Dive Brief:
- Farfetch and Neiman Marcus Group on Tuesday announced a global strategic partnership that has the luxury online marketplace making a minority common equity investment of up to $200 million in the legacy department store company, which runs its namesake banner as well as Bergdorf Goodman.
- The partnership's first project will be to re-platform Bergdorf Goodman's website and mobile application using Farfetch Platform Solutions, to expand its global capabilities and services, according to a press release.
- Both Bergdorf Goodman and Neiman Marcus will join the Farfetch Marketplace as a partner, "adding participating brands in key global geographies," per the release.
Dive Insight:
Luxury has been slow to embrace e-commerce, making Farfetch not just an outlier as an online retailer in the space, but also as a purveyor of technology useful to other high-end retailers and brands.
A couple of years ago, as the pandemic's economic fallout included major changes in consumer behavior, Farfetch collected just over a billion dollars from Alibaba and Richemont, an effort to bolster their online prowess in the space and smooth access to high-spending customers in China.
The new Farfetch-NMG tie-up is starting off with a focus on venerable department store Bergdorf Goodman, which last week also named new executives to guide its e-commerce and brand strategies.
But, like many digital-led companies, luxury or not, Farfetch has a history of losses. The company swung to black last year, ending 2021 with a $1.5 billion profit.
Furthermore, while the pandemic stoked e-commerce sales, those numbers are deflating as consumers have returned to stores. Like secondhand apparel site ThredUp, whose "resale as a service" tech may be more profitable than its clothing sales, Farfetch could find more success as a tech provider than a retailer.
"Our partnership with Neiman Marcus Group is another example of how FPS has become a preeminent digital partner for the luxury fashion industry," Farfetch Chief Platform Officer Kelly Kowal said in a statement. "This is a significant digital transformation opportunity that will allow us to unlock massive value for Neiman Marcus Group, its shareholders and its customers, who will now be able to shop from wherever they are in the world."
The tie-up holds advantages for both Farfetch and NMG. The marketplace will enjoy access to the brick-and-mortar channel, specifically one at a traditional retailer also well-versed in luxury, according to GlobalData Managing Director Neil Saunders. "It will also allow them to learn more about how consumers shop across different channels – a possible prelude to them making further moves into physical or omnichannel retail," he said in emailed comments.
Meanwhile, Neiman Marcus and Bergdorf have an opportunity to connect with younger shoppers, who expect to find goods online, including luxury items, though he also warned against an overdependence.
"Farfetch's $200 million investment in Neiman Marcus is a vote of confidence by a new-generation luxury player in a more traditional business," Saunders said. "After the travails of bankruptcy and restructuring, the deal underlines the continued relevance of Neiman Marcus in the luxury space."
