Alibaba, Richemont to invest $1.1b in online luxury retailer Farfetch

China’s Alibaba Group and Swiss luxury goods firm Richemont will be investing a total of US$600 million, split evenly between the two, in online luxury fashion retail platform Farfetch as part of a wider partnership.

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The global tie-up also involves Alibaba and Richemont each investing US$250 million in Farfetch China in exchange for a combined 25% stake in a new joint venture that will include Farfetch’s marketplace operations in the country.

Furthermore, Alibaba and Richemont will have an option to purchase a combined additional 24% of Farfetch China after the third year of the new venture’s establishment.

These investments are expected to be completed during the first half of next year, according to a statement.

In addition to the investment, Farfetch will also be launching luxury shopping channels on Alibaba platforms Tmall Luxury Pavilion and Luxury Soho, as well as Tmall Global. The move is part of an initiative to take advantage of Farfetch’s and Alibaba’s omnichannel retail expertise to serve the needs of luxury businesses.

In a 2019 report, Bain and Company said that Chinese consumers, which accounted for roughly a third of the global luxury goods market at the time, made 27% of their purchases locally. The data and analytics firm also expects this number to go up to 50% by 2025 due to stricter control over gray markets and import duty reductions, among others.

“The new initiatives with Alibaba Group and Richemont extend Farfetch’s strategy to power the digital transformation occurring across the luxury industry, which has been accelerated by the unprecedented challenges resulting from the Covid-19 pandemic,” said Farfetch founder, chairman, and CEO José Neves.