Why Did Farfetch Take Off-White? Will Investors Have Confidence?

The marriage of channel and brand seems to make the imagination of fashion retailing more open.

According to the fashion business news, Farfetch, the online luxury goods retailer with a market value of $5 billion, released its second quarter results on Thursday. The group's sales rose 42% to 209 million 300 thousand dollars over the same period last year, exceeding the analysts' expectation of 199 million 700 thousand US dollars, and the total GMV was 484 million US dollars, up 44% over the same period, a record high.

In the 2018 fiscal year ending December 31st, Farfetch group GMV rose 56% to 1 billion 400 million US dollars compared to the same period last year. Revenue also recorded an increase of 56% to 602 million US dollars. The annual growth rate is two times the average of the industry, which has aroused widespread concern in the industry.

It is noteworthy that Farfetch has also launched the largest acquisition since listing, saying it will spend $675 million to win the Off-White New Guards Group, which will be completed in the third quarter.

How to activate the market for young people is a top priority for luxury goods giants. New Guards Group, which owns Off-White, has attracted considerable attention recently. Early this year, there was news that LVMH, the world's largest luxury goods group, was also interested in acquiring New Guards Group. Previously, the group had already met several private equity funds but failed to reach an agreement.

As a fashion brand management company, New Guards Group group is more like a new species. The group was founded in 2016 by Antonioli Antonioli Claudio, founder of Milan luxury boutique, Davide de Giglio and designer Marcelo Burlon. It has only been built in three years to become an important participant in the fashion industry.

New Guards Group was founded only three years ago to build the prototype of the tide Empire and become an important participant in the fashion industry.

In addition to Off-White, the group also has a potential brand matrix, including the trend of brand explosion in Europe and the United States, Palm Angels, street style styled brand Heron Preston, Unravel Project, Marcelo Burlon, A Plan A, and the Italy knitting brand in 2017.

Last October, Claudio Antonioli revealed in an interview with Italy Fashion Network that he held 46.5% of the group's shares with Davide Giglio, and Marcelo Burlon had 7% of the shares. New Guards Group, after creating the brand name of Marcelo Burlon, directly acquired most of the mature brands such as Unravel Project and Alanui, and on the other hand collaborated with designers to launch new brands, which were considered to have more potential for development.

Palm Angels was founded in 2015 by Francesco Ragazzi, who is also director of Moncler art. Its brand was inspired by Ralph, Lauren and Tommy Hilfiger in 80s. Heron Preston worked as an art director of Kanye West and worked in Nike. She had held fashion show in Paris men's wear week earlier. This year, New Guards Group also launched the fashion brand Kirin with the most popular female DJ Peggy Gou.

"Circle culture" is vividly reflected in New Guards Group. The group is deeply rooted in Kanye West, and the "disciples" of Donda artists from Kanye West include Virgil Abloh, tide brand 1017 ALYX 9SM main person Matthew Williams, 9SM, tide brand, and human beings. Among them, Virgil Abloh and Heron Preston are currently working for New Guards Group. Peggy Gou is also very good with Virgil Abloh and others.

We have grasped key talents and made New Guards Group master the main right to speak in today's trend culture. With the trend culture moving from marginalization to the center, the development prospect of New Guards Group is favored by the industry.

In terms of production form, New Guards Group is also different from traditional brand management companies, pursuing a more independent and efficient way of working.

It is reported that New Guards Group group holds all subsidiary shares, but the specific ways of cooperation are different. The group created an operation company for every brand, and all designers participated in the group. The group bought some franchises for 15 to 25 years. The distribution and production were completed in Italy and Portugal. The group has brand offices in Milan headquarters, but all brand products are designed and sold independently. In such a management structure, brands run independently, and designers do not often have to go to headquarters.

But in providing enough independent space for the brand, New Guards Group group also creates group synergy in production and distribution. Last year, the group opened several stores for Off-White, Palm Angels and Heron Preston in Hongkong. Claudio Antonioli revealed that the group usually chose to open shop with partners. In September last year, Off-White opened second stores in Macao. At present, Off-White has opened 6 stores in mainland China's Shanghai, Beijing, Tianjin and Xi'an, and has opened 3 stores in Hongkong. Besides Macao stores, its partners are I.T, a popular retail group with a wide retail channel network.

