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Farfetch: is this the future for department stores online?

Harvey Nichols signing up to the Farfetch platform could signal a “new age” for the department store model at a time when many are struggling to find a place for themselves, industry experts have argued.

Harvey Nichols will become the first department store to work with Farfetch, from the second quarter of 2018, and will benefit from its ecommerce and logistics expertise. Harvey Nichols customers will also be able to use Farfetch services such as in-store returns and same-day delivery.

While traditionally the role of a department store is to curate brands rather than leaving it up to the algorithm of a marketplace, this alliance could prove inspired, as it immediately opens up a huge global audience for the retailer, believes Charlotte Pearce, retail analyst at GlobalData.

“At first glance it might seem a bit bizarre but it is not out of the question for innovative brands [such as Harvey Nichols] to be exploring options to try to broaden its reach and increase sales.”

Daniela Rinaldi, co-chief operating officer at Harvey Nichols, told Drapers online currently makes up 10% of sales, and adding the Farfetch deal will grow this significantly: “We see clear potential to grow the scale of our online business much further, and believe the Farfetch partnership will help us accelerate our growth by significantly widening our reach, in particular for international markets.”

With a smaller retail footprint from which to fulfil orders – Harvey Nichols has just eight stores in the UK and Ireland – tapping into Farfetch’s logistics will be another benefit, says Farfetch founder José Neves: “[Harvey Nichols] is no longer restricted to serving customers in specific store locations, and will have access to a very global customer in 190 countries. They can tap into our logistics platform, which will allow customers to benefit from our many delivery and return options, and our flat shipping fee.”

However, going down the platform route may not be a solution for every department store chain.

Suzanne Harlow, former group trading director at Debenhams, asserted the Farfetch model is “less attractive for mainstream department stores, as they already have the scale and infrastructure in place”: “It is all linked to scale, so for Harvey Nichols it is a fantastic opportunity. [Going forward] developing the international part of your business will be critical, because the UK has been flat.”

Daniel Bobroff, chief executive at creative technology firm Coded Futures, agreed the partnership would benefit Harvey Nichols: “For a very established business that is a bit slow to this increasingly unavoidable digital change, if you don’t start to make sense of it, your days are numbered.

“This is a good way to start, but it is by no means an answer and is just a glimpse of what the future might hold.”

Bobroff said platforms such as Uber and Airbnb that “empower the user” will begin to be seen more and more in retail.

On Farfetch the same product may now be available from a brand, independent retailer and Harvey Nichols – an algorithm will decide which product is served up to the customer based on availability and the most convenient delivery method.

Neves denies there will be a conflict of interest, as the platform offers customers “an unrivalled range of fashion from around the world, which drives further demand”.

Giulio Cinque, founder of the eponymous men’s and women’s wear independent in Cambridge, which joined Farfetch in 2010, agreed: “The global demand on Farfetch can’t be met by just independent retailers alone. I would much rather be on a site where a consumer has the ultimate shopping experience, than a negative experience.”

One question raised was whether brands on Harvey Nichols could be squeezed as Farfetch takes a cut of sales and charges for fulfilment.

However, Sarah Curran, non-executive director at French Connection, said any potential pressure on margins will be outweighed by an increase in sales: “The Farfetch and Harvey Nichols deal has the potential of creating a new way of thinking for department stores.

“In today’s market, anything that helps remove or mitigate the need for promotional activity to drive sales is a win.” 

The Drapers Verdict

In an increasingly difficult UK market, attracting new customers and opening up to new international markets is a must to further drive sales, as such Harvey Nichols must be credited for its leap of faith. Whether it will lead to the desired spike in turnover remains to be seen, but the fact that department stores need to act fast to make sure their ecommerce presence is fit for purpose is undeniable. The clock is ticking for many established UK department stores to accelerate and innovate, or they risk being left behind.

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