 9%. Bain & Company predicts the market will be worth $446 billion market by 2025. Online’s share is expected to be its fastest-growing segment, rising from about 9% to 25% by 2025.
I think you need to look at Farfetch in the context of being a major player in a fast growing market. The valuation seems to be based upon its potential and the appetite for this type of technology stock.
I don’t think the name ‘Farfetch’ is particularly well known with general consumers. They need to work on the parent brand and getting its name into the luxury consumer’s head for that initial search. They also need to feel like the Amazon of luxury: all the choice on one site, which takes me back to my disappointing Dries Van Noten search. They could do better with packaging and more Instagrammable things to raise awareness of the consumer side of the brand.
There also have a lot of variables. They have different stores buying different things in different currencies and it loses something of that personal touch that other retailers seem to nurture and one of the reasons you go to a retailer.
Left - The online market is growing massively and is set to grow from 9% to 25% of the luxury market
As for selling the tech. to other brands, I think this is where the long-term value is, but they need to be careful not to overstretch themselves and have too many fingers in too many pies. It’s better to do fewer things well. It feels like they are still working out the direction they are going in. They could easily focus on either sides of this business and quietly reduce the other. They need to grow revenues while keeping the costs constant or reduced. They just don't want to lose the momentum.
The price seems, initially, far fetched, (soz), but the long term prospects for luxury online is looking good.
Hot List The Puzzle Bag
After writing my latest Comment piece - Handbags at Brawn? about men, now, carrying styles of bags traditionally associated with women, it has cemented my desire for one of Loewe’s Puzzle bags. I’ve looked at this style for ages and it just gets better. This is a modern classic and I want one.
We're going into a new age of grown-up dressing and quality, and Loewe, the Spanish luxury goods house owned by LVMH, still make some of the best quality bags. If only I could pronounce it!
Left & Below - Loewe - Puzzle Grained-Leather Cross-Body Bag - £1795 from Matchesfashion.com
ChicGeek Comment Handbags At Brawn?
It could be part of the new push for a genderless society or simply the boundaries being widened for what is, or feels, acceptable for men to wear or carry, but it feels right and looks right for men to carry handbags, right now. This isn’t about making a statement or being provocative, it’s about design, rather than gender and size, that is dictating what a stylish man carries.
Left - The Dior Saddle bag reborn on Kim Jones' first catwalk for Dior Homme
There are certain styles that are simply great pieces of design or are fashion classics and look just as good on a man’s shoulder as on a woman’s. This isn’t about ‘feminising’ men, it’s just something of beauty that is practical in carrying what needs to be carried. Enough said.
What started with Loewe’s ultra-chic ‘Puzzle’ bag has ballooned to include many other classic women’s styles. It was the reintroduction of the Dior ‘Saddle’ bag on Kim Jones’ SS19 catwalk, at his new gig at Dior Homme, in Paris in June, that cemented this new feeling. The #DiorSaddle hashtag featured male influencers reintroducing this style designed by the former Dior Creative Director, John Galliano.
Luke Ross, blogger at Fashion Samaritan, says, “I noticed a real change around 2012 when Hedi Slimanne debuted his first Saint Laurent collection that featured his signature slim cuts that really made pockets obsolete.
“Guys wanted to wear these skinny silhouettes, but the garments just didn’t have sufficient pockets” he says. “You couldn’t carry a wallet, keys, phone etc in them as it ruined the lines and for the first time we started to see men carrying bags with them that weren’t just backpacks.”
Right - Spanish influencer, Prince Pelayo
We have so much more to carry today: wallet, phone, keys, charger, water bottle, notebook, that unless you have a coat with huge pockets, a bag is an indispensable accessory for men. Men want the elegance a bag can give their total look, rather than numerous bulging pockets which can make you look dishevelled and untidy.
Alvin Cher of Bagaholicboy, the dedicated blog for bags, fashion and luxury based in Singapore, says, “I think it was just a matter of time before men got more and more confident and realised they were not restricted to just bags made for them. And if the ladies can dip into what was offered for the guys, the guys can do the same too.
“Boys actually loved the Boy Chanel when it first came out. And started buying. Then slowly, but surely, more and more brands came in.” he says. “Remember Tisci's Givenchy when they had the Pandora? That was a hit too. Even Mulberry's Alexa was deemed 'boyish' enough by some guys to use. After that the gates opened, Dior did it, so did Gucci, Loewe. Even Celine has fans amongst the men, remember the Cabas that everyone wanted?” says Cher.
