Meet the Most Powerful Man in Fashion
Not who you were expecting? With a US$1.15 billion deal, Farfetch’s José Neves has gone from the industry’s David to its Goliath.
SUN-TZU’S THE ART OF WAR is a favourite reference for many a hard-charging power broker, but José Neves cites a decidedly less aggressive classic of Chinese literature as an early influence: Lao-tzu’s Tao Te Ching. After stumbling upon Taoism’s foundational text as a 13-year-old in northern Portugal, Neves delved into Eastern philosophies and emerged as a Zen Buddhist. It’s a school of thought that the founder and CEO of Farfetch, the luxury online retailer with the largest audience in the world, still follows today.
“I’m a Buddhist by philosophy, not by religion,” says Neves, who spends much of his time in London with his wife and five children. As we Zoom, he certainly looks like a Zen acolyte by way of Jil Sander, wearing a minimalist black T-shirt against the backdrop of a pristine, all-white room. That morning, he’d meditated for 45 minutes – though he endeavours to employ mindfulness throughout the day. The practice has been especially helpful during the turbulence of the past year. “The essence of Zen is: be here now,” he says. “In crisis, that’s really useful because you train your mind to be aware that the external situations around you, they’re all going to pass. Your role is to allow them to be there and find out what is the right action for you.”
His discipline has paid off. As the fashion industry grappled with shuttered stores, unsold inventories and how to survive it all, Farfetch experienced staggering growth: an 82 per cent year-over-year increase in gross profit. But it wasn’t just a case of luck fuelled by homebound shoppers on stimulus spending sprees. Even Farfetch’s digital competitors were forced to cancel orders and shut down fulfilment centres, inevitably leading to losses.
Farfetch’s point of differentiation is that it isn’t a retailer in the conventional sense. While it carries nearly 1,300 brands, from heavy hitters Gucci and Prada to niche labels such as Lardini and Girard-Perregaux, Farfetch doesn’t buy any inventory. Rather, the stock is supplied directly by manufacturers and by the sales floors of 750 retailers – from speciality boutiques to department stores across 50 countries – creating a lifeline for luxury shops that were otherwise closed by pandemic restrictions. So, while other e-tailers struggled with getting their handful of warehouses up to speed, Farfetch’s extensive global network was able to adapt nimbly.
The pandemic created a perfect storm for proving the strength of Farfetch’s model, to the tune of a 475 per cent surge in market capitalisation in 2020, totalling more than US$21 billion. To put that in context of 2020’s other breakout stars: vaccine developer BioNTech’s value grew by 125 per cent and Zoom’s by 408 per cent. Farfetch’s performance alone would have made for a remarkable year, but the ante was upped with November’s announcement that Neves had orchestrated a blockbuster deal with an unlikely alliance of titans.
The parties involved sound like a bad joke overheard at Davos: Alibaba, Richemont and Artémis walk into a bar. One is a poster child for the increasing might of Chinese shoppers; another owns fashionable houses like Cartier and Dunhill as well as Neves’s biggest competitor, Yoox Net-a-Porter Group; the third controls Kering, the stable of white-hot brands such as Bottega Veneta and Saint Laurent.
All are rivals in the e-commerce wars, yet all three are placing their bets on Neves’s ability to reimagine how we shop. Alibaba and Richemont invested US$300 million each in Farfetch, while Artémis, run by François-Henri Pinault, doubled its 2018 investment in the company, to a total
of US$100 million. Alibaba and Richemont also joined forces with Farfetch for a new venture called Farfetch China, chipping in a combined US$500 million for a 25 per cent stake, with an option to make it 49 per cent in three years. Amid all the bankruptcies and hand-wringing about the future of retail, Neves emerged from the annus horribilis as luxury’s lodestar for navigating this new world order.
Born in 1974, the year Portugal toppled its fascist regime, Neves likes to joke that his revolutionary streak comes from his mother “being heavily pregnant on top of a tank”. But rewriting the rules of luxury retail wasn’t the coup he intended to lead. A self-described geek, Neves reveals his first love was coding. On the precocious eight-year-old’s Christmas list was a
ZX Spectrum, one of the first widely distributed home computers. He recalls seeking out every book he could find and teaching himself how to build increasingly dynamic user interfaces. In college, he didn’t even bother with computer science, opting to study economics instead.
All the while, fashion was part of the furniture of Neves’s early life. The region from which he hails is the Mecca of Portugal’s centuries-old leather-goods heritage, and his grandfather ran a shoe factory. But like any angsty adolescent, he was repelled by his hometown industry.
“I hated fashion,” he says. “I thought it was frivolous, a waste of time and money, and vain. I really despised fashion, like a lot of techies still despise fashion to this day.”
