Farfetch, which Neves refers to as a “marketplace” or “platform”, was launched in 2008, just as the global financial crisis hit. He hit upon the idea for an online space where small brands or boutiques could sell their products, using his coding, and logistics he and a team of engineers built. The plan was to start with independent labels and work his way up to the big luxury players.
“I was selling my shoes at a showroom at Paris Fashion Week,” he says in his Portuguese lilt as he speaks over Zoom from an undisclosed location in Europe (Neves is anxious about his personal security, as well you might be if you were worth $US2.9 billion).
“There was a feeling of anxiety from the other designers in the room – both because of the financial crisis but also there was this sense by then that everyone could see the internet would be huge … but nobody knew where to start. I thought, well, I know where to start.”
By then, the internet was huge, but unwieldy. Natalie Massenet (who, in 2017, joined Farfetch’s board) founded Net-A-Porter in 2000, and while she had similar problems attracting brands, the site was a success, turning a profit in just four years.
Other sites were not so lucky – by 2009, LVMH had pulled the plug on its doomed e-commerce venture, the imaginatively named eluxury.com, which had haemorrhaged money from the beginning (Bernard Arnault was said to have poured in more than $US100 million).
Boo.com, luxlook.com and luxuryfinder.com all went the same way. Their problems were myriad: aggressive growth, money wasted on marketing, poor user experience and a general lack of trust when transacting on the web. Online shopping was there – but it needed a leader to grow and nurture it, to take it to the next level.
The idea for Farfetch, Neves says, had been “fermenting” since 1996, when he launched Swear’s online store. “If I can have a tiny little store, 250 square feet, a hole in the wall in London, but I can send the shoes to Japan, Australia, wherever, 24/7 … this is going to be huge. That, to me, was a moment where I thought, the lightbulb is going on.”
Very few believed him – what the heck are you talking about? – but by October 2008 the site was up and running, with fewer than 10 retailers on board (Neves had wanted a minimum of 25). For the first three years, the company was entirely self-funded.
The idea was simple and solutions-based: you’re a boutique, you have clothes, you want more customers. Farfetch has the platform to sell those clothes anywhere in the world, ship them there, return them free if necessary, and handle your customer service, end to end. All that for a 30 per cent commission.
The “secret sauce”, as Neves calls it, is a complicated chain of logistics that can take, for example, a Versace dress from Spain to Sydney in a few working days, sometimes without the customer even knowing they have engaged Farfetch at all. (Indeed, while working on this story, I ordered a sweater from Être Cécile. When I needed to return it, I realised I’d be sending it back to Farfetch HQ in Porto Novo, Portugal, not London, where the brand is based.)
This seamless, invisible chain of events is crucial to Farfetch’s success; that and the fact that the company holds no inventory and therefore carries far less risk. Neves likens Farfetch to a farmers’ market: he’s rented the space, he’s advertised the event, he’s set up the stalls. Now the farmers can come and sell their jam.
Neves won’t say how long the deal between his company, Richemont and Alibaba was percolating before it was announced in November last year. “It’s … commercially sensitive,” he says. “I don’t know if they’d like me talking about it,” he adds, as if he’s in a love triangle he cannot speak of.
And what a love triangle; Richemont is a luxury giant, the owner of Cartier, Van Cleef & Arpels, IWC, Montblanc, Jaeger-LeCoultre, Chloe and also, for good measure, one of Farfetch’s main competitors, Yoox Net-A-Porter.
Alibaba is the giant of Chinese e-tailing. In return for jointly investing $US1.1 billion into Farfetch, they will be privy to Farfetch’s back-end superpowers. At the same time, Artemis, owned by Pinault, announced it was increasing its existing investment in Farfetch by $US50 million. As CEO of Kering, Pinault is the man behind Gucci, Saint Laurent, Bottega Veneta and Balenciaga.
What Neves is willing to say is that when he was approached by Daniel Zhang, CEO of Alibaba, it was a true meeting of minds. “He was very curious to know how Farfetch worked,” he says. “Of course, I knew everything about Alibaba. I told him the details – 50 countries that we ship from, 190 countries that we ship to, real-time visibility of inventory across brands, department stores, boutiques all around the world.