Off-White single brand has gained 21 times growth in just 4 years.

At the end of April this year, New Guards Group earned $345 million and a pre tax profit of $95 million. By the end of June, in the first half of fiscal year, New Guards Group revenue increased 59% to 190 million dollars, gross margin 55%, pre tax profit increased 83% to 57 million dollars. Earlier data showed that the annual sales of Off-White single brand rose from 2 million 600 thousand euros in 2014 to 56 million 500 thousand euros in 2017, which means that the growth of 21 years in just 4 years has attracted more and more interest from the market. (extended reading: Off-White)

However, New Guards Group was finally surprised by Farfetch's command industry. Few people think that luxury fashion providers will eventually reach their upper reaches to acquire a fashion brand management company. However, after all, this is also in line with the recent layout of Farfetch, which is to conquer young people in taste.

Farfetch does not own inventory, which can significantly reduce management costs.

Farfetch was founded in 2008 by Jos Neves, and was listed on the New York stock exchange in September last year. In order to make more small boutiques accessible to global consumers, the Farfetch website used a special buyer shop mechanism to gather all the more than 50 countries' buyer shops. The website profits from the double digit percentage of the transaction amount, and the goods are sent from third party retailers, while Farfetch does not keep its own stock. This can significantly reduce management costs on the basis of maintaining buyer shop entities.

In February this year, Farfetch announced a more in-depth strategic cooperation agreement with Jingdong. Under the agreement, Jingdong's luxury electronics platform Toplife will be merged into Farfetch China. It is reported that Farfetch will also get the first level entry of Jingdong APP, so that more than 300 million of Jingdong's active users will be better connected with the more than 1000 luxury brands and boutiques covered by Farfetch, so as to maximize the benefits.

Based on the two concepts of full channel concept and technology provider, Farfetch began to prepare new business named Store of the Future in 2017. In April 2017, the "FarfetchOS Technology Fashion Festival" was held in April 2017. This "future store" is located in a brick wall built in the basement of London's ha Ni Ni, with the core operating system developed by Farfetch, and the advanced technology including hanger and smart racks.

In addition to Luxury Retailing, Farfetch is working with luxury brands to provide new technology and e-commerce solutions to its brand through its Farfetch Platform Solutions. It is noteworthy that in February last year, Farfetch reached a cooperation agreement with Chanel, which resolutely opposed online sales. It plans to provide consumers with the best digital shopping experience through online and offline upgrading. In the first quarter of this year, Farfetch has launched the first "future store" enhanced retail pilot in Chanel Paris flagship store.

At the same time, Farfetch will extend its reach to digital marketing. Last July, Farfetch acquired Curiosity China Chi Chi Rui, a digital marketing company in China, which mainly provides digital business development and management services for more than 80 luxury and high-end brands. By integrating CuriosityChina and Farfetch, it further supports its new business unit Black & White solutions launched in 2015, and provides services to enter the Chinese market for cooperative brands, including completing clear and complete inventory taking, enhancing the marketing capabilities of e-commerce providers, and providing a full range of customer service and cross border logistics solutions.

Last month, Farfetch joined Mr. Forbes, the fashion blogger of the 30 Under 30 Asia celebrity list who was selected last year, to join WeChat small program "Mr. Bao with Farfetch". With the help of a small program, the Farfetch's electronic business platform is put into the content environment. When consumers browse the content, they can place their orders directly under Farfetch without jumping out of the small program of Mr. Bao, and realize the experience of "seeing is buying" in the WeChat ecosystem.

Through the establishment of direct cooperation with luxury brands and the launching of exclusive new products, Farfetch has been upgrading its downstream channel status, making Farfetch not only a distribution channel, but also a display scene of luxury brand image, trying to become a link of brand communication and touch consumers.

From this perspective, it is not difficult to understand the logic of Farfetch's acquisition of brand management companies directly. Although the traditional luxury brands have begun to embrace digitalization, they are still more cautious. A new trend brand with bold development and multiple possibilities of development has its own social media and digital genes, which will make Farfetch's technology more room for landing. What you can imagine is that the new trend brand that is digitally packaged may become a real new species.

