Richemont & Alibaba buy Farfetch

On Friday, Richemont and Alibaba announced an exciting joint venture to buy a stake in an online luxury retailer called Farfetch. The partnership will require both Richemont and Alibaba to put in $550m each for a combined 25% stake in Farfetch and to take on some convertible bonds.

Farfetch is a US listed company with a Portuguese-British origin. It was founded in 2007 and has a market cap of $12.8bn. Farfetch operates in 190 countries with 10 million site visits a month. JD.com (Tencent) also has a stake in the company.

Remember that Alibaba and Richemont already have a successful partnership with NET-A-PORTER and Tmall. It makes good sense, Alibaba has the clients and Richemont has the products. The Farfetch stake is another strong indication of Richemont's push into online retail.

Here is how they plan on integrating the various platforms.

"Luxury New Retail ("LNR") is a visionary initiative which will leverage Farfetch's and Alibaba's state-of-the-art omnichannel retail technologies to serve the needs of luxury businesses, including a full suite of enterprise solutions powered by Farfetch. These solutions will serve both mono-brand and multi-brand distribution strategies for luxury brands, including fully-connected e-commerce websites and apps, omnichannel retail technology, and access to the Farfetch and Tmall Luxury Pavilion marketplaces via a single integration."

The announcement came on the same days as interim results which showed a 26% drop in sales due to global lockdowns. Either the market was expecting worse or it liked the new deal or both but the share price popped 11% on the day.