Farfetch’s “Chinese Dream” is about to accelerate.
After JD.com invested US $ 397 million, Tencent also entered the game.
It is learnt that Farfetch, a British luxury e-commerce company, announced on January 30 that it has received $ 125 million in investment from Tencent and US investment company Dragoneer. This investment is made by purchasing a convertible senior note issued by Farfetch , which is valid from March 31, 2020 to December 31, 2025, and will be converted at the initial price of $ 12.25 to stock.
Farfetch said that the financing was mainly used to supplement the company’s current liquidity. As of the end of 2019, the company’s cash and equivalent balance was approximately $ 320 million. In addition, the financing helps the company’s long-term strategy, especially the growth of the Chinese market.
Farfetch has already launched a number of businesses on WeChat platforms under Tencent, including the official WeChat account, WeChat mall, and WeChat Mini Program.
In fact, this is not the first time Farfetch has sought local cooperation.
On June 22, 2017, JD.com invested USD 397 million in Farfetch, becoming one of Farfetch’s largest shareholders. Last year, JD.com’s luxury e-commerce provider Toplife merged with Farfetch China, and Farfetch also won the first-level entrance of JD.com app. In addition, Farfetch also acquired China’s digital marketing company CuriosityChina.
Now, as the major shareholder of JD.com, Tencent has made a further contribution to Farfetch’s layout in the Chinese market.
How big is the luxury market in China?
According to the “2019 Global Luxury Goods Industry Research Report” released by Bain Consulting, global luxury goods sales in 2019 will reach US $ 310 billion, and China will contribute 35%. With the transformation of consumption patterns, online luxury goods platforms are also gaining more favor. In 2018, China’s luxury online sales were US $ 5.3 billion, an increase of about 37% over 2017, and accounted for more than 10% of China’s luxury market sales.
In this regard, Chinese BATs will naturally not stand idly by.
Alibaba, which started as an e-commerce company, announced in October last year that it would establish a joint venture with Yoox Net-a-Porter, the world’s largest luxury e-commerce platform. The joint venture will focus on the domestic luxury consumer market. Alibaba provides technology and logistics.On the investment side, there are two e-commerce platforms NET-A-PORTER and MR PORTER focusing on menswear and womenswear. Earlier, Alibaba launched its luxury platform Luxury Pavilion on Tmall in 2017, targeting 500 million high-quality users who have been screened by Tmall. The platform now has nearly 10 High-end members with annual consumption of over one million. In 2018, Alibaba invested Ordre, a luxury online wholesale technology company, at a high price .
Tencent started with social networking, and its focus on the domestic luxury market mostly revolves around its WeChat products. Online, friends circle ads have become a new choice for luxury brands. With the blessing of WeChat Mini Programs, luxury brands are more likely to complete one-stop digital marketing. For example, Burberry sells the B Series through a WeChat applet for a limited time. In offline physical stores, Burberry announced in November last year that it would try “social retail” with Tencent.
ByteDance, as a rookie of the BAT giant, has not fallen behind.
On September 3, 2019, Byte Beat and luxury e-commerce temple library jointly released Luxury Headlines . The cooperation will carry out in-depth business cooperation on modules such as precision marketing, deep technology connection, high-end brand advertising, and data insight reports for high-end consumer groups. According to the news of Byte Beat, as of July 2019, the total DAU of Byte Beat’s products worldwide exceeded 700 million, and the total MAU (monthly active users) exceeded 1.5 billion, of which the Douyin DAU exceeded 320 million. The attractiveness of the huge traffic pool to the e-commerce platform is self-evident.
Although the total global luxury goods sales and online sales are increasing, the life of Farfetch, a luxury e-commerce platform, is not good.
When Farfetch first went public in September 2018, its market value once broke through $ 8 billion. In August last year, Farfetch released its second fiscal quarter performance data, with sales up 42% year-on-year to $ 209.3 million, but its net loss expanded from $ 11.7 million in the same period last year to $ 89.6 million. While announcing results, Farfetch acquired the tide brand New Guards Group for $ 675 million. This move caused suspicion in the industry and capital. Some analysts believe that Farfetch is still not profitable on the one hand, and the other sideAs a brand management group, NGG is not directly related to Farfetch’s e-commerce retail. The suspicion was that Farfetch’s stock price fell by more than 40%. Although the stock price has increased due to the narrowing of losses since then, it is still far from the ideal state.
China’s luxury spending power has been proven time and again. Farfetch, anxious to make a profit at this time, has made another shot at this time, maybe it is looking forward to regaining a game.
(Source: Farfetch official website)