British luxury e-commerce company Farfetch has fallen into a dark moment. Recently, the well-known luxury e-commerce shares fell sharply, and its market value plunged. The company also announced the cancellation of its quarterly earnings and results release. For a moment, speculation was rampant. Previously, Secoo, a Chinese luxury goods service platform known as the "first share of luxury e-commerce", also received a delisting notice from Nasdaq. Does the collapse of well-known listed e-commerce prove that the model of "luxury + e-commerce" is difficult to go through?
With the asset-light model and the advancement of the digital transformation process of the luxury industry, Fafaqi was favored by the capital market in the early days. Within nine years of its founding, Fafaqi completed series A to F financing. In 2014, Fafaqi entered China and quickly gained investment from Internet giants such as JD.com, Tencent and Alibaba.
After the outbreak of the epidemic, offline consumption was blocked, consumers flocked to online, and luxury e-commerce sales increased by 150%. Fa Fa Qi is riding the momentum all the way forward. In 2020, Fa Fa Qi's share price rose 500%, from about $10 to break through $60, surpassing Pinduoduo, which was regarded as the "dark horse" of the e-commerce industry at that time. Its financial report shows that Fafaqi's GMV (gross merchandise volume) from 2019 to 2021 was $2.14 billion, $3.187 billion and $4.230 billion, respectively, an increase of 49% in 2020 and 33% in 2021.
However, Fafaqi's highlight moment was short-lived. Financial data show that in 2022, the company's full-year GMV was $4.059 billion, down 4% from 2021. In the first quarter of 2023, its performance returned to growth, but only by 8.1%. In the second quarter, its GMV edged up just 1.2% from a year earlier, revenue fell 1.2%, and its loss widened to $280 million from $68 million a year earlier.
The selling pressure on Fafqi has been persistent. As early as the end of August, before the share price crash, the US investment research platform Seeking Alpha had been rating Fa Fa Qi at "strong sell" or "sell". Analysts at Seeking Alpha have also been warning investors to avoid the stock. On December 13, Moody's cut the company's credit rating further into "junk" status and placed it on review for further downgrade, citing its deteriorating financial position.
Today's Fa Fa Qi has become a "hot potato". According to The Daily Telegraph, founder Jose Neves is in talks with shareholders such as Richemont Group and Alibaba Group, as well as investors such as JP Morgan Chase to take the company private. The day after The Daily Telegraph disclosed the privatized news, Fafach's financial results for the third quarter of fiscal year 2023, originally scheduled for November 29, were also delayed. The company said it "expects to provide market updates in due course." The Company is not providing any forecasts or guidance at this time and should no longer rely on any prior forecasts or guidance."
Shortly after, Richemont Group, one of the shareholders, announced that it did not assume any financial obligations to Fafqi, did not intend to provide loans or investments to Fafqi, and was re-examining Fafqi's acquisition of YNAP, another of its luxury e-commerce. Alibaba President and board member Mike Evans also resigned from the board.
According to fashion Business Review (BOF), Fafarge's cash flow may not be enough to sustain it until the end of December, and it is seeking external support. Experts speculate that the worst possible outcome for Fafqi in the future is bankruptcy.
Previously, Secoo, known as the "first share of luxury e-commerce", has also received two delisting notices from Nasdaq. Does this mean that the road to luxury e-commerce is blocked? In this regard, Jiang Han, a senior researcher at Pangu Think Tank, told the Global Times reporter that consumption habits are an important factor affecting the development of luxury e-commerce. Although the young consumer group is rising in the luxury market, when they have enough purchasing power, they may be more inclined to buy luxury goods in physical stores to obtain a more authentic shopping experience and a more complete consumption enjoyment. He believes that the luxury e-commerce model is not impossible, and providing value-added services is an important means for luxury e-commerce to attract consumers.
