Alibaba x Farfetch - The union of giants
If the alliance (and the amount of the buyout) of Tiffany & Co by LVMH had marked the spirits in 2019, it is today with a 1.15 billion dollar operation that luxury mastodons present a global strategic partnership.
Indeed, last November 5, Alibaba and Richemont announced that they will each invest 300 million dollars in Farfetch Limited and 500 million dollars in a joint venture "Farfetch China" to increase their penetration of the Chinese market. This partnership, called "Luxury New Retail", is also intended to optimise the digitalisation of the luxury industry on a global scale.
By joining forces with Farfetch, a market-place that offers a selection of hand-picked luxury brands, this operation shows the willingness of digital to expand in the luxury industry. With a catalogue of more than 300 cutting-edge European brands, with strong and sometimes emerging identities, Farfetch knows exactly how to seduce the Chinese Millenials and Generation Z, who, it should be remembered, are the most expensive and sophisticated customers in any market. The perfect profile for brands. And if the luxury market in China is expected to account for half of the world's sales by 2025, and if it concerns hundreds of millions of young customers born with digital, who better than Alibaba, the Chinese e-commerce giant, to support this rapprochement in favour of digital retail?
The period of health crisis has definitely given a boost to the pooling of financial and technological investments and to profound changes. If the luxury industry is increasingly tending to invest in ethics, responsibility and sustainability (upcycling, make to order, slowing down the pace of collections...), it is clear that the same is true of the digital sector. The players are well aware that tomorrow's luxury belongs to the young, or even the very young, and that it is vital to occupy the digital field in a global way. Especially in a context where the lack of Chinese customers is cruelly affecting the major houses.
The agreement around Farfetch is a perfect illustration of how closer ties and common retail perspectives have become indispensable levers in an increasingly competitive sector. Tiffany and LVMH, but also Chanel, which has recently made several acquisitions to secure its supplies (purchase of the brand's production houses, or targeted actions).
As Thibaut de La Rivière, director of Sup de luxe, points out, "The time is ripe for strategic partnerships and more than ever the transition and digital expansion of luxury is necessary."