Meet the boss | José Neves, founder and CEO of Farfetch

Last year Farfetch generated US$275million in sales and is experiencing 100percent year-on-year growth. Little wonder the London-based company has attracted the interest of the investment community, recently closing a US$66 million round of venture capital funding, which brings total investment to approximately US$111million. FELLT senior writer Patty Huntington met up with the company founder.

José Neves

Entrepreneur with a career spanning over 10 years within the retail industry. In October 2007 José combined his interest in fashion and technology to launch farfetch.com, an integrated online marketplace supporting and promoting the retail activities of independent boutiques in the e-commerce sector.

What

Chief executive officer and founder of farfetch.com

Where

London, United Kingdom

When

July 4, 2014


Back in March, Farfetch founder and chief executive officer José Neves touched down in Australia for the first time and with two missions in mind.

First up, as a business seminar speaker at that month’s Melbourne Fashion Festival.

Keynote duties out of the way, Neves then set forth on a 10-day retail discovery tour of Melbourne and Sydney, scouting for some 50 Australian designer or retailer names that he plans to add to his collection of 300 independent global fashion boutiques.

According to a Farfetch spokesperson, there was no update at press time on which Australian brands may now be in discussions with Farfetch. They added that the company’s business development team is due to return to Australia within the next six-twelve months to meet with boutiques.

Founded in 2008, Farfetch is an e-tailer with a difference – one that doesn’t actually buy clothes to onsell.

An online luxury retail portal – or in Neves’ owns words, an “enabler of physical businesses from traditional channels” – Farfetch gathers together the best and most interesting in the fashion retail business, with a particular interest in emerging fashion markets, and hosts them together in the one stop curated shop.

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Farfetch’s Spring/Summer 2014 campaign starring Gia Coppola.

Last year Farfetch generated US$275million in sales and is experiencing 100percent year-on-year growth.

Little wonder the London-based company has attracted the interest of the investment community, recently closing a US$66 million Series D round of venture capital funding from Vitruvian Partners, which brings total investment to approximately US$111million, following three earlier investment rounds led by Advent Venture Partners, Index Ventures, eVenture Capital Partners and Condé Nast International.

Patty Huntington

So you are currently scouting for Australian retail talent for Farfetch. What interests you specifically about this market, beyond obviously the huge appetite for online shopping?

José Neves

I think that where the opportunity is, is in terms of supply. Of course Australia for us is already a big demand market. It’s our number three after the US and the UK. What I think is impressive is the emergence of really interesting Australian designers, which I think gives a big point of difference in this market. When you go to other important markets for us, like China or Russia, you don’t have a thriving local community in terms of independent fashion designers at all.

But there are plenty of independent designers in China and Moscow.

Yes, but it’s not as strong as here. The comparison for me is a bit like Brazil – a very strong local industry with a very big market. It has a similar feel here in Australia.

This is the wonderful future of being able to create global communities around a common mission. In terms of fashion, Farfetch is quite unique in that sense.

 

Does that surprise you, that a market with a population of 23 million can be such a e-sommerce force? Australia is an important market for a number of international e-tailers.

It is surprising, the fact that for everyone in the industry – in the UK, ASOS, Net-A-Porter and in the US with people like Shopbop – Australia is big for all of those. Not being a big country in terms of population, on the one hand that’s surprising. But I think it’s down to how internet-savvy the Australian consumer is. And I think it’s also down to the fact that English is the basic language, so it’s easier for Australians to navigate and get comfortable with British and American websites. Australians are also very well travelled, cosmopolitan consumers. The [Farfetch] logistics are impeccable, they’re easy. All that comes into play. So it is already a big demand market. But I would love to give back to Australia and that’s where Farfetch is different, because we are a global company, not just from the demand side but from the supply side as well. That’s something people often don’t realise. We source from 25 countries. The whole of the European Union – not every single country, but most of them. The US, recently India, we just opened our first partner in the Middle East. In Brazil, we represent 90 Brazilian designers. So I think the big point of difference with Farfetch is that it’s a global community. It’s not just a group of buyers in the UK, buying for a global consumer. But it’s actually hundreds of buyers scattered all around the world with different viewpoints in fashion, addressing a global consumer. I think that’s really interesting. This is our first trip so we cannot promise anything, but certainly I would love to expand here as well.

