farfetch-business-model

How Does Farfetch Make Money? The Farfetch Business Model In A Nutshell

Farfetch is an online luxury fashion retail platform founded by Portuguese entrepreneur José Neves, a stalwart of the fashion industry since the 1990s, with the vision of allowing anyone to purchase clothing from high-end brands from cities like Paris and Milan, from the comfort of their home. The company makes money through commissions, fulfillment services, and wholesale distributions.

Origin Story

Farfetch is an online luxury fashion retail platform founded by Portuguese entrepreneur José Neves, a stalwart of the fashion industry since the 1990s. Neves had a vision of allowing anyone to purchase clothing from high-end brands from cities like Paris and Milan from the comfort of their home.

Farfetch began as a platform in 2008 with around 40 boutique fashion stores. Although poorly timed with the onset of the GFC, the company quickly established itself as an innovator in the fashion industry. Instead of holding physical inventory in a warehouse, Farfetch utilizes retailers to pick and pack the merchandise in Farfetch-branded packaging. In this way, the company acts as an intermediary between the buyer and seller and avoids many of the risks associated with a typical retail business.

The company is also a leader in efficient worldwide fulfillment, using technology and economies of scale to reduce costs and delivery times.

Farfetch now ships approximately 1300 brands to over 190 countries worldwide.

Farfetch revenue generation

Farfetch has a surprisingly diverse revenue generation model as an online marketplace.

Let’s dive straight into it.

Commissions

Farfetch collects a commission of 30% of the total sale price from every merchant using its platform. It’s important to note that merchants are not simply paying for access to Farfetch leads. Instead, they are gaining access to a proprietary integrated system that helps them track inventory levels across buyers, suppliers, and couriers.

They also get access to data analytics and other technological tools to leverage sales.

Fulfillment services

Farfetch also collects a fee of around 8% for its fulfillment services. These services include item delivery, return and refund management, and the storage of goods.

Software

Farfetch Platform Solutions is a suite of products designed to help fashion brands connect and interact with their customers. Brands can select from specific product or service bundles or can opt for a full end-to-end eCommerce experience.

Prices for this SaaS option are available upon request, but it can be assumed that it involves a setup fee plus a percentage fee of all subsequent revenue generated.

Bricks and mortar acquisitions

Over the years, Farfetch has acquired several physical retail stores including Stadium Goods, New Guards, and Browns.

As a result, it generates revenue via the sale of goods online or in-person.

Wholesale distribution

When Farfetch acquired New Guards Group in 2019, it automatically inherited several established luxury fashion brands. One of these was Off-White, an Italian brand founded in Milan in 2012. Others included knitwear label Alanui and men’s streetwear brand Heron Preston.

Products from each of these brand acquisitions are now sold to a variety of merchants on a wholesale basis.

Key takeaways:

  • Farfetch is a Portuguese digital marketplace for high-end fashion. It was founded by entrepreneur José Neves who had the vision to give consumers access to designer goods from the comfort of their homes.
  • Farfetch takes a 30% commission from each sale made on its platform. Merchants using its integrated and proprietary solution get access to a suite of tools in addition to prospective leads.
  • Farfetch Platform Solutions is a SaaS offering for merchants who want to better connect with their audience. The company also makes money via the wholesale distribution of products from brands it has acquired.

Read Also: Bernard Arnault Empire, The Family Owned Prada Integrated Business Model, How Does Zalando Make Money, How Does Amazon Make Money, The Kering Group Multi-Brand Business Model.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"