‘The next big frontier is the complete convergence of physical and digital.’

Farfetch founder José Neves discusses the reality of online success in physical lockdown.

Interview by Jonathan Wingfield
Photographs by Juergen Teller
Creative partner: Dovile Drizyte

Counter culture. José Neves. - © System Magazine

Farfetch founder José Neves discusses the reality of online success in physical lockdown.

Think of Farfetch, and you can’t help but think of numbers. More than 2 million customers drawn from almost every market in the world. A $6.2 billion IPO in 2018. A thundering growth rate: a 64% average rise every year since 2015 and a stock price that has increased 546.5% during the pandemic. In under fifteen years, the digital-market-place-turned-‘platform’ founded by José Neves has become the defining fashion behemoth of our digital times, and Neves has been crowned the unexpected King of Fashion. His masterstroke, of course, has been that unlike many of his competitors in e-commerce, Farfetch has never held any physical goods, a nebulous and ever-evolving rapport between the material and the intangible that holds the key to the future of both Farfetch and perhaps fashion retail in general.

Prior to Farfetch, the Portuguese Neves was a teenage computer programmer and a product of London fashion retail – at 22, he founded footwear brand Swear and at 30, opened the multi-brand b store on Savile Row – and he’s since made understanding the interplay between online and offline the backbone of his business. Today, Farfetch boasts a global network of over 700 independent bricks-and-mortar boutiques, as well as owning much-loved London retailer Browns. Starting life in 1970 as a tiny fashion store on Mayfair’s South Molton Street, Browns was acquired by Farfetch in 2015, recently relocated around the corner to Brook Street and has been reinvented as a ‘purveyor of experimental retail’. Neves considers Browns Brook Street, with its interactive mirrors, augmented-reality apps, and checkout-free payment, as the standard bearer of ‘Luxury New Retail’ or LNR, the term he’s coined to define the future of the fashion retail experience. System recently connected with José Neves over Zoom to discuss online success in physical lockdown, the importance of virtual sneakers, and why Farfetch isn’t nearly as powerful as some might have us believe.

Jonathan Wingfield: To what extent has this past year presented you with a kind of existential dilemma? On the one hand, the future of the physical boutiques behind Farfetch has never felt so uncertain, but at the same time, Farfetch as an online business has never performed so well.

José Neves: Our success is entirely dependent on the success of our boutiques and brands. Ninety percent of what we sell is via someone else’s sales. We have teams in China and Japan, so our lockdown experience started in January 2020 before spreading to Europe and the US, with boutiques, brands and factories all shutting down. It wasn’t a case of, ‘Oh, what a fantastic year we’re going to have online.’ In those first few weeks, we dropped like a stone to our lowest-ever valuation. Not just us – everyone. All the companies that you might ultimately call ‘winners’ from the crisis began the year similarly, and many of them reacted by cutting staff. Airbnb fired 25% of its workforce and raised $1 billion at a 10% interest rate. That was the most visible one, but everyone was cutting 30% of their
workforce, 40% of their costs. It was all about cash, like, ‘Let’s harvest as much cash as we can for the winter.’

How did you avoid a similar fate at Farfetch?

One of the things that I am most proud of is that we were courageous enough to say, ‘Hang on a sec, let’s not jump to conclusions. We cannot save lives, but we can save businesses and jobs; we can provide a platform for this global creative community. We have 3,500 designers represented on Farfetch, and they totally depend on the boutiques and on our platform. There are over 700 independent retailers on the platform; they won’t be able to survive this pandemic without us.’ So, rather than cut, we decided to go the other way, and double down on our efforts. In April, very early on, we launched #SupportBoutiques, which was a comprehensive campaign to help small boutiques and designers everywhere, in any way we could. That paid off, resulting in an acceleration of sales for the boutiques and the brands, which translated into an acceleration of sales for Farfetch. Our success was a product of our beneficial impact on the fashion system, not the other way around: we didn’t profit at anyone’s expense. For us, these things are always totally linked; it’s never one or the other, it’s one and the other. It has to be. We continue to bet on this message that we are connected with the curators and the consumers around the world who love fashion, and that remains a central theme for this year, because we are not out of the woods yet.

Tell me about the conversations you’ve been having with boutique owners, and the insights you’ve been getting from them.

