Farfetch CEO Urges Luxury Brands to Discount Less at Department Stores

Stop discounting! That was the surprising message from Farfetch founder and visionary Jose Neves to c-suite level executives gathered at The New York Times Luxury Conference in Hong Kong. He advised the attendees to stop discounting at department stores, a habit started in 2008 when retailers relied on heavy markdowns to spur sales during the financial crisis. The industry and department stores’ approach to highly frequent promotions is not benefiting luxury brands that base their value on high pricing and exclusivity, Neves noted. “While it makes sense to offer consumers the occasional well-timed promotion, the discounting season has widened from just a few times a year to close to ten months a year,” he said. In the example that Neves gave to the audience, his wife bought a 2,000 Celine coat designed by Phoebe Philo at a U.S. department store last October, and she was offered a 700 coupon afterward even though she was not visiting the store that often. He also revealed that many department stores basically ignore luxury brands’ requests to stop discounting. Therefore, brands really need to take a stand so the industry can avoid a race to the bottom -- one way to do this is for brands to convert their global online wholesale business relationship with department stores to concession models. With concession models, luxury brands have better autonomy on how they want to run themselves in department stores, which include control over distribution and pricing. French luxury powerhouse Chanel is an example of a luxury brand that has done it right, he said. Last week, the brand reported that it had changed its business model with a slew of U.S. department stores, from Bergdorf Goodman, Neiman Marcus to Saks Fifth Avenue, to concession models. As a matter of fact, a group of luxury players including Louis Vuitton, Dior, Gucci, and Prada has already taken the same measure to regain control over pricing in recent years.

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Farfetch CEO Urges Luxury Brands to Discount Less at Department Stores