LONDON, United Kingdom — Farfetch announced Wednesday that it has acquired sneaker purveyor Stadium Goods in a deal that values the company at $250 million, as the luxury e-commerce marketplace seeks to extend its reach in the growing streetwear market.
The companies first partnered on a distribution deal in April of 2018, bringing a limited offering of Stadium Goods products to Farfetch. After the acquisition deal closes, Stadium Goods’s inventory of limited edition sneakers and streetwear, offered on consignment, will be available everywhere Farfetch’s marketplace reaches. The New York-based business will continue to operate independently while tapping into Farfetch’s logistics and delivery capabilities.
Online luxury’s largest players, including Farfetch, MatchesFashion and Richemont’s Yoox Net-a-Porter, are adding new services and technologies through investments, acquisitions and internal research and development to stay ahead of the pack, generate higher margins and become the go-to platform for consumers and brands.
They’re all chasing a rapidly expanding online market for high-end fashion, which Bain & Co. sees growing from an estimated €26 billion ($30 billion) in 2018 to between €80 billion and €91 billion (between $90.9 billion and $103 billion) in 2025. Sneakers are a key part of the boom, outpacing overall luxury sales growth to reach $4 billion last year.
Farfetch chief executive and founder Jose Neves said that while his marketplace has built a following around high-end streetwear, “we did not have access to the rare sneakers, to the premium limited editions in the secondary market,” that Stadium Goods Offers, he said. The partnership has so far generated “phenomenal, immediate traction” from all of Farfetch’s markets, especially China, Japan, Russia and the Middle East.
“[Sneakers] are growing faster than other categories and we see the same on farfetch,” said Neves. “We now have the strongest secondary [market] brand, in our view.”
Stadium Goods co-founder and chief executive John McPheters said Farfetch’s international reach will be a major advantage to the business. “They’ve figured out a lot of things that we are still learning,” he said, adding that he and co-founder Jed Stiller first met Neves and a year ago and began conversations that led to this acquisition.
Most of Stadium Goods’s sales happen online, and the marketplace has partnered with larger digital retailers including Amazon, eBay, Zalando and Alibaba to scale its access to sneakerheads. Last year, it turned over $100 million in gross merchandise volume.
McPheters said the relationship between Stadium Goods and Farfetch is unlike its other partnerships to date. “We can do so much more in terms of driving that engagement, that resonance, that cross pollination of product,” he said. “Our models are very well aligned. A lot of the guess work in terms of selling on channels is really taken out.”
Both Farfetch and Stadium Goods are focused on capitalising on China’s growing luxury market, but they have taken different approaches. JD.com, China’s second-largest e-commerce company, has a stake in Farfetch. Stadium Goods started selling products on JD.com rival Alibaba's Tmall in 2016, and the company has said the channel now accounts for 15 percent to 20 percent of total sales.
But McPheters said Stadium Goods’s relationships with its existing e-commerce partners will remain “business as usual.” As for the potential conflict between the two company’s alliances with JD.com and Tmall, Neves said any changes will be up to the Stadium Goods management. “We need to do what’s best for Stadium Goods… We should be open minded if channels are bringing great customers,” he said.
Farfetch, which went public on the New York Stock Exchange in September 2018, has aspirations to be the “Amazon for luxury,” adopting the e-commerce giant’s marketplace model. Third-party sellers, from tiny boutiques to global brands and retailers, list products on the site, with Farfetch processing sales and sometimes handling the logistics, but not taking inventory.
Since going public, Farfetch has made clear it is aggressively going after new markets, pursuing more business in emerging economies such as China and the Middle East, as well as signing on additional retailers and brands. Neves told analysts in November that he wants Farfetch to take the “lion’s share” of new luxury spending online over the next decade.
The company reported $310 million in sales on its platform in the third quarter, a 53 percent jump from the same time last year, and putting Farfetch on track to handle transactions worth well over $1 billion for the full year. Farfetch’s cut of each sale is around 30 percent. Losses are also growing, as it invests heavily in technology, hitting $77 million in the third quarter of 2018, up from $28 million during the same period the previous year.
On Wednesday, Farfetch shares were up 5.9 percent at $23.90.
Stadium Goods is Farfetch’s first acquisition since picking up Chinese digital marketing agency CuriosityChina in July. In 2015, it also acquired London boutique Browns.
“We will continue to look only at world-class absolute leaders in specific markets or technologies or categories, and nothing else,” said Neves, describing his strategy around potential future acquisitions as case-by-case. “I believe first in deals that are win-wins.”
Stadium Goods opened in New York’s Soho in 2015, reselling limited edition sneakers to a growing market of fans ready and eager to pay thousands of dollars for rare pairs. Founded by McPheters and Stiller, the business raised $4.6 million in January 2017 in a Series A funding round led by Forerunner Ventures. In February 2018, LVMH bought an undisclosed minority stake in the business.
“They have huge knowledge and great passion for this space,” said Neves.
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