They tell us what they are seeing in the market, what they are going to buy, who the customers are, what customers like or don’t like in-store, and we flow back
to them information on digital customer behaviour, about which we have an incredible wealth of knowledge. It still works after 12 years, and we have this amazing relationship with the boutiques. I’ve known most of our boutique owners personally for many years, either because I sold my shoes to them for two decades, or because they were my buddies in the boutique trade, so I know the incredible wealth of curation and fashion knowledge and experience that they bring to the fashion system. A couple of years after we started Farfetch, we decided to do this thing called the Boutique Gathering. We invited about 50 or 60 boutiques to Portugal for a big party, people like Andrea Molteni of Tessabit in Como and Armand Hadida from L’Éclaireur in Paris; everyone we had worked with up to that point.
Getting 100 people in the same room talking about the problems that independent retailers face was vital; getting them involved and talking about rising costs, practicalities, management, all these very practical aspects, but also our vision and how we were building. When we used to say this in 2010, people would roll their eyes, but we had a global vison of luxury and wanted to bring independent retailers together under one roof to become the most powerful force in the industry.

How do you think Farfetch has changed life for someone like Armand Hadida, the owner of L’Éclaireur?

Armand is probably one of the most celebrated fashion curators in the world, so there has always been mutual respect. We know that we need each other; there
is a very strong sense of a win-win partnership. These days that just operates at a different scale. In 2019, we represented roughly 30% of the turnover of boutiques. Obviously, we don’t have the exact numbers for 2020 yet, but we will represent a significant amount of their turnover. Things have also changed in terms of the scale of operations, of logistics; they have had to employ specific staff to meet Farfetch orders, and to rent warehouses. Things went from picking out five pieces a day – which was good at the time – and spending half an hour beautifully packaging those items for collection the next day, to receiving orders that have to be sent the same day, with a team of 20 people churning them out. So, for both sides, the scale is different, but the fundamentals remain, in terms of the human relationships and the ethos of the partnership.

‘It wasn’t a case of, ‘Oh, what a fantastic year we’re going to have online.’ In those first few weeks of lockdown, we dropped to our lowest-ever valuation.’

Counter culture. José Neves. - © System Magazine

The Browns London flagship store has just reopened. You use the term ‘Luxury New Retail’ in the store’s official communiqué, and refer to the store ‘serving the changing needs of the customer’. What are those changing needs, and what do they mean for physical stores?

With the digitalization of every single industry, the world was already changing very fast. That doesn’t mean we will see the obliteration of physical stores, but it does mean that the experience instore, as well as the connection between the store and the rest of the world, will be digitalized. That transformation has already happened in China. For many Chinese people, before they even arrive at a supermarket, their digital cart is already half-filled. They browse the selection, choose additional items, pay by facial recognition, walk out, and whatever they’ve purchased gets delivered immediately, so it’s waiting for them when they return home. For them, that’s normal, an everyday experience; that’s just how they shop. And that is what we are trying to bring to luxury: the digitalization of how we shop.
People in our industry continue to think of things in a two-by-two matrix: offline sales in physical stores, online sale through apps, mono-brand stores, and multi-brand stores. Right now, these things are still separate, so that even within one company, you have completely different departments – the store team, the website team, the wholesale team – and they don’t really speak to each other. As a result, the user experience is rarely a seamless journey across these channels, but I think that will fundamentally change. That’s what we are demonstrating with Browns. You can be at home on the Browns app or a brand app, such as the Off-White app, then in the Browns store, and then on Farfetch, and your shopping cart is shared across all of these platforms. Then you book an appointment at the store, and when you arrive an assistant knows your wish list, understands your tastes, and has things prepared for you. That’s one of 250 customer journeys that we mapped out in studying how to make this work. I think this is the next big frontier: this complete convergence of digital and physical.

Are you ever surprised by the way that younger colleagues or your own kids engage with fashion now? Have there been instances when you’ve thought, ‘Wow, I didn’t see that coming’?

All the time! I have kids aged 2 to 22, so I know first-hand how they look at the world, how they are being inspired by trends, and how they buy things. My son likes gaming and spends his pocket money buying skins, which in itself is a multi-billion-dollar industry that’s emerged in recent years. In gaming alone I think there will be a complete convergence of physical and digital. In the future, it will be very strange to buy just a physical sneaker; you’ll want the physical and the digital versions together – a piece of fashion that you can wear on your real body and on your virtual bodies, whether you are in Fortnite or an avatar on social-media platforms. The whole world of digital gaming and social media is going to merge with the physical world.

How is this shift in the customer’s relationship with material products affecting physical boutiques’ sense of curation?

It is our job as a platform to really bring those boutiques on the journey; we are working on solutions right now. That is why Browns is so important, because we are demonstrating what can be done in a multi-brand environment. It also works with a mono-brand environment, too – we did it with Chanel – and what we are hoping to demonstrate is that all of the things that can happen with Chanel can also happen with L’Éclaireur, for example. No customer is going to download 800 apps
from different boutiques, but everything can work seamlessly through one Farfetch app, almost like a loyalty scheme that works across different companies. The same app that knows you are inside Browns can know you are in L’Éclaireur and transform itself to give you the full digitalized experience in that store. That is what we are going to demonstrate with Browns, and we will fully kit boutiques out with everything they need to do the same.

