Last week, JD.com and Farfetch announced a landmark partnership in which the e-commerce giant will acquire a US$397-million stake in British luxury shopping site. Farfetch will benefit from JD’s logistics and social media prowess while JD will take advantage of Farfetch’s worldwide influence as a major luxury e-tailer.
While both stand to benefit from the union, is the deal better for one or the other? We asked our readers what they thought. Below are selections from the responses we got along with comments from others via Chinese social media:
“I don’t think it’s a good deal. JD is low fashion, Farfetch doesn’t sell well either.”
— Xiaoxue, via Jing Daily WeChat
“I think JD overestimated domestic spending. If Farfetch bought products from stores at a low price, taking a fee for hosting them on the platform, plus the tax and shipping fee, I doubt JD would stand to profit from this deal, the pricing probably won’t be good for consumers.”
— I:MWHOIM Sitong, via Ladymax WeChat
“It’s a win-win deal; Farfetch is looking for a local partner to open up the China market, and JD needs a major fashion outlook upgrade. It’s like how Amazon bought Whole Foods, Walmart bought Bonobos.”
— Chenyin Pan, China manager at the digital agency Fireworks, via Jing Daily WeChat
“I am confident about this deal. JD indeed doesn’t have the branding and outlook for a fashion e-commerce platform, but display and style can be improved. It’s not a major problem. If the product is good, and there’s fast delivery and responsive service, it would naturally attract luxury consumers.
Plus considering the terrorist attack in Europe, travel consumption is likely to go down, domestic spending would increase. In the recent 1-2 years, consumers’ tastes have evolved to be more mature than ever. They are educated in terms of consumption channels and brand names. The JD and Farfetch deal has been made at the right time.”
— LYX, via Jing Daily WeChat
“The luxury industry has a high bar to entry. Net-A-Porter is 17 years in the making, Farfetch has been around 10 years. We can see that a mature fashion e-commerce is built on years of supply chain resource and relationships with brands. JD.com used 397 million to cut the market wide open, paves itself a road to the prestige luxury market.
Farfetch has the 10 years of foundation in the business, and the future outlook is good. The company has received 8 investments from top-notch investment groups since 2010, acquired one of the biggest British boutiques and e-commerce platforms, Browns. It also bought style.com, and now it has the content supply chain from Conde Nast. The media channels from Conde Nast, like Vogue and GQ, will direct traffic to Farfetch, complete the “Look now Buy now” ecosystem.
What we want to know is, besides the $397 million investment, what else can JD offer for Farfetch?
Most of JD’s resources are limited in China. From the official partnership terms, first, most consumers in China use WeChat pay and Alipay, not JD payment. Second, because Farfetch sources from global stores, JD doesn’t have the best support for global delivery. The fast track domestic delivery system won’t necessarily be more efficient.
Overall, I maintain a positive attitude to this deal. It’s only an investment not an acquisition. Luxury is a slow-cook business. Both founders are visionary leaders. China now accounts for 10 percent of global revenue. The investment percentage makes sense. I am confident that JD will deliver Farfetch what they are looking for in China.”
—Yan Ming, founder and CEO of a Chinese social e-commerce app Look, former executive at Netbase, via LadyMax WeChat
Tmall has the domestic advantage, it acquired more domestic brands. If JD wants to win, it has to expand internationally. The direct benefit for JD is to acquire more international brands. Farfetch’s CEO [Jose] Neves has openly said that their next step is to go public. The partnership with JD is likely the last missing chess piece, reaching the second largest luxury marketplace. If Farfetch decides to go public, it would be a happy ending for both.
— Yijia, media veteran and cofounder of Chinese WeChat channel Fashion Note