“I think everyone played a part by releasing a piece that helped the evolution - Ghesquiére released those 'Arena' leather document cases at Balenciaga that every guy in fashion had and they kind of trickled down as more and more people were carrying ipads and laptops so they could be justified as practical even if they weren’t for the everyday man.” says Ross. “For me, Loewe really moved things along by making it cool to have a bag that was a replica of a female bag with the Puzzle. It’s large enough to look like a duffle bag, but then also can be small enough to look like a camera bag.”
This new trend has been pioneered by men’s celebrities, bloggers, influencers and street style images, all making the look believable and cool: men seeing other men carrying these types of bags, making it feel contemporary and fresh.
Navaz Batliwalla, founder of disneyrollergirl.net and author of The New Garconne: How to be a Modern Gentlewoman, and champion of androgyny in womenswear says, “With the influence of streetwear on men’s luxury, men's style icons like A$AP Rocky and any Korean boy band member you care to mention, have long embraced their fashion-forward side, so increasingly, the idea of carrying a bag that’s more exciting than a briefcase or a Uniqlo backpack is no biggie.” she says. “Plus, the fact is that everyone is simply carrying more stuff. Why let your outfit down with a sad generic gym bag, when you can have something that’s as considered and design conscious as the rest of your outfit?”
Left - Luke Ross, Blogger, Fashion Samaritan
The term ‘manbag’ was from the age of the ‘Metrosexual’ and feels just as dated. Who can forget that episode of Friends when Joey becomes too attached to his new shoulder bag, and the ribbing he took from his friends. Looking back, it was huge.
“I think the rise of the reusable tote also fuelled this fire as it became normal for a guy to carry a tote without it looking like a ‘manbag’.” says Ross.
Men don’t need the labels anymore: manbag, mutch - male clutch - or whatever else adds a masculine moniker to a name. I think brands will start to offer more gender neutral shopping areas and put more styles into the men’s shopping areas and advertsiing. This is a market growing into another and actually the true meaning of ‘unisex’.
So, what should us guys be looking for?
“I'm all for a guy carrying a bag made for ladies, but it still boils down to my proportion ratio. You have to try it on and see if it looks correct visually.” says Cher. “I think the time has gone when it comes to specifying which bag suits which gender. More and more brands are coming out with versions that look exactly the same for both guys and girls, so it is all about trying them on, seeing what works and having fun. It is a bag after all at the end of the day, we don't have to be so so serious about it.” says Cher.
Right - Blogger - The Modman with the Loewe Puzzle bag
“I think it’s about being authentic and genuine to your attire and aesthetic.” says Ross “Don’t do a tailored suit and then wear some flimsy nylon, touristy looking money bag.” he says. “Lastly, buy the bag for what you want it to do not the label. I’ve bought bags in the past that I wanted because they were cool, but they actually couldn’t take that much weight in them before the leather started to warp leaving them at the back of my closet and mind.”
The opinion formers in menswear have been carry women’s styles of bags for a while now, but with the new Dior grey Saddle bag set to hit stores in February, I think we’ll see a huge expansion of men carrying styles that were traditionally seen as women’s.
“Men have evolved, which is what fashion is all about anyway.” says Cher.
Male handbags were a major trend on the Milan AW18 catwalks - See more here
ChicGeek Comment Burberry’s Reboot The Verdict
Burberry has opted to put all its checked eggs into Riccardo Tisci’s basket. Before a single collection, except for a couple of teaser T-shirts, they’ve changed the logo - 2018 is the year of the bland, officially - found an old monogram in the archive - plastered London (& the world) with it - and really committed to this creative director before a single industry or customer reaction.
Unlike Gucci, who rushed out a quick collection with Michele, and tested the water, this has had a six month build up. Need I remind you what happened at Roberto Cavalli or Brioni when they changed everything for a new creative director.
Left - Burberry's new monogram from the archive
Following the departure of Christopher Bailey - more here - whose rainbow swan song ended an era when Burberry was a fashion leader. The winds of fashion changed, Burberry was no longer as relevant and it’s been playing catch up recently.
Control, alt, trenchcoat?! The new Chief Executive, Marco Gobbetti, previously at an accented Céline, inserted Tisci, whom he worked with at Givenchy. and proclaims to want to ‘elevate’ the brand and take it away from ‘accessible’ luxury. I’m not sure how accessible the current £1500 trench coats are, btw?