‘In the future, you’ll buy physical and digital sneakers together – a piece of fashion that you can wear on your real body and on your virtual bodies.’

Counter culture. José Neves. - © System Magazine

How do you personally reconcile the importance of staying ahead of the game with your own advancing years?

[Laughs] Good question! Being ‘revolutionary’ is one of our fundamental values at the company – we have it written everywhere – and I think that spirit will always remain. I was just on a call with our open innovation and R&D teams and they were showing me virtual trying-on systems for watches and jewellery that were mind-boggling, even for me. But I love that! On the other hand, there is a level of maturity that comes with being a public company. There is no such thing as a small project anymore; we can’t put just anything out there. Everything needs to be compliant with literally dozens of financial and data regulators around the world. You
could call us a grown-up revolutionary, one that’s replaced the young Che Guevara.

You mentioned earlier that people in the industry used to roll their eyes at your plans, but Farfetch is now the one driving the industry forwards. Can you pinpoint a particular moment when you thought, ‘OK, I think they are onboard; they finally see the future?’

People still don’t completely get it, but I think that is a good sign because we are constantly reinventing ourselves. By 2016, the Farfetch marketplace was accepted as a great place for boutiques and businesses, and then we opened up to working with brands. Then we had 550 brands on the platform, and we created the white-label arm of the business, working with companies from Chanel to Harrods. Now we are presenting the store of the future and Luxury New Retail. We push the boundaries into unsteady terrain, find our balance, then push the boundaries again.

I heard that, at one stage, Gucci was concerned that Farfetch had access to more Gucci stock than Gucci itself, and that Gucci saw that as a threat… Would you agree that sometimes Farfetch might be considered almost too powerful in the industry?

It’s just not the reality. We are a $3 billion company – based on net sales for 2020 – in a $300 billion industry. That is one percent. Relative to the industry, we are a tiny company compared with, say, Spotify, which has 50% of all music sales, or Expedia and Booking, which, between those two platforms, have 85% of all hotel reservations around the world. In that example, you talk about being too powerful for their own good, but we are just 1% of the market share.

Is diplomacy your greatest attribute?

Quite possibly! It is the nature of being a platform: you sell other peoples’ products, and you mediate between brands, boutiques and consumers. That all requires a tremendous amount of diplomacy, because the brands see each other as competitors, and they would love to have access to all the customer data, but we can’t do that, legally. If the brands had their way, they would each be the only one on Farfetch, and would have all the customers for themselves. Naturally, I would love to offer that, but it just doesn’t work that way, so you have to be diplomatic.

Jonathan Anderson often talks about his experiences working in retail at the start of his career – in the Prada concession of a Dublin department store – and how that continues to inform his work as a creative director. Given that you yourself once owned an independent boutique, how does that experience inform your thinking at Farfetch?

I am with Jonathan Anderson on that one. I still remember the first pair of shoes I sold in Swear, which was a 250-square-foot hole in the wall. It was literally the smallest shop you would ever encounter, but I remember the pleasure and the excitement in the eyes of the customers. And I remember the crushing disappointment when there was a problem with the quality, or a sole falling off, and we had to replace them or refund them. And then when we opened the b store, and had designers like Roksanda Ilinčić and Boudicca come in to see their collections displayed, I will never forget the excitement in their eyes as they asked how the collection was being received, what was selling and what wasn’t selling. These are the emotional foundations for what you do, for the love of fashion, and you
cannot develop this love in a conceptual way. You develop it in human relationships; you develop it on the shop floor, by touching things and speaking to people. This is our biggest advantage over Amazon. They love selling everything, but they are not in love with this particular part of culture. That love is a very soft, subtle, almost invisible, but super-important ingredient.

Tell me about the last memorable physical shopping experience you had…

In July 2019, I took my four kids to Tokyo. I was alone, because my wife was at home pregnant. It’s pretty difficult handling four kids on your own in an airport, and I ended up losing my hand luggage, so I had to do a quick, complete head-to-toe shop the moment we arrived in Tokyo. It remains one of the coolest cities to shop in and it was amazing: several looks, for several days, including a professional event I had to attend, all in physical stores that were not my stores. In one hectic but inspiring morning, I got to experience the incredible service in Isetan department store, the monumental beauty of the Prada flagship in Aoyama, and then find limited-edition sneakers in a tiny backstreet specialist store in Harajuku. There was no better reminder ofthe magic of physical retail. It gave me a lot of ideas – because it always comes back to that shopping experience.

Taken from System No. 17.