Alibaba, Farfetch and Swiss luxury house Richemont have struck a "global strategic partnership," including the establishment of Farfetch shopping channels on Alibaba's Tmall Luxury Pavilion, Luxury Soho and cross-border marketplace Tmall Global.
Alibaba and Richemont will invest in Farfetch Limited ($300 million each) and in newly formed entity Farfetch China Joint Venture ($250 million from each), with both Alibaba and Richemont exploring "additional opportunities to work closely with Farfetch."
Kering shareholder Artemis will invest $50 million to expand its ownership interest in Farfetch. Farfetch and Alibaba are also forming a steering group that includes Richemont chair Johann Rupert and Kering CEO and Artemis chairman François-Henri Pinault, according to an emailed press release.
The luxury market was leaning hard on Chinese consumers even before the pandemic shooed high-spending tourists out of high-end stores.
Spending by Chinese shoppers accounts for 33% of the global luxury market, and last year luxury goods saw 20% growth in China for the second straight year, according to a Bain & Company report.
While China appears to a have a firm enough grip on the pandemic to return many aspects of daily life to normal, making e-commerce less crucial for retailers there, shoppers are used to buying online in all categories. But upscale brands face continued challenges due to the disease outbreak, which in many areas of the United States and Europe is surging anew.
Luxury in general has been slow to embrace digital sales, making Farfetch, as an online pure player, something of an outlier in the space. But the channel will remain critical as long as the pandemic is a threat, and probably after as consumers change their habits.
"This announcement is a major step in our mission to connect the curators, creators and consumers of the luxury fashion industry," Farfetch founder and CEO José Neves said in a statement. "The $1.15 billion investment in Farfetch from Alibaba Group, Richemont, and Artemis is a strong validation of our position as the global platform for luxury."
This move casts a long shadow over Amazon's effort to make a luxury fashion play. The U.S. e-commerce giant made good on longstanding rumors in September when it debuted its "Luxury Stores" fashion channel with Oscar de la Renta.