British online fashion firm Farfetch has become the latest start-up to be valued at $1bn (£654m), after an $86m funding round. The London-based firm has now raised $195m in total, leading some to label it Europe’s latest ‘unicorn’, or highly promising start-up.
Farfetch gives its customers access to 300 luxury fashion boutiques worldwide, while offering the boutiques logistical support that would normally only be available to larger retailers. It’s not profitable yet, though, which might raise a few eyebrows. Big investments in young tech firms that aren’t making any money looks unfashionably late 90s, after all.
Farfetch is experiencing rapid growth, however, having increased its daily sales volume from $25,000 in 2010 to $1m now. Besides, the investors in this latest round of funding – led by venture capitalists DSL Global, but also including current backers Vitruvian Partners and, just to add a little more glamour, Vogue publisher Conde Nast – will be hoping the money will translate into international growth.
Currently, Farfetch’s markets are the traditional ones of Europe and the US, but there’s a great deal of scope to translate the model to markets where local access to high end boutiques is limited, such as China and South America.
It might seem risky, particularly given the recent wobbles at rivals ASOS and Boohoo.com, but that’s the whole point of venture capital. Besides, online clothing retail has hardly been a flash in the pan. Amazon’s still going rather strong, though to be fair it too has yet to turn a serious profit.
Of course, Amazon is all about keeping the price down, which is anathema to luxury fashion. If Farfetch can become the go-to site for fashionistas in Sao Paolo or Shanghai who want a taste of Paris or Milan couture and are willing to pay hundreds of dollars a time to get it (the average basket at Farfetch costs $650), then it’s hardly inconceivable that it could up its margins in a way Amazon could never do, which would make it worthy unicorn indeed.