The slowdown in the US market, combined with the impact of inflation and cautious investors, has weighed on luxury retail platform Farfetch's results.
The company, run by businessman José Neves posted a slight decline in the second quarter of 2023, according to its latest published financial results. The platform announced a -1.3% ($7.3 million) fall in sales, totalling $572 million. Figures for the first half of 2023 totalled $1.12 billion, up on sales for the same period in 2022, which stood at $1.094 billion.
According to a press release issued by the company, the decline in the second quarter was driven by an overall drop in both online and in-store sales (-15% in-store and up to -42.2% on the online sales platform). The slowdown in the vitality of American retailing has therefore impacted the company, a trend that José Neves attributes to a problematic but expected cyclical downturn. Interviewed by the press, he said: "We have taken decisive steps to adapt to the macroeconomic environment of the last 18 months. The year 2023 is shaping up to be a great year for Farfetch, with strong growth in business volume."
The real question underlying this financial wavering is whether Farfetch will continue to include the beauty division on its digital platform, the company's Achilles heel. Integrated in April 2022, this sector boasts a very rich portfolio of luxury brands, from the legendary Crème de la Mer, to the trendy British brand Charlotte Tilbury, Violet Gray and its own range of products.
Today, this promising division faces several obstacles, and the platform's management is reportedly considering discontinuing its cosmetics business. These difficulties are partly due to the unstable economic climate and the fierce competition from other leading online players, such as the Canadian platform Ssense, which was valued at 5 billion dollars two years ago.
Although McKinsey's research on the beauty market in 2022 shows impressive figures - the beauty care business is estimated to be worth €391 billion - the proliferation of new players in this segment means that brands need to be highly differentiated, and therefore costly to invest in - a challenge that can prove complicated for sales platforms.
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