Farfetch remains bullish on luxury growth

Farfetch, the luxury online fashion portal, is optimistic that demand for luxury will remain resilient in 2023, and as such, the company intends to keep its products at full price and avoid discounting in the holiday season, choosing instead to focus on driving repeat purchases from high-value customers. 

Why it matters 

Luxury tends to be less impacted than the overall retail sector by economic downturn and consumer changes in spending, because it caters to an affluent consumer who is less reactive to these pressures.

In a Q3 earnings call, group president Stephanie Phair said: “Our customers are highly engaged, and the demand generation leverage delivered indicates that we have become more efficient in interacting with them. This is also a reflection of our investments in building our brand, which is particularly beneficial in times like these.”

In numbers

• Farfetch saw Q3 revenue grow 14% year-on-year, despite high inflation impacting the wider consumer economy and its decision to pull out of Russia, formerly a key market which represented 7% of global GMV.
• Farfetch’s stores grew revenue 54% year-on-year.
• 90% retention of private clients, whose average order total was circa US$1,100, with continued demand for high price-point items.
• Double-digit percentage growth of active existing customers, as well as 500,000 new customers in the most recent quarter. 
• Significant efficiencies achieved in customer acquisition costs, which were down 18% year-on-year.

Avoiding the discount temptation

Farfetch is not engaging in discounting this holiday season, as it chooses to focus on high lifetime value customers instead. 

Elliot Jordan, Farfetch's chief financial officer, explained that their gross margin was up “significantly” year-on-year because it's not copying the promotions of some of its competitors. 

“It's a deliberate decision to maintain a focus on full price for our participants on the platform and drive our own margins,” he added. 

Focusing on repeat purchases 

Phair said the company's investments in marketing tech has helped the company attract customers, including over the pandemic. 

“We really leaned in and acquired a lot of customers. That hasn't stopped … this is also a deliberate strategy to really lean into our most valuable customers and valuable targets in terms of new customers,” the group president explained.

“Where we're really leaning in is our retention efforts ... we've really been leaning into that over the last year or so, everything from increasing personalization, curation, and driving sales from the app, where you really see strong retention and focusing on those higher cohorts,” she added.

[Image: Farfetch]