Online luxury department store Farfetch has become the latest London technology business to be valued at $1 billion, with its founder claiming it would have been worth more if not for the recent run of bad form for online retailers.
Clerkenwell-based Farfetch has joined the likes of TransferWise and Shazam in being valued at $1 billion, following its latest fundraising. The company, which lets shoppers buy from independent boutiques around the world, has raised $86 million from investors including DST Capital, a venture capital fund run by renowned Russian investor Yuri Milner that has in the past backed the likes of Facebook, Twitter and Airbnb. Existing investors Conde Nast, the publisher of Vogue, and Vitruvian Partners also took part in the funding round.
Farfetch founder José Neves defended the company’s high valuation, saying: “We were valued by our investors based on other e-commerce businesses that are out there, based on marketplaces that are public and based on other fashion retailers. No one is going to pay more than what the market has been valuing these companies at.”
He added that Farfetch could have been given a higher price tag if not for the recent poor run of form among online retailers. Asos suffered through three profit warnings last year and Boohoo.com’s shares crashing 40% at the start of the year after a similar warning. Mysale, the Australian flash sale site backed by Topshop tycoon Sir Philip Green, became the latest online retailer to put out a profit warning last week.
Neves said: “We probably would be worth more if it wasn’t for that correction in the market. Our investors have access to the news, everyone is reading this information.”
Farfetch targets a more high-end market than many of those who have suffered profit warnings and Neves said margins were as a result higher. Farfetch charges an undisclosed percentage commission on orders and Neves said the average order on the site is $650.
He said: “We allow consumers all around the world to shop the streets of London, Paris, Milan, LA, Miami. We’ve signed up boutiques in 25 countries and have signed up over 300 companies. We take care of the whole experience – taking the pictures, ensuring the logistics work, pre-paying the duties, processing returns, customer service.”
The latest round of investment will be used to expand the Farfetch’s reach, targeting Asia and Australia. The business is also hoping to attract more customers with the launch of Chinese, Russian and Japanese local language sites. Korean, German and Spanish websites are set to follow later this month.
Neves admitted that Farfetch’s commitment to luxury meant there was ultimately a ceiling to how big the business could grow, but denied that this limit was close, saying: “We’ve just opened an office in Tokyo and we’ve started signing up boutiques. That’s a country where we have potentially 100 retailers of high end luxury fashion. There are many territories out there that we do not yet cover – there’s a lot of room for expansion still.”
Farfetch’s most popular product is ready-to-wear clothing, followed by shoes. The US is its biggest market in terms of demand, with a third of orders shipped there, while Italian boutiques are the most popular among shoppers.