LONDON, United Kingdom — Everyone now acknowledges the importance of online retail in fashion. But how does a small fashion boutique, with limited resources break into the e-commerce game? The costs of building and maintaining a top-quality site can be prohibitive, not to mention the operational challenge of managing deliveries and returns. What's more, with everyone piling in to the fashion e-commerce game, there is so much product out there, on so many niche sites, that it can be tough for small retailers to attract traffic.
Enter farfetch.com, the brainchild of José Neves, a serial fashion entrepreneur who is also an owner of B-Store, Swear and SIX, a manufacturer and showroom for shoes by Opening Ceremony, Ksubi and Surface to Air. Through these myriad experiences, Neves identified an opportunity to support independent fashion boutiques and designers so that they can compete in the burgeoning online retail space with the same level of resources and customer service the big guns.
I caught up with José to learn more about the farfetch model and his plans to take the business model to the United States and Brazil.
BoF: How was the idea for farfetch.com born and what makes you different from all of other fashion e-commerce players out there?
Our other business, SIX London, operates two retail stores in London and we wholesale our own brands and licenses to 600 prime retailers worldwide. I noticed that our web sites had reached a point where further progress could only be made with a significant investment in human resources and advertising. But as a small business, that would be difficult to be justify.
On the other hand, I also noticed that the retailers that work with SIX stock absolutely fantastic designers and products and have very talented buyers. Their stores are world renowned. But, they either did not have any e-commerce operations altogether, or were facing the same problems our London stores faced in terms of growth and quality of service.
The idea of farfetch.com stems from these experiences and observations. The rationale of the business is to create a world class infrastructure supported by a top-notch team, and then put all that to the service of the world's most interesting retailers and their web sites. In addition to that, we thought that creating a single "portal" where users could easily find products from 35 retailers instead of browsing 35 separate sites would greatly improve the customer experience, and also enable us to advertise the portal properly.
We do not buy stock, however we do select stock like pure e-tailers do. The fashion enthusiasts out there find in farfetch.com a carefully put-together selection of designers and products, with a focus on the quality of service and consistent experience, and that is the same as other pure e-tailers, however since we are a multi-channel operator we are able offer many designers and products which would be too risky for a pure e-tailer. Our forte is, therefore, the breadth of designers and items which I believe is truly unique. And the fact that they are carefully selected by 35 buyers who peruse the world scouting for the best designers and most exciting products makes us completely different from a "marketplace" like eBay.
I like to say we are the "third" model - not a pure e-tailer and not a marketplace, but a multi-channel e-tail network.
BoF: Working with more than 35 retailers all over Europe, farfetch.com is a complex operational machine. Can you tell us a bit about how you make it all hum?
Indeed, this is the biggest challenge of the business model. We have a strong operations team, some bilingual in French, some in Italian, so we ensure a good communication with our partners in those countries. We constantly train our retailers and we develop our own e-commerce platform, which keeps evolving to adapt to issues and problems we encounter.
We still depend on the proficiency of retailers in adhering to our operational guides, and not all have the same level of expertise. There is a learning curve. However, we have proven the business model works. The operations are running efficiently and the figures are a very pleasant surprise!
BoF: How is the new Internet channel offered by farfetch.com helping your retail partners to weather the recession?
Practically all our partners have enjoyed a big commercial success as part of their partnership with farfetch.com. Some of our partners are selling £2,000 of merchandise every day. For a small store, this is a very significant turnover — sometimes greater than what they are able to do in their stores. For many of our partners, their experience with farfetch.com has overwhelmingly surpassed their initial expectations.
Based on our experience, internet sales on average will make up 15 to 20 percent of the total sales of a specialist high-end retailer. No business can dismiss this kind of opportunity, especially in these tough times.
BoF: Which products or categories are working best at the moment?
Footwear is clearly our top category, followed by clothing. Women's is performing much better than men's, although this did not come as a surprise.
BoF: What are your future plans for growth?
We have curbed our expansion in Europe in terms of number of partners, trying to keep the operations and the size of our team at a stable level.
Our big step for this year is the launch of farfetch.com in the US. We have teamed up with the founders of revolveclothing.com, who have a very established e-tail business in America, and all the expertise we could wish for. We are also signing on some great American retailers, and will be up and running in the US by October 2009.
The other strategic shift is to extend our services to designers, and we have a major contract just recently signed (but still confidential), which will be our first step in this area.
We are also in advanced talks to launch in Brazil, a market which is fenced from outside competition by very high import duties. The project will target the free-trade region of Mercosul (Brazil, Argentina, Chile, Venezuela, and others). It is a huge market which is sophisticated and has spending power, but is riddled by a very traditional and stiff system with great barriers to entry for new players. We believe the Internet can make a huge difference and we can benefit from the exponential growth that this area of the world is experiencing.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.
This interview has been edited and condensed.