José Neves Unpacks the Farfetch-Alibaba-Richemont Partnership | #BoFVOICES 2020

Opportunistic investment was a theme in this year's report on the state of fashion 2021. It offered a prediction that companies will begin maneuvering for the post-pandemic reality to grow market share and expand their capabilities. But in fact, it is already happening. The recent landmark deal with Farfetch, Alibaba, Richemont, and Kering is a case in point. First, it brings together two rival luxury goods groups, Richemont and Kering, who both invested in Farfetch. But there's also added interest because Richemont is also the owner of YNAP, a major rival to Farfetch. Now, I'm joined by José Neves, founder and chief executive of Farfetch, who's in São Paulo today, as well as Mike Evans, president of Alibaba, who joins us from Mexico. In this, their first joint conversation, they'll help us to understand the anatomy of this mega deal and what it portends for the global luxury e-commerce space. Welcome to you both, José and Mike.

Hi. José, I wanted to start with you first. You know, this is a deal that really took the industry by surprise. Some of our reporters kind of dropped the mic on Slack and other places, like, where did this deal come from? So, in the first instance, can you just give us a sense of the genesis of this mega deal? How did it happen?

Sure. You know, I think the genesis of the deal was a conversation, which I will never forget, that conversation with Daniel Zhang. You know, we had that conversation just to understand the Chinese online luxury market and what both the Luxury Pavilion and Farfetch China were doing. And we ended up staying for a long, long time, much longer than what we expected. And what was clear to us was three things. First, we think as tech businesses, we are technology platforms, we're not retailers. And we really are at the service of the best brands and the best retailers to really enable them. We're here to enable industries. And that ethos was very, very striking because we're not here to replace physical retail. For example, Farfetch started with physical retail, that's what we did since day one, and we continue to have. We started the Future of Luxury New Retail, very much believing in how do we reinvent the magic of luxury of physical retail. And it's the same with Alibaba, actually. So they are enabling tens of thousands of physical retailers in China, not in luxury but in other categories, with one single digital platform. So that was one. The second was China and how combined and joining forces we could have a win-win proposition for consumers and also for brands and retailers in that market. And the third one was the global nature of this deal, that we should really join forces to create this vision of Luxury New Retail. This Alibaba strategy, New Retail, was Farfetch's strategy, Luxury New Retail, is the combination of these two strategies. And it's really a movement and a suite of products and technologies that is ready. So this is not fantasy, this is not future gazing. This is ready. We are powering companies already, as Chanel, for example. We saw the Future of Luxury New Retail now available to other companies, and obviously Alibaba in China. So that was how the story started. And then Richemont has a very close partnership with Alibaba. Artemis, and allow me to introduce a small correction, the investment was not from Kering, it was from Artemis, so the Pinault holding company. They were already investors in Farfetch since our IPO. So we naturally, you know, asked them, what do you think? Is this a vision from two technologists that really are not seeing what the industry needs, or is it something that your maisons and your brands would need and embrace and think very much in the future? And so, would you help us shape that future? And we created this steering group where Johann Rupert and François-Henri Pinault were very helpful to have them help us with the map. This is what we have, this is what we're doing, does this make sense for you? And so, in a nutshell, that's how the deal happened.

Okay. Mike, from the Alibaba side, you know, you're such a dominant company in China. Something like 20% of consumer goods, I believe, are bought through your platform. What was the motivation from the Alibaba side to move into this partnership?

Got it. Okay. Yeah, now on that point, you know, when you hear all of the players that are involved with this deal, there's one player that's noticeably absent, which is, you know, the dominant luxury group in the sector, LVMH, which owns something like, you know, 75 different brands, not all of them fashion, of course. Was this something that you took to LVMH? I know, for example, José, some LVMH brands are on the Farfetch platform. You know, if this is something to kind of really bring the different players in the industry together to kind of create this standard operating platform for the whole industry globally across physical and digital retail, why isn't LVMH in the mix here? I'll go to you first, José.

Well, you know, we spoke initially with the groups that already have a shareholding or a JV relationship, in the case of Richemont with Alibaba, in the case of Artemis with Farfetch. But this is open to everyone. This is absolutely, this is a two-platform shining process to create a single unified platform across online, offline, mono-brand, and multi-brand. By the way, because CEOs think of a matrix of 2x2, the consumer thinks as a circle, right? And we need this to be transformed. And I think this year clearly showed that. And that's what we have, and we have ready to go and out of the box and for everyone, for all the luxury groups, obviously LVMH, other luxury groups, maisons, medium brands, smaller brands, retailers, for department stores. And I think for medium and small brands, actually, this is an incredibly, incredibly powerful combination because with one single integration, and without the need of producing one single product mark, which is also a very sustainable approach, you're suddenly visible not only on the Farfetch platform, but on the Tmall Luxury Pavilion platform, which is transformational for small, medium brands, but also for brands that already have a position on Farfetch and maybe they have 100 SKUs. With this, they will have 5,000 SKUs. They will have the global inventory, which gives them much more visibility than before, again, without producing a single item mark, and giving Chinese consumers, because that's what's in it for the consumer, the ability to shop real-time fashion from Paris, from New York, from LA, from Tokyo, from wherever they used to love shopping and now unfortunately they're not able to. So this is, I think, a win-win for all participants and it's open to work, so everyone's invited to join.