Farfetch accelerates osmotic movement and street apparel market. Last December, Farfetch announced that it would buy Stadium Goods, a multi brand sportswear retailer, at a price of $250 million in cash and equities. Since April this year, the Farfetch platform has entered into cooperation with Stadium Goods and added an entry to the platform, mainly offering new and second-hand products such as Adidas, Nike, Palace and Supreme to accelerate osmosis and street apparel market. Different from Chao brand store and sports brand store, Stadium Goods is an independent form of selling shoes, which represents the consumption vitality and trend index of young people in the region. According to John McPheters, the American women's wear daily revealed that Stadium Goods had more than 100 million dollars in sales in 2017, of which 90% of electricity suppliers accounted for revenue. It can be seen that unlike other sports shoes retailers, Stadium Goods started betting on e-commerce channels, and its founders not only worked with Amazon, eBay and Alibaba, but also participated in the Tmall double eleven Shopping Festival many times.

Different from Chao brand store and sports brand store, Stadium Goods is an independent form of selling shoes, which represents the consumption vitality and trend index of young people in the region. Stadium Goods sales in 2017 exceeded $100 million, of which electricity suppliers accounted for 90%. It can be seen that unlike other sports shoes retailers, Stadium Goods started betting on e-commerce channels, and its founders not only worked with Amazon, eBay and Alibaba, but also participated in the Tmall double eleven Shopping Festival many times.

LOOK, the founder of the new retail platform, Yan Ming, told WeChat public No. LADYMAX that the two recent acquisitions by Farfetch indicate that their platform data show that sports shoes and tide brands are increasingly becoming the main force of the new generation fashion consumption. These two categories all have the characteristics of "scarcity" and "guerrilla". As a collective electricity supplier, Farfetch must have a deeper control of the upstream supply chain, which can only be acquired through acquisitions. However, compared to the acquisition of Stadium Goods, which can significantly bring the depth of vertical category supply, the acquisition of single or multiple brands also seems to face the huge risk of the rapid rise and fall of the emerging brands themselves. The Vetements that was once in keeping with Off-White has withdrawn from the public view in just two or three years, which is an illustration.

The layout of Farfetch also takes into account the impact of luxury brand e-commerce business autonomy on the fashion business. After all, the brand wants to "flow" in its own hands.

Gucci's group opened a statement this June. In view of the growing potential of the Asian electricity market, the group decided to terminate its cooperation with Yoox Net-a-Porter group. The electricity business will be independently operated in the second quarter of next year. The two sides set up a joint venture to operate e-commerce business in 2012. Gr goryBoutt goryBoutt, chief customer and digital officer of Kai Yun group, said that its future brand will expand its share of online sales through the official website and franchising business with the third party e-commerce platform.

As the biggest competitor of Farfetch, Yoox Net-a-Porter (YNAP), which was fully bought by the group, also sniffed the new market trend. Earlier this year, Yoox of YNAP group launched a website that looked for designers who could design "Yoox consumer works". This shows that the online retailer has made new progress in promoting its own brand business.

Last year, YNAP launched the Mr.P brand on the male e-commerce website Mr.Porter, which is the same as other trend brands on the website. Its competitor MatchesFashion has also joined its own brand business and launched the Raey brand. YNAP CEO Federico Marchetti said at last year's annual shareholders' meeting that it would increase its own brand business and plan to make up 10% of its net income by 2020.

According to New York Times, in 2017, the number of fashion suppliers of Net-a-Porter, including luxury electric business, was up to 40% of its sales volume from about 3% of customers. YNAP has 3 million 100 thousand active customers, which means that nearly half of its sales come from less than 100 thousand customers.

In order to achieve long-term growth, luxury and fashion businesses are going all the way, and they need to start their own brand to cover more new young consumers. In addition to gaining traffic directly from the News Guard Group Empire, Farfetch also said it was building a community operation system, including the launch of the station wide UGC (user original content) "Farfetch fashion community" as a planner.

Data and young people are the fuel for the continuous operation of the fashion business, and the two are the core of the trend culture, which provides a fundamental sense for the acquisition. As of Thursday's close, Farfetch shares rose 5.07% to $18.25, with a market capitalization of about $5 billion 300 million.