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Days after LVMH agreed to go ahead with its acquisition of Tiffany Co. at a slightly lower price, ending months of bitter public conflict, the global luxury industry has produced a new landmark deal that will unite some of its biggest names.
Richemont, the Swiss luxury watch and jewelry maker, and Artemis, the holding company of French luxury goods group Kering, are joining the Chinese e-commerce titan Alibaba to invest $1.15 billion in Farfetch, a luxury e-commerce platform based in East London but listed in New York.
The aim? To create a new Chinese marketplace that will capitalize on the country’s booming demand for luxury goods, which has recovered from a temporary drop in consumption brought on by the pandemic earlier this year. The partnership, announced Thursday night, could also herald further consolidation in the fragmented online luxury market at a time of dramatic upheaval in global retail.
As part of the deal, Alibaba will introduce Farfetch luxury shopping channels on its Tmall Luxury Pavilion and Luxury Soho platforms. Alibaba and Richemont will each invest $300 million in Farfetch Limited, and a further $250 million each into the newly formed Farfetch China. They will have a combined 25 percent stake in the new joint venture.
Artemis will increase its existing ownership in Farfetch with a $50 million purchase of Farfetch shares. A steering group will also be formed among Farfetch, Alibaba, Richemont and Artemis to “explore new ways to incorporate digital into luxury retail,” a statement said.
At a time when Amazon continues to invest heavily in its luxury fashion operations, the deal confirms Farfetch as the leading player in the Western luxury market. Unlike rivals, Farfetch has seen flying sales this year, reporting $721 million in sales in the second quarter, a 48 percent increase from the same period last year. Founded in 2007 by José Neves, the company counts Alibaba’s rivals JD.com and Tencent among its investors. Until now, Farfetch’s biggest competitor was considered to be Yoox Net-a-Porter, which Richemont acquired in 2018.
“You are either a disrupter or a disrupted and I hate being the latter,” Richemont’s chairman, Johann Rupert, told reporters on a call on Friday, later stressing that Richemont was not interested in a merger or in taking over Farfetch.
“We’re dealing with a public company that we hope will remain independent,” Mr. Rupert said, adding that Mr. Neves would remain in charge at Farfetch.
The Chinese luxury market, which is expected to account for half of global luxury sales by 2025, has seen a strong recovery this year as shoppers emerging from Covid-19 lockdowns splurged online or in retail stores.
Article source: https://www.nytimes.com/live/2020/11/06/business/us-economy-coronavirus