Farfetch pens new deal for Middle East expansion

Farfetch Middle East

Farfetch has penned a new deal with one of the biggest distributors of fashion and luxury goods in the Middle East to help it increase its market share in the region.

The joint venture with the Chalhoub Group, which partners with luxury brands who want to trade in the Middle East, will see it combine its expertise in retail, distribution and marketing of luxury retail across the region with Farfetch’s ecommerce, technology and logistics platform.

The partnership will lead to the launch of an Arabic-language version of Farfetch’s platform in the first half of the year, a curation products for Middle Eastern consumers, and increase local supply by bringing Chalhoub’s network of retailers — including Level Shoes, Level Kids and Tryano — as well as other partner franchises to the Farfetch platform.

The deal will also see Farfetch take advantage of Chalhoub’s physical retail footprint to extend its omnichannel offering with an array of delivery options and new services.

Farfetch – an online retail platform that connects consumers with a curated network of boutiques and brands – already operates in the Middle East, but hopes the new joint venture would allow it to reach more customers in the region.

The joint entity will be headquartered in Dubai and employ 50 people by the end of the year.

Specific terms of the deal were not disclosed.

“As one of the largest luxury markets in the world, the Middle East is of great strategic importance to Farfetch,” founder and chief executive José Neves said.

“We have a presence in China and Hong Kong, Japan, Russia, Latin America, Korea and the US — the Middle East was a big gap in our strategy.

“The plan is to grow the Middle East very, very fast.”

London-based Farfetch has been seeking ways to expand and scale up ever since it raised over $700 million (£492.7 million) in funding.

Last year it announced a partnership with Chinese online retailer JD.com to boost sales in the country, which subsequently saw JD.com invest $397 million (£318 million) in Farfetch.

Farfetch also partnered with Condé Nast following the demise of the publisher’s ecommerce venture Style.com.

Neves said the “next financial milestone” for the online retailer would be to enter the stock market with an initial public offering.

While Neves has not yet revealed specific details about the flotation, a report in Business of Fashion suggests it could IPO on the New York stock exchange in September, with a valuation of more than $5 billion (£3.5 billion).

In 2016, Farfetch raked in $800 million (£562 million) in gross merchandise value, generating an estimated $150 million (105.4 million) in revenue due to the way it takes 20 to 25 per cent commission from partners.

While it is not yet profitable, Neves has said it “delivered significant underlying profitability” in the fourth quarter of the 2016 fiscal year.

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