Recently, CoupangInc, known as South Korea's Amazon, announced that it will acquire the world's largest luxury e-commerce platform Farfetch (Fafaqi) for 500 million US dollars, which also means that Fafaqi will be delisted from the New York Stock Exchange. Fa Faqi, which once had a market value of up to $25 billion, has been continuously abandoned in the capital market, with a stock price of **99% in less than 3 years, and now only 2$5.3 billion. So, what happened behind Fa Fa Qi, and why was it abandoned by capital?
Founded in 2007 as a technology company, founder Jose Neves has been interested in programming since he was a child, positioning Falqi as a technology company. Unlike traditional e-commerce platforms, Fafaqi does not participate in the ** chain link, nor does it hold inventory or determine the selling price, but provides a full range of solutions for major brands, including platforms, digital marketing, logistics and customer service. This model has so much attracted the attention and trust of luxury brands that it has received hundreds of millions of dollars in investment between 2016 and 2020, courted by Chinese capital tycoons.
However, although Fafaqi once made a name for itself in the capital market, it has proved that the natural contradiction between luxury goods and e-commerce makes it really difficult for them to come together. First of all, the positioning of luxury goods determines that it is not only beautiful and durable, but also a symbol of social distancing. E-commerce, on the other hand, focuses on cost-effectiveness and cannot create a high social distance. Secondly, the problem of the supply of luxury goods is also a difficult problem for luxury e-commerce to solve. As luxury brands are generally family-owned, it is difficult to obtain authorization through formal channels**. This has led to many e-commerce companies can only obtain the source of goods through secondary or ** dealers, which not only allows middlemen to make the difference, but also has the risk of selling fake goods, once discovered, it will have a serious blow to the brand image of e-commerce.
Therefore, although Fafaqi was once regarded as a leader in luxury e-commerce, it has not found a unique model suitable for luxury. Due to the nature of luxury goods and e-commerce, it eventually led to the decline and delisting of Fafaqi.
The key reason why Fafaqi can attract the pursuit of Chinese capital tycoons is that it has rich luxury resources behind it. According to the financial report, Fafaqi has 550 boutiques from more than 400 countries, and has more than 200 international brands and more than 2,000 designer brands. At its peak, even the biggest luxury brands, including Prada, opened their warehouses to Fafaqi. This is very rare in the luxury industry, because luxury goods have always been very strict in terms of channel control, and it is very difficult to obtain brand authorization.
Through its own technology and platform advantages, Fafaqi has successfully built a mutually beneficial cooperative relationship with luxury brands. For luxury brands, Fafaqi provides a low-cost and efficient e-commerce solution that can help brands manage platforms, digital marketing, logistics and customer service. This is undoubtedly very powerful for traditional luxury brands. In the context of the rapid rise of global e-commerce, traditional luxury goods are facing changes in the market environment, and they also hope to take the initiative to change. Fafaqi provides a solution that can not only embrace e-commerce, but also avoid competition with offline stores, so it can win the trust and favor of luxury brands.
However, with Fafaqi's expansion and acquisitions, its business model has also changed. Fafaqi has transformed from the original technical service to the three modules of digital platform, brand and physical store, which means that it has returned to the traditional e-commerce model. However, the natural conflict between luxury goods and e-commerce still exists, resulting in very limited success stories of luxury e-commerce.
To sum up, the reason why Fafaqi is sought after by Chinese capital tycoons is because of the rich luxury resources behind it, and on the other hand, because of its technological advantages and solutions for luxury brands. However, the contradiction between luxury goods and e-commerce cannot be ignored, making it difficult for luxury e-commerce to find a sustainable and successful model. Fafaqi's delisting is also a product of this contradiction.