Online Luxury Fashion: Marketplaces vs Retailers

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Can you provide some context to how the online luxury market has evolved over the last decade?

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It’s interesting because it was the independent stores like Mytheresa in Munich, Matches Fashion in London, END Clothing in the North East of England, SSENSE in Canada that grabbed the opportunity more than the big, established department stores at an earlier stage. They also had the advantage of owning all of their own stock. They were wholesale partners to the brands. They owned all of the stock that was on their shelves and they were able to present it online. Whereas the department stores had a mixture of wholesale relationships which they could present online if they wished to, but also concession contracts where they sublet space to the brands, so their product mix would have been more patchy versus the independents.

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Can we lay out the different online business models we have today between the wholesale inventory-based model versus the Farfetch marketplace. How do you compare the two?

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The advantage of the retail model as Mytheresa, where we buy the stock and present the goods directly, means that we ship directly to the customer. We can control the level of service, speed of service. We can control the edit of products on the site. We can have a perspective in terms of the way we edit and present to customers. Ultimately, we own the close relationship with that customer and we can service their customer so that they come back time after time. We look at it from the perspective of the lifetime value of any given customer, not one single sale.

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Can we lay out the different online business models we have today between the wholesale inventory-based model versus the Farfetch marketplace. How do you compare the two?

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Marketplace, by contrast, tends to be more promotionally driven. There’s less loyalty from individual customers who are often brought in through promotions and search. They can’t guarantee service levels to the same degree because the fulfilment could come from multiple places, from any of the retailers that have their products on that site. There is a customer relationship, of course, but there isn’t the same longevity or same point of view and they can’t guarantee the same level of service. It’s much more difficult to do that with a marketplace.

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