Farfetch Launches Start-Up Accelerator

LONDON, United Kingdom — Farfetch is launching a start-up accelerator in a move aimed at giving the fashion marketplace, which connects consumers with a global network of luxury boutiques and brands, an early peek at potential new features for its retail "operating system."

The company is building out an array of services that retailers can adopt in the online marketplace and their physical stores, ranging from mobile payment systems to a tool that tracks a customer's behaviour across multiple stores. Chanel earlier this year invested in Farfetch and said it would install this operating system concept in some of its stores.

While luxury e-commerce is growing fast, the portion of personal luxury goods purchases that happen online — now about 7 percent of total — is expected to plateau at about 20 percent by 2025, according to a report from Bain & Company. This means that, for the foreseeable future, the vast majority of sales will still take place in physical stores, which have yet to really benefit from the digital revolution.

Farfetch has created some of its technology offerings in-house, but is increasingly looking to third parties to develop new applications. The accelerator, which will cycle ten start-ups through a 12-week program in Lisbon, is designed to help jump-start the development process, said Stephanie Phair, Farfetch's chief strategy officer. Burberry and venture capital firm 500 Startups are partners in the program.

“We’re developing an ecosystem,” Phair said. “Think about Farfetch as the platform for the luxury industry.”

Other luxury companies are taking a similar approach. Earlier this month, LVMH announced it had opened a tech accelerator of its own, with plans to invite 50 start-ups a year to its “Station F” campus in Paris.

Corporate-backed accelerators have become increasingly common in recent years as a low-risk way for large companies to discover emerging technologies — or head off potential competitors. BMW’s “Start-up Garage,” for example, bills itself as "a start-up’s gateway into the multi-trillion dollar automotive industry.”

“You’re not hamstrung with managing a portfolio of these companies, you can get kudos just for supporting them,” said Henry Whorwood, senior consultancy associate at Beauhurst, which tracks UK start-ups. Beauhurst estimates that 548 start-ups entered UK-based accelerators last year, from just 21 in 2011.

Corporate incubators don't always deliver results, however. The approach has been tried by everyone from Nordstrom to L'Oréal. Despite the attention of senior leadership and ample funding, many have failed to accomplish strategic innovation goals. Some companies, including Turner Broadcasting and Coca-Cola, have shut their accelerators down entirely.

At Farfetch, the launch of the new accelerator — dubbed "Dream Assembly" — is the latest in a drumroll of announcements meant to prime the market ahead of an expected initial public offering later this year. Farfetch is rumoured to be seeking a $5 billion valuation, close to fashion e-commerce leader Yoox Net-a-Porter's market capitalisation before its sale to Richemont. That's despite just $198 million in revenue in 2016, the most recent figures available, about 10 percent of YNAP's sales that year.

The focus on services “is quite a clever strategy,” said Thomas Sineau, an analyst with CB Insights. “It distinguishes them from [other marketplaces] and positions them as an enabler for luxury companies rather than a competitor.”

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