What Farfetch’s Branch into Brand Building Means for Luxury Retail

August 12, 2019

Online retailer Farfetch is stepping up its investment in streetwear with the acquisition of New Guards Group, in a move that gives it further access to some of fashion’s hottest brands in an increasingly competitive category.

Announced on Aug. 8, the acquisition will see Farfetch leverage its data and retail capabilities along with New Guards’ strategic vision to help drive growth for the group’s brands and other emerging labels. As Farfetch makes the leap into brand building and development, is this a route that other multibrand retailers could follow?

“The creation and curation of brands is imperative for multi-brand retailers to drive enhanced customer loyalty and gain market share,” said Gene Bornac, senior vice president of retail at enVista. “Brands owners are becoming retailers and vice versa.

“The ascendancy of brand above most other factors will continue for the foreseeable future,” he said. “Farfetch is following a playbook laid out by companies like LVMH and Tapestry, as these companies know that customers seek and follow hot brands and their investments in these brands will be rewarded.

“This is another sign for other retailers that retail is undergoing a shift to brand above all else. Consumers are gravitating towards brands that speak to them, and the retailers that will gain share of wallet are those that step up their efforts around building high growth meaningful brands.”

Mr. Bornac is not affiliated with Farfetch, but agreed to comment as an industry expert. Farfetch was reached for comment.

Brand Direction

Founded in 2015, the Milan-based New Guards Group specializes in building emerging brands into bigger players. The group has a majority stake in seven brands and holds the licenses for the labels Off-White, Palm Angels, Marcelo Burlon County of Milan, Heron Preston, Alanui, Unravel Project and Kirin Peggy Gou.

Under the agreement, Farfetch will acquire 100 percent of New Guards Group’s shares, resulting in a total enterprise value of $675 million. The transaction is set to close in the third quarter (see story).

“A $600 million bet is pretty dicey, maybe precocious, for a recently IPOed company, but they’re betting on the marketplace impact,” said Chris Paradysz, global chief growth officer of ForwardPMX. “That is, they’re expecting consumers – people – to want to shop in a more niched, targeted and highly efficient manner.

“The trouble is, fashion and luxury surely can’t afford margin compression and, unfortunately, that’s the reality of consolidation,” he said.

“But, what I’m worried about are the brands. Does this distance them from what makes them special? Exclusivity is just that. It’s a complicated bet that Farfetch can play multiple hands.”

Some of New Guards’ brands already have a presence on Farfetch through multi-brand boutiques. Off-White is one of the top 10 labels on the platform based on gross merchandise value.

According to data from Lyst, Off-White was the second most popular fashion brand in the second quarter of this year. The label, led by Virgil Abloh, also had the hottest women’s wear product of the quarter, a handbag with handwriting spelling out phrases such as “cash inside” and “logo.”

Palm Angels also made Lyst’s top 20, placing 15th right behind Givenchy. The label has collaborated with Moncler on capsule collections for its Genius initiative, bringing its street style to a luxury audience.

Read the whole story here in Luxury Daily. 

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