A year ago, the biggest players in luxury e-commerce faced an uncertain future. Myriad competitors had flooded a space once dominated by Net-a-Porter, ranging from vast marketplace Farfetch to niche challengers like MyTheresa, MatchesFashion and Ssense. These sites were largely undifferentiated, often selling the same products at the same price, while offering similar customer experiences. That led to high marketing costs, frequent promotions and difficulties reaching the necessary scale to pay off significant investments in technology, logistics, rapid shipping and other white-glove services.

At the same time, luxury brands were ramping up their own e-commerce stores and shoppers were flocking to social media platforms like Instagram for style advice and product curation, eliminating much of the need to digitise the traditional multi-brand retail model. “They’re all losing money. It’s not a good sign,” LVMH chairman Bernard Arnault said in a January 2020 presentation, commenting on the challenges faced by his company’s own multi-brand e-commerce venture, 24S. “The bigger they get, the more money they lose.”

One player in particular faced an uphill battle to reassure investors about its future: Farfetch, the marketplace founded and led by José Neves, which had made a name for itself by short-circuiting luxury brands who were slow to enter e-commerce. Instead of relying on the brands for stock, he had created a platform for multi-brand boutiques around the world to sell their inventories online. A year after raising $885 million in a much-hyped initial public offering, Farfetch faced mounting concerns about its lack of profitability and high costs for acquiring clients. Market support collapsed following an unexpected move to acquire Milanese streetwear manufacturer New Guards Group, and by the autumn of 2019, Farfetch shares were trading at less than 40 percent of their IPO price.

Fast-forward to a year later and the coronavirus pandemic has driven a luxury e-commerce boom. Amid a freeze in long-haul tourism and the intermittent closures of physical boutiques due to coronavirus containment measures, e-commerce has scooped up an unprecedented share of luxury demand.

Farfetch enjoyed the most dramatic turnaround. Its market capitalisation grew by a whopping 475 percent in 2020 — more than other companies that experienced a notable pandemic boom, like vaccine-maker BioNTech (whose shares went up 125 percent) or home cycling hit Peloton (up 432 percent).

Neves has said the company will report positive EBITDA (a measure of profit) for the first time ever for the fourth quarter of 2020. Last November, the company inked a blockbuster deal aimed at accelerating its expansion in China — already the growth driver for luxury and more important than ever following the country’s comparatively swift economic recovery. The partnership signed with Chinese e-commerce giant Alibaba and Swiss luxury group Richemont (alongside Pinault family holding company Artémis) raised $1.1 billion and has pushed excitement about the company to new heights.

Investors are now betting that Farfetch will not only become profitable, but that it can fulfil its mission to become the world’s go-to marketplace for high-end fashion, “connecting creators, curators and consumers.” In short, they’re betting it can be the so-called Amazon of luxury. “If not them, who else could be?” Cowen analyst Oliver Chen said.

In our April 2020 case study, “The Next Wave of Luxury E-Commerce,” The Business of Fashion explored the rise of Yoox Net-a-Porter (YNAP) and how its dominant position in online luxury gradually eroded amid mounting competition from brands’ own websites, marketplaces like Farfetch and niche online boutiques with devoted followings.

Now, we take a closer look at Farfetch, and how it has seized the pandemic opportunity in luxury e-commerce to surge ahead. The value of products sold on its marketplace grew by nearly 50 percent during coronavirus lockdowns in the spring of 2020, and are now close to overtaking the sales of chief rival Net-a-Porter.

Looking ahead, how strong is Farfetch’s advantage in the luxury e-commerce race? A $21 billion market capitalisation certainly sets it apart from the pack. But can Farfetch buck the trend of luxury brands moving to more direct relationships with consumers, both online and off — a strategic shift which risks cutting out multi-brand players? And how will it fend off the challenge from technology giants like Amazon, which is redoubling its efforts to break into selling luxury fashion, or Alibaba, which has invested in Farfetch even as its own high-end venture, the Tmall Luxury Pavilion, continues to gain ground?

We’ll understand what makes Farfetch stand out to investors, including its marketplace model and technology investments, and how fashion brands’ increased appetite for its services allowed it to stage a spectacular comeback in the market and nab a historic deal.

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Editor’s Note: This case study was corrected on January 15, 2021. A previous version of this report stated that Farfetch’s Store of the Future team is working with Chanel to implement a service for shipping items purchased in-store. This is incorrect. Chanel does not have this Store of the Future functionality enabled.