Platforms or conglomerates business models excel at optimizing resources and reduce financial risks (everything impact on financials such as over-stocking, slower lead-times…). It’s the story of “a basket of eggs or eggs in baskets”. Understanding what is the value proposition and leveraging your key resources and partners is crucial to grow in a sustainable way.
In a volatile environment, platforms or conglomerates have a competitive advantage thanks to specialization. In a platform, the whole is greater than the sum of its parts. In Luxury, brands take advantage of being part of a conglomerate while benefit from economies of scale, centralization of capabilities (e.g. purchasing power, technology, advertising), access to an exclusive network of suppliers, access to capital, access to professional talent, amongst others. Therefore, brands can focus on what they are best at. In fashion, most of the times, it means designing.
Luxury fashion is probably the segment in the pyramid that is concentrating the most brands and power in the industry. LVMH, Richemont and Kering lead the “oligopolistic” situation that illustrates the luxury industry (fashion, beauty, cosmetics, spirits, wine, jewelry, watches, …). But these behemoths are playing safe as they are acquiring well-known brands. While luxury conglomerates are investing in “Pareto A companies”, the emergence of “Digital” introduces new powerful business models, like technology platforms. .
This is the case of Farfetch, that I described in previous articles as the long tail of fashion that give market visibility (demand) to niche players (fashion brands) thanks to their e-commerce capabilities. Today, the Portuguese company that went public on 2018, includes in its marketplace over 3,000 brands and delivers to more than 190 countries around the world. Furthermore, today Farfetch operates a modular end-to-end technology platform and describes itself as a technology platform.
The Farfetch Platform (source: U.S. Securities and Exchange Comission)
What Farfetch growth strategy is? Some of the milestones achieved include:
- In 2018, acquired Stadium Goods, the world’s premier sneaker and streetwear marketplace. Farfetch expands its sneakers category and integrates more know-how and customer data, while Stadium Goods benefits from Farfetch’s technology, logistics, supply, brand and marketing.
- July 2018 – Farfetch acquired Curiosity China (Social Media marketing).
- Feb 2019 – Harrods chooses Farfetch as exclusive Global E-commerce Partner.
- June 2019 – Farfetch launches on JD.com, China’s largest retailer.
- Aug. 2019 – Acquired brand platform New Guards Group (NGG), a platform that launched brands such as Marcelo Burlon County of Milan, Off White™ or Palm Angels, and recently acquired Opening Ceremony.
In a more volatile and connected global economy (weather extremes, political crisis, virus…), partnerships, collaborations and ecosystems are a proven model to reduce risks and make a business more sustainable.
Farfetch is a good example of how to understand the business as a network, where each part is high-performing whether on technology, data, logistics or design and marketing.