But the entrepreneur in him eventually had to
Amid all the bankruptcies and hand-wringing about the future of retail, Neves emerged from the annus horribilis as luxury’s lodestar for
navigating this new world order.
embrace the local economy. While still in college in the early 1990s, Neves was developing software for dental clinics when he met Cipriano Sousa, who now serves as Farfetch’s chief technology officer. Together, they began a business creating software for the many shoe factories throughout the region.
Unsexy as servicing sole suppliers was, Neves came to see fashion as a passport to a wider world. While attending a footwear trade show in Milan, mingling with a United Nations of vendors and retail buyers, he got the itch to create something of his own. Ever tenacious, Neves convinced a shoemaker to train him one hour each morning before work, learning pattern cutting and last moulding by hand. In 1996, at the age of 22, he moved to London to open a shoebox of a store for his sneaker brand, Swear.
Beginning his career almost simultaneously in technology and in fashion, Neves has always had a clear vision of how the two could cohabitate. In fashion’s C-suites, it’s a unique pedigree. “Entrepreneurs who love and are intimate with both worlds are rare,” says Sousa, who continued working with Neves on the software business throughout Neves’s expansion into retail. “Someone who programmed in a lowlevel language and understood technology, the potential and the limitations, and at the same time was a fashion creator and knew every aspect of that world.”
Technology first is more than a business strategy to Neves – it’s an instinct. In 1997, when e-commerce was embryonic, Neves took the bold step of launching a website for Swear. Initially, he saw it as a pragmatic solution to the headaches of brick-and-mortar reality. His storefront was tiny, didn’t have prime visibility and – like most shops of its kind – was largely reliant on foot traffic.
“But in the back,” Neves realised, “I can have a website that the rest of the world can see literally 24/7, with the same inventory and the same staff.” His audience could grow exponentially. That was when it all clicked. “It took me 11 years from that realisation to launching Farfetch, but that was the moment when I knew that fashion was going to be transformed by the Internet.”
Neves’s first-hand understanding of the struggles of an independent brand and store owner are at the core of Farfetch. He likes to think of the company as a co-operative, equating it to vineyards that band together to share a bottling facility while retaining independence. It provides stores with resources and reach that no individual boutique could access on its own.
Farfetch’s platform model is most often compared to Amazon, with Neves frequently deemed the Jeff Bezos of fashion. “I think it’s very flattering,” he says, adding he has nothing but admiration for the king of click-to-buy. Still, the comparison isn’t entirely analogous. “Amazon sees it as a zero-sum game. They come in to wipe out the offline world,” says Neves, whereas his role is not to compete with offline retailers but to be their “enabler”. “We’re only a platform. We can only sell what they sell. By making them successful, we are able to succeed.”
It’s what sets Neves apart from other retail heavyweights: a sense of duty to the larger fashion ecosystem.
“If it hadn’t been for Farfetch, many of our favourite local boutiques would have disappeared,” says Carmen Busquets, a founding investor in Net-a-Porter and a businesswoman dubbed the fairy godmother of e-commerce. An investor in Farfetch since 2015, she describes Neves as a “refreshing presence” in the worlds of fashion and finance.
“In my 30 years of experience, I have not come across another founder like him,” Busquets says, remarking on his ability to rally opposing parties around a shared goal. “It requires you to remove your ego from the picture.” Neves’s knack for building bridges rather than burning them facilitated something that has never existed in the history of retail. “He knows how to be friendly, which is something that very few of us in the fashion industry are capable of.”
With Farfetch, Neves says, he “created this community of people who, theoretically, are competitors”, noting that a shop in Milan and a store in London often sell the same items. On Farfetch, that just means a larger inventory and fewer worries about size. Depending on the buyer’s location, the item will be dispatched from whichever retailer is closest; in some cities, certain items can even be delivered within 90 minutes. From a shopper’s perspective, having access to hundreds of stores’ products on a single website is a big draw. For a commission on each order, Farfetch takes care of photographing, marketing, selling and delivering the wares to 2.7 million shoppers in over 190 countries.
Swear’s cyberpunk sneakers were a product of the 1990s – chunky soles and clownish silhouettes that, today, look like proto-Balenciaga – and the style eventually reached its expiration date. The brand took a nosedive, but, undeterred, Neves pivoted to a new retail venture. His multi-brand boutique B Store opened in 2001 and became a launchpad for a new generation of London designers, eventually moving to Savile Row and, in 2006, earning the British Fashion Award for Retailer of the Year.
It was at B Store that Neves experienced the magic of brick-and-mortar at its best, but his inkling about online shopping’s potential was too great to ignore. During Paris Fashion Week in October 2007, he shot off an email to Sousa saying he had an idea: pause the software business and channel all their coding power into building an e-commerce platform. Having worked with Neves on technology for numerous facets of the industry, from manufacturing to selling, Sousa recalls: “The first idea that occurred to me was that he wanted to share all that with the world, to consolidate all this know-how on a platform accessible to others.”