“And he listened to all of that and said, ‘Ah, OK, you’re doing new retail. That is our vision.’ I said, ‘Really?’ He said, ‘Absolutely. That is Jack Ma’s vision. We call it new retail.’ ” As it happened, Neves had been calling what Farfetch did “luxury new retail”, and it felt like, at long last, he’d met someone who didn’t immediately ask, “What the heck are you talking about?”
Neves speaks with complete reverence of Alibaba’s Hema supermarkets, launched in 2018 – where customers can pick live seafood and have it prepared in store, where payment is via facial recognition, where stores double as distribution centres behind the scenes.
The partnership is not simply a way to reach the $US52 billion Chinese luxury market, because Farfetch already had that with Alibaba competitor JD.com (a contract which ended when this deal took place). Perhaps, more importantly, it is a way to connect the dots between real-world shopping and the digital experience.
“And I realised this was much bigger than opening a store on TMall. This is the digitisation of a global luxury industry.”
What Neves wants to do is not so much disrupt the fashion industry as to level it, to iron out the wrinkles. Online, offline, who cares? Department stores versus boutiques? It’s not important. Multi-brand or standalone? You’re asking the wrong question.
“Farfetch is a connector between curators and consumers in this industry, which is a lovely position to be in, because we can partner with anyone.” And he really means that. “When we partnered with Harrods I had investors say to me, ‘Surely Harrods is a competitor’, and I didn’t see it that way at all. Sometimes they overlap but the Harrods customer is different to the Farfetch one.”
People, he says, get “too caught up” with ideas of cannibalisation. “This is a $300 billion industry, we are a $3 billion company. That’s 1 per cent. The big opportunity here is to change the system.”
It has taken time for him to convince the luxury brands that he always coveted to come on board. Though Pinault was an investor in Farfetch’s IPO, Gucci joined the site in only 2017. Hermès, Louis Vuitton and Chanel are not available on Farfetch (or any other online retailer). But in the main, resistance to selling online is gone. Neves’ next step is to integrate physical shopping with the online experience: something he thinks customers already do.
“People don’t wake up and say, ‘Oh, today I am offline. Today I am online. People don’t think like that. When we want inspiration, we open a site or an app. But then we might go out for coffee, and go past a store, say, Off-White,” he says, adding a cheeky reference to a brand his business now owns.
“After lunch you go to a department store and you see the Off-White pants you were looking at there. They don’t have your size so you place the order online. You’ve got the product. Great. But companies don’t think like that because no one has come up with a technology suite that blends all of these solutions. Nobody has done the whole circle.”
Neves is on a mission to find the best minds to do that. In 2018, Farfetch launched Dream Assembly, a start-up incubator which targets businesses seeking to improve fashion tech. Two of those businesses, Wishi, a virtual styling service that uses augmented reality, and Restory, a luxury restoration service, are now part of Farfetch’s offering.
VIP clients can use Wishi for styling help, and anyone can send back their Fendi baguette for a little TLC. “We wanted to build a community of companies revolutionising the industry to give our customers and our network of retailers proof of concept. I don’t think one company will have one solution. It’s important to keep an open innovation mentality.”
He has also tried to merge the online and offline experience with a “Store of the Future” concept with Chanel, and soon in a new format with Browns, the London department store Farfetch acquired in 2015.
Most retail technology that is purported to be the saviour of the industry is nothing more than a gimmick. Neves knows this. “Technology for the sake of technology is not something that excites me. Those 3D stores online don’t work. But there will be a convergence of physical and digital.”
By contrast, Farfetch’s “store of the future” is based, as with everything else at the company, on data, and seems perfectly timed for this year. Customers check in using a universal login. As they browse, their choices are uploaded to their wishlist via radio frequency identification – technology that retailers use to prevent theft and to track inventory.
Stock can be transferred from nearby boutiques if unavailable in store. London-based customers can opt to have their shopping delivered home, leaving them baggage-free for the rest of their day. And a dedicated Very Important Customer space will blend digital and human personal styling.
“It’s about experiences that start at home and continue when you’re in store and then go right back home with you,” says Neves. “It’s about user journeys, moving from digital to online seamlessly. People already do this; it’s the technology that must catch up.”
Neves came late to the fashion party. A self-described nerd who was more comfortable crafting lines of code than selecting a pair of pants, he is a sort of accidental player, the outsider who has become the ultimate insider.
He began his career as a programmer, with the man who would one day become Farfetch’s chief technology officer, Cipriano Sousa. “I convinced him to develop software for local businesses with me,” Neves says. This was pre-internet, 1993. “People take it for granted that you can develop a piece of software and distribute it globally now, but there was a time you couldn’t do that. Programming used to be a very local business.”
