JD.com wants to bring luxury e-tail to the east
Chinese Ecommerce titan JD.com has bought a “significant stake” in global luxury fashion platform Farfetch. The former company spent $397 million on the latter, and they will now partner “on marketing, logistics, and technology solutions to build the Farfetch brand in China.” In other words, JD.com is hoping to create a luxury fashion Ecommerce platform specifically for Chinese consumers.
In the west, there area already examples of such companies – Yoox Net-a-Porter, Zalando – but JD.com sees a gap in the market at home. And as Ecommerce becomes a more fundamental part of luxury retailing, it is likely to be a profitable gap. This may even be truer in China than the west: the Chinese luxury market is recovering quickly from President Xi Jingping’s austerity drive, and the country has embraced Ecommerce more quickly, and to a greater degree, than its western counterparts.
JD.com’s share price has risen by almost 70% so far this year…
Source: Yahoo Finance
JD.com is China’s second-largest Ecommerce company after Alibaba, and it’s making a concerted effort to push into the luxury market. Partnering with Farfetch will seriously raise its credibility in the area, and provide it with the basis of a ‘readymade’ luxury platform. Farfetch, in exchange, not only gains access to the world’s second-largest luxury market, but also has an established local company to help it cross any cultural barriers that might present themselves.
Amongst the more technical offerings JD.com brings to the table is recently launched premium delivery service, JD Express, as well as payment service JD Pay and microedit channel Baitiao. These will help Farfetch transition from its current mode of operation in China – where is has partnerships with 200 luxury brands and over 500 multi-brand retailers, but little brand awareness of its own – to a more ‘front and center’ operation that sees the Farfetch name become commonplace.
José Neves, founder, co-chairman and CEO of Farfetch, said:
"China is the world's second largest luxury market, and we are delighted to have such a respected partner, known for its strict protection of IP, with whom to address Chinese luxury consumers. This partnership addresses the market's challenges by combining the Farfetch brand and curation with the scale and influence of the foremost Chinese e-commerce giant.”
“This strategic partnership will provide brands a seamless, immediate access to the luxury consumer and Chinese luxury shoppers with access to the greatest selection of luxury in the omni-channel way of life they have already fully embraced."
Dominion holds JD.com in its Global Trends Ecommerce Fund.
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