Farfetch launched one year later with 25 retailers from throughout Europe. It was a promising start – until Lehman Brothers went bankrupt two weeks later. For the first three years, the website was entirely self-funded by Neves and his other businesses. But that wasn’t the worst of his growing pains. Most marquee fashion houses were still vehemently opposed to e-commerce. To them, Neves was something of an insurrectionist, sidestepping traditional wholesale channels to sell their products online. Things got, in a word, tense.
“We’re only a platform. We can only sell what they sell.
By making them successful, we are able to succeed.”
“The first five years, I almost had nervous breakdowns every fashion week,” Neves remembers. The boutiques would go on their usual buying appointments with brands only to be confronted with an ultimatum: stop selling on Farfetch or forget carrying our collection. “It was me, jumping on a plane to Paris, going to Milan and trying to beg them, beg them, to let us have a chance at survival.”
As luxury’s elite gradually came around to digital, they knew whom to call. Now over 550 of those brands sell directly on Farfetch, including Farfetch-exclusive collections from Gucci and Burberry, among others. Moreover, the company also provides the technology that powers many brands’ own e-commerce sites.
Ten years after it debuted, the company went public in 2018 with a splashy Wall Street IPO.
Valued at some US$6 billion, it became one of the elusive ‘unicorns’ of fashion. Despite the enthusiasm, some investors were left scratching their heads when Neves went on a buying spree of his own over the next year. The acquisitions of Stadium Goods, a sneaker reseller, and New Guards Group, a hub of buzzy brands such as OffWhite and Palm Angels, for US$250 million and US$675 million, respectively, came seemingly out of left field. In a single day, the company’s shares plunged 42 per cent.
Neves, of course, had a plan. Stadium Goods seized on the booming secondary market for collectible kicks, which no major retailer had yet to tap into. He was drawn to New Guards’ portfolio because its designers, including OffWhite’s Virgil Abloh, possess what Neves calls a “knack for creating movements”.
Paradoxically, brand building has been one area where Farfetch has struggled; it still doesn’t have the name recognition of Net-a-Porter, much less Neiman Marcus. These acquisitions afforded the website exclusive products from brands coveted by millennials and Generation Z, cornering the market on haute hype.
They have been good for business, too. The launch of Off-White’s collaboration with Nike marked one of Farfetch’s busiest sales days, and products from New Guards’ collective labels have consistently grossed more than any other brand on the website.
“Netflix, like us, started aggregating content from others,” Neves explains. “There’s a pivotal moment where they say that if they want to creat a unique brand, they need to have original content that no one else has.”
With a collection of brands under the Farfetch umbrella, Neves has his own original-content factory and a thoroughly modern breed of fashion consortium, rooted in the digital era. It’s an approach to luxury that’s very different from the heritage houses of LVMH and Kering, one that reflects Neves’s distinctly 21st-century attitude. “The world has changed,” he says. “It’s not about a conglomerate buying you and opening 200 shops around the world. That’s the old days.”
In other ways, too, he comfortably breaks from the fashion-CEO template, eschewing immaculately tailored suits in favour of edgier fare from Rick Owens and Undercover. Many days, his footwear of choice is a pair of sustainable fish-leather sneakers by the Brazilian brand Osklen. Regardless of his uniform, Neves’s strategy has earned him a place in the major leagues. When asked about Farfetch’s potential, Busquets doesn’t mince words: “I think it can be bigger than LVMH and Kering. No one else at the moment understands the luxury industry better than José.”
Another addition to Neves’s growing stable was the pioneering British boutique Browns, which serves as a laboratory for translating Farfetch’s technology offline. For all the innovation that has happened digitally, Neves saw that brick-and-mortar had stagnated. “The shops still operate as if we were in the ’90s,” he says. “We don’t really know the customer’s journey. There’s no 360-degree view.” So he set out to make one.
In 2017, Farfetch invited 200 executives from fashion’s biggest brands to an event introducing a technology suite it coined the Store of the Future. From a clothing rack that detects which items a customer handles while browsing to a fittingroom mirror that allows one to summon pieces in alternative sizes or colours, Neves presented a vision of physical retail bolstered by the insights of e-commerce. “This division between physical retail and online, it’s imaginary,” he explains.
“It’s only separated because companies have not had the technology and the strategy to unify it. For me, that is the next frontier.” Chanel was so impressed that it negotiated a two-year exclusive on the technology and invested in Farfetch. While Chanel continues rolling it out in its stores, the exclusivity lapsed in September and the system is proving to be a hot commodity.
