Coupang, South Korea’s Amazon, buys Farfetch for $500 million
The online fashion giant was on the brink of bankruptcy due to falling sales and a declining luxury market
By February 2021, Farfetch’s market capitalization had reached approximately $23 billion. Two and a half years later, it had fallen to $250 million. Founded by Portuguese entrepreneur José Neves in 2008, Farfetch knew how to capitalize on the fever for online shopping. It operated as a large multi-brand platform for luxury brands, selling products mainly for independent designers or brands with few physical stores.
In the last 10 years, the company expanded, not only opening offices in London, Tokyo and New York, but also launching different lines of business. In response to the rise of urban fashion, Farfetch created New Guards Group, a conglomerate that owns brands such as Off White, Palm Angels, Heron Preston and Marcelo Burlón. In 2015, they gave up on physical stores and bought Browns, the legendary London multi-brand independent design store. And in 2017, the publisher Condé Nast entered as an investor in Farfetch after closing its e-commerce platform Style.com.
Farfetch’s success seemed unstoppable. Indeed, it was recently confirmed that the company was negotiating with the luxury goods group Richemont (owner of Cartier) to take over the majority stake in its main competitor in the digital market: YOOX Net-à-Porter (YNAP), which belongs to that group. However, falling gross profit, with sales down, and the declining share prices in the luxury sector pushed Farfetch to the brink of bankruptcy in a matter of months.
On Tuesday, it was confirmed that Korean giant Coupang had agreed to buy the company for $500 million. Founded by Bom Kim in 2010, Coupang is the largest digital retailer in South Korea, which has led it to be nicknamed “South Korea’s Amazon.” Although it offers all types of products and services (including restaurant food delivery), the acquisition of Farfetch is the company’s opportunity to enter the luxury sector, which has one of its most thriving markets in South Korea. “This acquisition positions Coupang as a leader in the $400 billion global personal luxury goods segment,” Coupang said in a statement.
José Neves will continue to retain his role as CEO of Farfetch, but it is unknown if the acquisition will affect the company’s collateral businesses. In other words, it is not yet known whether Coupang will take over News Guards Group, Browns or Farfetch’s recent stake in Neiman Marcus. What is known is that Richemont has put the deal to sell Farfetch a stake in YNAP on hold. The company said it “will re-evaluate options for YNAP to best harness its strengths and potential under new stewardship.”
A few months ago, it was believed that this deal would give Farfetch a monopoly on luxury online commerce. But now, with shopping at physical stores making a comeback and the falling share prices of luxury companies, the landscape has changed.
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