The duo built a roster of clients, many of them in the fashion industry. “And that’s when my passion for fashion began. I saw the ins and outs of it, and started to go to trade shows in Milan, Dusseldorf. This beautiful industry revealed itself to me and I fell in love with it.” Until then, he had thought of fashion as “frivolous, like any good geek. I thought it was a waste of time and money.
“It was only when I realised the whole process of creativity, design, manufacturing, marketing, selling it, the way consumers engage with it, the way boutiques curate the selection … all of this makes it a magical industry. I didn’t start as a consumer, I started with the nuts and bolts.” Being part of the pipes, he says, made him realise “there was really something going on here”.
Starting the business at the height of another global trauma, the 2008 financial crisis, was a gift to Neves, much as COVID-19 has been. “In a way it lowered people’s guard,” he says. “People were less defensive about their brands, prestige, exclusivity. It was good for us that the industry was going through such a tough time, it gave us a reason to exist. The boutiques were looking for new avenues, they needed money. And they also thought, who cares? We’ll probably be dead in a few months anyway.”
During the pandemic, there was much talk of the end of fashion. What would we all wear, now that we weren’t going anywhere? Neves was not immune from this, but remained largely unconcerned.
He does concede that “2020 was a very tough year for everyone” and admits to panicking when Farfetch’s share price slumped to $5.90 last March (it’s now back over $50). But as soon as he galvanised his team and asked them, “What is our job here?” he knew what to do.
“I thought, we can’t save lives, we can only save businesses. We had all this beautiful editorial for March – the theme was travel. So we had to get in the room and really figure out, what is the raison d’être of Farfetch in a year of lockdown? For us it was about helping small businesses and the designers that depend on those boutiques.”
The team scrapped their plans and got behind a hashtag instead: #supportboutiques. It worked. Last year, Farfetch shifted inventory worth more than $US3 billion, an increase of 49 per cent year-on-year, while revenue was up 64 per cent, at $US1.7 billion. Its market capitalisation grew by 475 per cent.
And yes, he says, consumer habits changed. How could they not? “Certain categories,” he says, “almost disappeared: travel, stilettos, evening gowns.
“But fashion is culture, I always say that. It’s as much our culture as art, music, cinema, literature and if you’re engaged in that part of the culture it doesn’t go away; actually, it soothes you during a crisis. You read more books, you watch more movies. So if you love fashion, you engage with it even more. You still want to be inspired, you want to know what’s coming out. You might not be going to a red carpet event but you still exist. It is still important to you.
“And of course,” he adds, almost as an aside, “because people couldn’t shop offline they shopped online.” Yes, that too.
While Neves’ farmers’ market analogy is cute and still fairly apt, these days he’s more likely to make a comparison to the juggernaut of streaming entertainment. “Netflix realised aggregating content was not enough, they needed their own. Same with Spotify, investing in podcasts.”
And now, Farfetch is developing its own products, through the 2019 acquisition of New Guards Group, which owns labels such as Virgil Abloh’s Off-White.
“I was keeping an eye on NGG because I thought sooner or later, to build Farfetch as a consumer brand, we need to have a point of difference. If you Google ‘Balenciaga sneaker’ you will find 50 websites or more. So we needed to de-commoditise the industry by having original content – exclusive brands, capsules, special collections.”
Last month, Farfetch launched a capsule collection with former Lanvin creative director Alber Elbaz in partnership with Richemont’s Net-A-Porter, called AZ Factory. This, says Neves, opens the door to further collaborations with a company some may have mistakenly seen as his rival.
He is relentlessly optimistic about the future and, in particular, the future of this company he built with little more than gut instinct. “We don’t know the future,” he says, shrugging. “That’s the short answer. There are certain things we can predict – the convergence of online, offline, mono-brand, multi-brand in a single journey, this is what customers ultimately want.”
That sounds simple. However, much like it is now very simple to find out what time a movie is playing near you, or to book a taxi within seconds, there is incredibly complex technology behind the idea. But, says Neves, that’s no reason not to try.
“It’s very difficult. But that’s what we are good at. We build tricky things.”
The April issue of AFR Magazine is out on Friday, March 26 inside The Australian Financial Review. Follow AFR Mag on Twitter and Instagram.