Increasingly, the brands that Neves once begged to sell on Farfetch are turning to him for the answers. His fluency in the on- and offline retail landscapes is one thing, but his new potential to conquer the highest levels of Chinese e-commerce makes him a singular fixture in the industry. Bain & Company reports that Chinese consumers accounted for 33 per cent of luxurygoods sales in 2019, a figure expected to hit 45 per cent within five years. And yet no fashion retailer has been able to crack that market online, mainly due to the peculiarities of Chinese regulations and the nuances of local shopping habits.
In 2019, Net-a-Porter launched a channel on Tmall, Alibaba’s website dedicated to high-end wares. While the company hasn’t released details on the Chinese site’s performance specifically, Yoox Net-a-Porter Group’s profit margins have been slipping and Richemont’s overall business in Asia has dipped. Discussing the new Farfetch deal with shareholders, Richemont chairman Johann Rupert dodged questions about how it would affect Yoox Net-a-Porter’s operations. Instead, he reiterated a plea he made to LVMH and Kering to get on board with a neutral selling platform in 2015, telling them that e-commerce “was a very big game that I was not sure that any single luxury-goods company, no matter how big, could do on their own. That fell on deaf ears.”
Busquets, who was Rupert’s partner in Neta-Porter before unloading the last of her shares in 2015, recalls things a bit differently. “The truth is that the people who surrounded Johann Rupert didn’t understand e-commerce, fashion or women, and I know this because we were equal partners with the same rights for eight years.” Rupert declined interview requests.
The year that Busquets completely divested was the year that Richemont merged Net-aPorter with Italian e-tailer Yoox. She had been vocal about her disapproval of the merger. Why? She thought it should have been with Farfetch. “Johann admitted that Richemont were not Internet experts and time has proven that he should have listened,” Busquets says. She applauds the new deal and sees it as a sign of how far Rupert and Richemont have come in their thinking about the digital frontier.
On his call with investors, Rupert suggested that the new Farfetch deal provided strength in what has proven to be Richemont’s blind spot: technology. Comparing his organisation with
“This division between physical retail and online, it’s imaginary. It’s only separated because companies have not had the technology and the strategy to unify it.”
Farfetch, Rupert evidently borrowed a line from his new colleague, saying: “Currently, the two companies, in (Neves’s) words, have got different blood types.” The partnership certainly gives Richemont a digital edge, but the big question is what that means for business in the fastestgrowing market. Even Farfetch’s previous forays into Chinese e-commerce, Neves has admitted, did not perform as anticipated. Partnering with Alibaba, however, is a game changer.
“It’s absolutely transformational,” Neves says, noting Alibaba’s domination of Chinese e-commerce in general and Farfetch’s luxury prowess in particular. “The combination is a win-win for the brands and for consumers and boutiques globally.”
Their partnership was borne of a mutual desire to bridge the gap between online and offline shopping. What Farfetch has done with fashion boutiques around the world, Alibaba has done with convenience stores throughout China. Merging their brainpower could have global implications, laying the groundwork for luxury’s first retail supergroup. While the initial leg of their strategy is bringing blue-chip brands to the Chinese web, beginning the first half of 2021, the bigger aim is to provide the technology behind every luxury purchase, be it in-store or online.
Thanks to widespread pandemic restrictions, global online sales doubled last year, but they still account for only 23 per cent of luxury purchases worldwide, according to Bain, leaving considerable room for Farfetch to expand its influence. In that sense, this alliance isn’t just about Chinese e-commerce. It’s about shopping – full stop.
“You are either a disrupter or you are a disrupted, and I hate being the latter,” Rupert, discussing his backing of Neves, told The New York Times. “We see this deal as an acceptance of a new way of retail.”
For his part, François-Henri Pinault said in a statement: “The investment by Artémis demonstrates our belief in the future of Farfetch and I am personally looking forward to exploring the future of luxury retail with this group of visionaries and experts.”
Two of the industry’s top dogs effectively rolling over and conceding that the future of shopping lies with Neves – surely, that reversal of roles must bring him some satisfaction? “It is a big shift,” he modestly admits. But pressing Neves on this topic is futile; his Zen even keel applies in times of feast as much as famine. “When the stock price goes up and (the team) goes, ‘Whoa!’ I say, ‘Hold on a sec.’ It’s the same way when the shares fell,” Neves says, recalling the day Farfetch’s stock tumbled by almost half. Instead, he keeps his eye on the long-term goal. “I always wanted to be the innovation partner for this industry. We need to respect our shareholders, explain our strategy, and sometimes it won’t be understood. That’s fine. We have to live with it and accept it and accept the lessons that they’re trying to show us. But that’s not going to change the mission of this company. It’s not the stock price that dictates, ultimately, if we’re doing the right thing or not.”
Reflecting on their early days, Sousa observes that Neves “remains as revolutionary as he was then, but with much more wisdom, more serenity, more focus”. Cool, calm and eagle-eyed, Neves may be grounded in the present, but his sights are firmly set on changing the future.