That's good to hear. So we'll track the other brands and maybe groups that decide to be part of it. I wanted to turn the conversation and focus a little bit on the Chinese market. We, earlier in the event, we've been talking about kind of, you know, China basically bucking the global trend in terms of economic growth, consumer confidence, a series of measures that say that, you know, China has, of all the countries in the world, the major markets in the world, China has already, in a way, come out of the crisis stage and things are turning back towards growth. So, Mike, as that's a market that you know very well, can you just paint a picture for us right now of the retail landscape in China and how you expect that to evolve, and any lessons to share that might be applicable on a global level?

Yeah, it's been kind of amazing to hear similar perspectives right from the first session that we did. I mean, José, the China market opportunity for Farfetch has been a focus of yours for some years now. And you know, this latest deal just underscores the importance of that market for Farfetch's continued growth. But you already had a partner in China, you had JD.com. And now you're changing your strategy, clearly partnering with Alibaba. What does this new partnership offer that the partnership with JD.com did not? And why did that partnership not continue?

Listen, you know, first of all, I have huge, huge respect and admiration for JD, for Richard Liu, what he's built, and for that team. We've been good partners, we've worked together very closely. I think there is definitely an intent, a level of intent for international luxury specifically on Tmall that doesn't exist on any other platform. It's not just JD. And fashion is the core category of Alibaba. We all think Alibaba is the Amazon of China, which is a way of putting it and thinking of it, but fashion was never the core category for Amazon. It has become a more and more important category, but it was always the core category for Alibaba. So they have the customer, they have the intent, and they have the tools and the way of presenting it and searching it and shopping it, etc., etc., that has created an incredibly powerful platform for fashion in China. And in recent years, the amazing work that Alibaba has done with the luxury groups to create an environment where they're extremely comfortable to grow their businesses is incredible, is quite something. So for us, it became clear that the alignment with Alibaba, with Tmall, was the next thing to do and the right thing to do. And here we are. And you know, we're going to work very diligently. We're targeting half of Q2 next year for the launch of the Farfetch on Tmall. That's very exciting. That gives the 3,500 designers, and here we're talking very small designers, medium, and very large, presence in China's favorite fashion app, which is female and Luxury Pavilion. So I think that's extremely exciting. That goes for retailers and department stores as well that utilize our platform. And I think it's going to be a pivotal moment for everyone's China strategy, not just our channel strategy, but everyone's China strategy in 2021.

Okay, we only have a couple of minutes left. So I wanted to conclude by kind of looking far into the future. Because José, you know, you and I have known each other since way back, I think in 2007 or 2008, when you were first setting up Farfetch and I was first setting up BoF. And you've always been a man with a vision. You know, how has this current period, the pandemic, all of the changes that we've been talking about here at Voices, changes in customer behavior, changes in the market landscape, how has that changed your vision for Farfetch, say five or ten years from now?

Well, first of all, there's a sense of service to the community. You know, our team was very, we didn't know how this was going to pan out, by the way, no one knew, right? And we started dealing with COVID in January because we have a huge team inside, we have 400 people in China, we have a big business in China. So we've learned so many lessons. But the sense of community, we've launched #SupportBoutiques to support the smaller companies which are the ones that are more vulnerable in this situation. But this sense of we're here to enable an entire industry to thrive and to evolve and to innovate. And I think the other big lesson is an acceleration. We just need to remove all these completely fabricated ideas around online, offline, multi-brand, mono-brand. That's not how the consumer thinks. And the brands and retailers and all of us, we really need to stop using the word digital as a buzzword that sounds good when we do earnings calls and when we put out investor letters because they want to see the digital there, blah, blah, blah. And really say, guys, there's no digital or physical. It's there, there, there, right? Single view of inventory, single view of customer, single view of journey across multi-brand, mono-brand, online, offline, globally, including China. We need it now in 2021, not in 2025. And this is what I'm absolutely laser-focused in leveraging this partnership with Alibaba, but also what we already have. This already exists. It's not a futuristic vision. And how can we make it easy for brands to embrace that vision working with us and potentially other providers and other partners, of course.

Okay. And Mike, just some quick thoughts from you. We're almost out of time. But you know, it strikes me, earlier you said this is a global partnership. You know, Alibaba is thought of as a Chinese platform. You know, looking into the future, where does this deal take Alibaba on a global level?

Okay. Well, I look forward to catching up with you both maybe a year from now to track the progress. Thank you so much for joining us today and giving us the backstory on this mega deal.

Thanks, Imran. Thank you everyone. Bye, guys.