A leading online retailer in Asia has invested nearly $400 million in a luxury online marketplace in a move aimed at bringing more luxury goods to Chinese consumers.
JD.com Inc., No. 1 in the Internet Retailer 2016 Asia 500, is investing $397 million in U.K.-based Farfetch UK Ltd., No. 91 in the Internet Retailer 2016 Europe 500. JD.com’s investment will be spent on building up the Farfetch brand in China. With this latest investment, Farfetch has raised a total of $701.5 million from 16 investors since launching nearly a decade ago, according to CrunchBase.
The move aims to gives Farfetch a greater presence in China while helping JD.com to better cater to China’s affluent class according to a press release announcing the move.
“We have always believed that the long-term trend of Chinese e-commerce is toward quality over price and this partnership with Farfetch further extends our lead in the battle for the future of China’s upwardly mobile consumers,” JD.com CEO Richard Liu said. “We look forward to deepening our relationships with Farfetch and luxury brands in the months and years ahead.”
Andrew Robb, Farfetch’s chief operating officer, acknowledged reports the company was preparing for a $5 billion initial public offering in the U.S. but declined to comment. His company plans to double a team of 50 based in Shanghai to 100 by the end of 2017, and will maintain control of the brand and all operations.
Bain & Co. reported in its Worldwide Luxury Market Monitor report last month that purchases of luxury goods are expected to grow in the neighborhood of 6-8% in 2017 in China.
This is the second partnership announced by Farfetch in the past week. Last week, the company said it was buying the Style.com domain name from publisher Condé Nast. Condé Nast will continue to publish editorial content for the site, while Style.com redirects to Farfetch’s website. Conde Nast will feature Farfetch products in its publications and distribute content that links back to Farfetch.com across its platforms.
Farfetch generated an Internet Retailer-estimated $330.6 million in online sales in 2015, up 12.0% from $295.2 million the previous year, according to Internet Retailer’s Top500Guide.com.
JD.com is exploring ways to grow its international presence while expanding the scope of its domestic business. The company is said to be considering a sizable investment in Indonesian peer Tokopedia, and has begun courting higher-income customers with a “white-glove” premium service on more expensive purchases.
The Chinese company seeks to invest and partner with more e-commerce providers around the world, President of International Winston Cheng said in an interview. Despite the investment, JD and Farfetch remain competitors: fashion houses can continue to sell their product on either platform.
Bloomberg News contributed.