The stock market likes the idea - the share price is up 20% so far this year - and is salivating at the higher prices and bigger profits these more expensive items should generate. If only fashion was that simple.
Cut to Vauxhall, and the first show from Tisci’s new ‘B Series’ Burberry. You can shop his first pieces now – available for 24 hours, only on Instagram.
Right - New Burberry projected onto Global Harbor, Shanghai
First impressions is, it’s big - 133 looks (crazy) - but doesn’t have a clear viewpoint. I would have done a smaller collection - say 40 looks - and kept its message very focussed, strong and styled.
It looked like a Parisian’s take on Burberry, and maybe something Phoebe Philo would have done, if she’d got/wanted the job. It’s probably too tasteful for the current Burberry customer; they want more check and logos. People go to Zara for these types of clothes, these days. When people buy ‘designer’ they want a statement, they want a recognisable piece and there didn’t seem to be much of that here.
If Burberry wants to do clothes like this, at these prices, then the quality and cut needs to be flawless. There was a couple of nice takes on the trench. I liked the silk scarf details on one.
Brands need to highlight something they’re getting behind for that season, be it a bag or a type of coat, and really ram it home. I couldn’t see any key bag styles, and, if they’re going to elevate the brand, like they hope, then it will all be from accessorises to drive the revenue growth.
The male models, with their 80s gelled back hair, had touches of Tisci’s Givenchy in the baggy sweat shorts and luxury sportswear, but there was nothing here you couldn’t get at Boss or Louis Vuitton.
Left - Armed with an umbrella, but where was the Britishness? Burberry SS19 Menswear
I was expecting the new monogram to be on everything, it wasn’t. I feel like that’s a mistake, no matter how tacky it could be. It would be a major sales driver in the all important Asian market and I’m sure we’ll see more in these ‘drops’ of collections we keep hearing about. There could have easily have been a logo segment in this huge collection.
It was chic, at the beginning, with some nice detailing, then the men’s section arrived, and then it got all confused towards the end. Sadly, these aren’t the type of clothes you’ll be thinking about until they come out, there’s just too much good competition.
Hot List The Small Teddy Jacket
The Venice-based Barena is one of those brands that wasn’t made for the internet. It doesn’t shout ‘look at me’ and it’s hard to get across, online, the quality and tactile nature of the garments. This is true made-in-Italy quality and design without paying extortionate prices for the name.
Faux fur, fun fur, sheepskins and and generally anything furry or shaggy is very fashionable in both men’s and womenswear at the moment. I noticed this jacket the other day in Liberty, but couldn’t find it on their website. It’s really cute and the perfect length of shagpile. This, being in a cropped jacket shape, feels different and is perfect for this transition period of cool mornings and evenings. Add a rollneck and it’ll take you all the way into winter.
Left & Below - Barena - Lightweight Teddy Jacket - £338 from Farfetch
More...
Splash or Cash? Logomania
Fendi taste, River Island budget?! Worry no more, as the logo trend needn’t pass you buy just because your pockets aren’t deep enough. Fendi is probably the strongest of the logo brands, right now, and River Island has a clever rift on their own RI initials that look strikingly like those of the famous Rome fur house. Get involved.
Far Left & Left - River Island - Brown Slim Fit RI Monogram T-Shirt - £20
Below - Fendi - Logo-Print Raincoat - £1550 from matchesfashion.com
Hot List Christopher Raeburn X Finisterre
What do you get when you cross one of the nicest guys in fashion and a cult British cold water surf brand? The new designer collab. from Finisterre.
Left - CR X Finisterre Scarf - £45
Debuted at London Fashion Week in January 2018, the collection is based upon a shared ethos and rooted in sustainability. Finisterre and Christopher Raeburn have used performance fabrics, sealed seams and recycled insulation throughout the collection, from the Insulated Waterproof Coat to the Albatross Crew Sweater.
Right - CR X Finisterre Intarsia Albatross Jumper - £160
The 20-piece collection features outerwear, knitwear and accessories.
“The inspiration for the collection was the sea and, specifically, immersion in the harshest of conditions. On a more personal level, it’s also about my trip down to Cornwall and to Finisterre HQ where I got to meet Tom Kay and embrace cold water surfing with the team. It really allowed me to ‘immerse’ myself in the world of Finisterre, and the unity was born.” says Christopher.
I particularly like the made in Portugal knits with the albatross silhouettes. I think these are going to soar away very quickly! Soz.
Left - CR X Finisterre Insulated Cocoon Coat - £325