Welcome to OpenForum. Join our global community: Sign up, Login or Learn more

Shopping Around the World with Farfetch

Farfetch is an experiential online retailer that competes on providing a personalized customer journey rather than on price and breadth.

Photo of Diana Lee
3 0

Written by

Farfetch is a London-based online retailer that launched in 2008 by providing a platform and virtual storefront for small apparel boutiques all around the world. Farfetch functioned essentially as a marketplace that aggregated these independent stores and allowed them to foray into the digital space without investing in their own infrastructure and design. Today, it has a network of more than 300 boutiques that carry some of the most coveted brand names, like Burberry and Missoni, as well as representing up-and-coming designers.

With the backbone of Farfetch, these boutiques are now able to compete within the ecommerce segment. Its nearly half a million customers are now able to shop globally and experience more cultural diversity with just a click; for example, a guest could purchase “shoes from a Milan boutique, a dress from a New York specialty shop, and a handbag in London and…check out in one very easy transaction” (National Retail Federation – “Know Thy Customer,” Mar. 31, 2014). Thus, the value creation is high for both types of partners in this two-sided platform.

Farfetch is particularly astute in how it captured the maximum amount of value from shoppers. Farfetch used the services of another firm called Qubit, which is an expert in providing rich marketing-centric solutions, including around analytics, A/B testing and optimization, and product recommendation. Qubit also works with retailers like Topshop, Bebe, and Staples. Together, the companies did an immense amount of research on the habits of online customers and leveraged big data to understand the best way to sell and to convert visitors on the site.

Farfetch and Qubit devised tests to understand which selling method was more effective. In one incident, Qubit drove first time visitors to Farfetch to the FAQ page. Given that Farfetch is a new concept with its digital portal to physical boutiques, Qubit found that this forced traffic to the FAQ page increased familiarity with store operations like returns/refunds and had a significant impact on conversion with the likelihood of a purchase increasing by 17%. Other tests were carried out, so that the entire site is optimized in terms of messaging and aesthetics, such as how pricing and product information is displayed.

Furthermore, Farfetch is able to take advantage of big data and personalize the site for every customer so that the products and offers a visitor sees will vary depending on the location. A particularly interesting example was that Farfetch found that free shipping was extremely important to its US customers and that not having this benefit would result in losing 25% of all US visitors at the shopping cart. Farfetch was able to geographically pinpoint US visitors to provide a free shipping code, which resulted in 10% uplift in conversion rate.

Farfetch has grown at an explosive rate and as of April 2015, it had raised $194.5 million in VC funding from partners including DST Global, Conde Nast, and more. The most recent funding in March valued the startup at over $1 billion, making Farfetch one of the rare ‘unicorns’ in the tech sphere. Funds are being channeled into expanding into international markets and acquiring more partnerships with boutiques – this can be a reinforcing cycle as consumers explore the new boutiques and more data is acquired about likes/dislikes, thus enabling Farfetch to exploit the information in an effort to obtain ever more sales, and therefore more boutiques.

3 comments

Join the conversation:

Comment
Photo of Geraldine

Interesting post! FarFetch has been successful in increasing total amount spent by customers but I wonder if they also use Big Data to acquire new customers. If so, I wonder if they discovered an innovative way to do so.

Photo of Christina

This is fascinating, Diana! I have never heard of FarFetch until this. This is a great example of how some companies find it more advantageous to partner with another analytics firm rather than build the solution in-house themselves. I also love the experimental tests like driving first-time users to the FAQ page. I can't tell you how many times I've searched around for the "About Us" page when I visit a company I've never heard of. For a business that relies so heavily on personalization, I can see how FarFetch really has the potential to bring a new elevated shopping experience to every individual. This sounds like Algorithms 2.0 for eCommerce!

Photo of diggingit

Given the VC funding and everything, apparently this is a successful venture. But nonetheless it leaves me wondering what the success formula would be. My concern comes from the fact that one of the value creations Farfetch is providing is allowing customers to shop stuff from worldwide stores, as you have mentioned in the second paragraph. But the first question that comes in my mind is, how many brands would have a pair of shoes exclusive in the Milan store? It might be possible for some super upscale designer brands but those do not seem as the customer of Farfetch or any other online retailers. Second question is the price - obviously for such global shopping Farfetch won't be able to grant free shipping(I would be stunned if they do.) Does Farfetch have some advanced supply chain that enables them to minimize the shipping cost or do they have some agreement with their apparel partners to reduce the cost of the clothing/shoes to cover the shipping cost?