What kind of boutiques are you looking for specifically in Australia?

I think it would really be a mix of multibrand boutiques but also monobrand, so the brands’ own flagship stores. Which is exactly what we have in Brazil. To give you an idea, we have 90 Brazilian monobrands. So, flagship stores from designers, directly operated by designers. And we also have 10 multilabel stores, which are the best multilabel stores in Brazil. And I think that’s the reverse of Europe and the US, where we work fundamentally just with retailers, not with brands. But I think in Australia it would be more the monobrand store, as well as the stores focussing on Australian designers. That’s what interests me, that’s their forte.

What names are on your shortlist?

I have a long list. We have a list of shops that we have been visiting here in Melbourne, but also in Sydney. By the end of this trip we’ll have a better perspective.

There is a great deal of anxiety in Australian fashion retail, due to ongoing invasion of international retailers here over the past five years. Australia was seen as one of the few bright spots in the global retail horizon post the GFC. Some locals are doing well, however many are struggling and there have been a number of closures. But what you’re saying is, perhaps they should focus on their unique, local points of difference that are of interest to the global market. 

Absolutely and that’s where I think there’s an opportunity for Australian fashion also to become global. Like everything in life, the internet can be a threat, but it can also be an opportunity. And it can be the perfect platform for Australian designers and Australian brands and retailers for that matter, to rationally attack the global audience.

Many brands obviously already sell to the majors, like, Shopbop, Net-a-porter, Asos, etc.

And also on Farfetch. We have a few Australian designers, selling through various American and European boutiques.

What will Farfetch be able to offer the designers who are already selling to international e-tailers?

Whilst we establish ourselves in Australia as a supply market – and that wouldn’t be in 2014, the best scenario would probably be 2015 or around that timing – basically what we offer is access to our platform and our global customer base. We have over 260,000 customers right now and growing very, very fast. We’re growing at 100percent year-on-year and it’s a very global footprint. Australia is our third largest market, but it’s only five percent of our sales. The US is our largest market, around 30percent of sales. Then we have the UK with less than ten percent. Both Australia and Brazil, around 5percent. Then we have China. By using our platform, the Australian designers will be able to address a clientele that is 95percent international. That’s where I think our added value would be – tapping into that global demand and also the technology that powers these shops and allows them to ship worldwide and benefit from our centralised customer service and all the e-commerce functionality that comes with that.

How many Australian boutiques might you pick up?

It’s difficult to say. We’re spending 10 days in Melbourne and Sydney and we’re trying to scout and map out the market. But I would say that certainly north of 50.

As many as fifty?

Fifty brands and boutiques, for sure. If you look at Brazil, we have almost 100. Australia is a smaller country, but it’s a very rich country. There is not so much inequality in terms of distribution of income. Brazil’s population is 10 times the size of Australia [199million] but it’s not a luxury market, it’s not at all best practice. It’s not that big. [The Brazilian luxury market is, nevertheless, projected to grow by 30percent over the five years to 2018, placing it in the Top 15 global luxury markets, overtaking both Australia and Taiwan].

Are there ever exclusivity problems between retailers and designers as exists in the bricks and mortar world – with some retailers demanding exclusivity in a designer for a certain region or area?

Sometimes it is a problem. We talk to all the brands. I’ve had meetings with hundreds of brands from all the big European groups, the big American labels. And we try to address any concerns that they may have in terms of pricing, styling directions, in terms of discount windows, which we’re very careful with. We make sure we’re respecting each territory’s own timings for discounts. All these factors are things that brands care about. It’s a one-by-one negotiation really.

Our most successful boutique this year is going to do US$10million for the year. I can’t say who it is.

