Why sell it cheaply?
Pencil Trail Author |The article is surprising. A giant with a market value of $25 billion, but recently at a price of $500 million, its shareholders include but are not limited to Alibaba, JD.com, and Tencent.
It is Farfetch, a British luxury e-commerce platform founded in 2008 and listed on the New York Stock Exchange in 2018.
The buyer this time is the Korean company Coupang.
According to the official website, it was founded in 2010 and headquartered in Seoul, South Korea, and is a leading technology retailer in Asia, with one of its core businesses being "e-commerce platforms".
This is surprising.
From a market value of $25 billion (about 180 billion RMB) to the bottom, what has happened to Farfetch at 2% (about 3.6 billion RMB)?What is happening to the luxury e-commerce industry?
The peak of Farfetch was from 2010 to 2018: from Series A financing directly to IPO.
In 2017, JD.com invested in Farfetch 3$9.7 billion, becoming one of its largest shareholders.
In January 2020, Tencent invested another 1$2.5 billion;In November of the same year, Alibaba and Richemont (a Swiss luxury goods company) jointly invested $600 million. Since then, the two have invested another US$500 million in their Greater China business.
From the perspective of global and domestic trends, the last 2-4 years have been a period of decline in luxury e-commerce, with foreign reference to farfetch and domestic reference to Secoo.
In terms of performance, Farfetch's transition from prosperity to decline occurred in the second half of 2022.
Its revenue curve is: Q2 2022 revenue of 5$7.9 billion, 5$9.3 billion, with a Q4 of 2022 of 6$2.9 billion, 5$5.6 billion.
From the perspective of the net profit curve, since Q2 2022, Farfetch has not achieved a single quarterly profit: 0$700 million, -2 in Q3 2022$7.4 billion. Since then, the net loss has remained at 1$700 million to $2$700 million.
It burns cash quickly.
From January to June 2022, its cash (and equivalents) decreased by 7$88.1 billion;From January to June 2023, its cash (and equivalents) was consumed by 2$87.2 billion, only 4$5.4 billion.
According to its half-year consumption of 2800 million to 7At a rate of $800 million, its book cash flow could not be maintained for long.
And the domestic trend is more or less the same, even earlier.
Secoo was founded in 2011, with a rapid growth period from 2012 to 2018, and in 2019, it turned from prosperity to decline: the annual loss reached 26800 million yuan;The loss in the first half of 2020 was 23500 million yuan.
By the end of June 2020, Secoo had become insolvent: about 1$200 million, but accounts payable and liabilities exceed $3 billion. In the following 2-3 years, the temple was sluggish and lacked signs of a comeback.
What is the reason behind the decline of luxury e-commerce?
Reading through the financial reports, it is found that both mention a big background: the epidemic. In the same context, the reasons for the two are different.
Secoo's crisis originated at the end of 2019. After the outbreak of the epidemic, offline stores and warehousing logistics were severely restricted, resulting in a decline in revenue such as order cancellations and returns. On the other hand, the epidemic has led to a contraction in users' demand for high-end consumption.
Of course, there is another important reason, and that is the shift in consumption scenarios: online. In this fierce battle for online traffic, Secoo has a poor record.
As far as international markets are concerned, the impact of the pandemic on Farfetch is the opposite.
At the time of the pandemic, Farfetch was a dividend-along, with consumers gravitating towards buying luxury goods online. And when the epidemic disappeared, with the help of luxury brands, consumers returned to offline, and Farfetch was finally eaten up.
For many Internet companies, the "disappearance of the epidemic" caught them off guard.
Take Meta (formerly Facebook) as an example, it will start layoffs in November 2022, accounting for more than 13%. The core reason is that the epidemic "disappeared ahead of schedule", causing the previous expansion to become "blind expansion".
The general process is as follows: after the rise of the epidemic, the consumption scene will move online, which will detonate the brand's advertising on social **. Under this premise, Meta increased its workforce by 30% in 2020 and 23% in 2021.
After the epidemic disappeared early, Meta began to lay off employees.
Musk's newly acquired "X" (ex-Twitter) is also facing a similar problem, being eaten up by the epidemic dividend.
However, on the whole, whether it is the epidemic, the shift of consumption scenarios, or the weakening of demand, are not the essential reasons for the decline of luxury e-commerce. According to the conclusion of the pencil road survey, the fatal flaw of luxury e-commerce is that compared with integrated e-commerce, vertical e-commerce lacks industry barriers, and they are not two industries, but one industry, and the two compete with each other.
Therefore, under the squeeze of comprehensive e-commerce represented by Ali and JD.com, luxury e-commerce has gradually fallen into disadvantage.