 

What will you focus on in your business seminar talk?

The first part will be about what is Farfetch and how it works and also the story behind the brand and the company. And then the second part will be about why do we think that this mission of supporting independent fashion companies – be it independent fashion boutiques or independent designers – why do we think this is relevant and meaningful to the fashion industry as a whole. Then also explaining that it is independent fashion companies that are pushing the boundaries of fashion’s new territories. It is these companies that are emerging everywhere, in Australia, in eastern Europe, in Canada, in Brazil, in China. Traditionally, the way that the brands have had to cover territories physically, a designer brand will have shops in the main cities and then would have independent retailers covering smaller cities or smaller neighbourhoods. And that continues to be the case, but at a global level. So providing a global platform is really, really important for the ecosystem in fashion. Because otherwise all the stuff is going to look the same. If these small independent companies were to disappear, it would be everything concentrated on just the big cities and everything would look the same. They also have local understanding and local access and they also seek out new ideas and new talent. So they are really the fashion scouts. It’s why we think our mission is important and meaningful.

Is Farfetch a unique concept in that case?

I think it’s very unique. Definitely in the designer highend or luxury industry, we’re the only platform at the moment. There have been other communities in other areas, Etsy for example. And I think they will flourish in other areas. This is the wonderful future of being able to create global communities around a common mission. In terms of fashion, Farfetch is quite unique in that sense.

It’s like an online series of department stores “shop in shops” in a way?

I always say that in terms of business model, we’re a marketplace. But marketplaces come in all sorts of flavours. Our marketplace is very centralised. The experience of when you shop in Farfetch is very similar to the experience of when you shop in a luxury department store. There’s one checkout, the same set of terms and conditions for everyone, it’s one customer service centre. Although it is [the customer service centre] scattered all around the world really, it’s one company, one touchpoint. So we really make sure the experience is consistent and it’s well curated. I think there’s a big trend towards this kind of structure. I think it’s much more agile and much more of the future.

Could you ever see yourself opening a bricks and mortar Farfetch emporium one day?

People say ‘Oh you’re an online company’. Where actually, we think of ourselves of a community of physical boutiques. That is very important. So even when we partner with brands in Brazil for example, we only do it if they have a physical boutique. And the reason for that is that we believe in the physical experience. I don’t think that the physical experience, the retail experience, is going to go away. And actually there’s much hype about online sales, but online sales are only seven percent of sales in the designer high end. Over 90 percent is done in physical spaces. So we see ourselves as an omnichannel company. We’re an enabler of physical businesses from traditional channels.

What is the most successful boutique on Farfetch in terms of sales revenue?

Our most successful boutique this year is going to do US$10million for the year. I can’t say who it is.

Do your boutiques ever see Farfetch as competition for their own e-store?

Most don’t have their own e-store.

So what’s the situation if the brand or retailer does have an e-store?

Some of them do and they know it’s completely incremental. I won’t give you names, but we have two partners, one in New York and one in London, with very successful online operations. But they are focussed on the local market. When they start selling on Farfetch, what they see is there is almost no overlap with customers. It’s a completely different clientele that they’re tapping. On average we represent 30percent of our partners’ sales at the moment. So by joining Farfetch they have boosted sales by 30percent.

What advice would you give to all spooked Australian designers and retailers?

The first thing is would say is that it’s inevitable that competition is going to be global. It’s not just Australia. Zara and Uniqlo are invading the world. invading is a negative word. But they are expanding everywhere. It’s the reality of the time. Anywhere where these companies see growth, they’re moving to. They’re opening stores everywhere. I go back to Brazil, which is a market I know very well. Zara is a massive, massive success in Brazil. So it’s inevitable and I think with that, you need to look at the bright side of things, which is, globalisation works both ways. By tapping the online channel, today for the first time Australian brands and retailers have the opportunity to sell globally. It’s not actually expanding physically, like sass & bide and others have done. So there are opportunities in globalisation both ways. That’s how I would look at it.