Alibaba is working with Farfetch and Richemont to provide the luxury brands with enhanced access to China and speed up digitisation as part of its New Retail initiative.

New Retail is Alibaba’s blending of online and offline retail by digitising the entire value chain.

Farfetch plans to launch luxury shopping channels on Alibaba’s Tmall Luxury Pavilion, Luxury Soho and cross-border marketplace Tmall Global, looking for seamless integration of digital and physical experiences.

“This highly complementary partnership brings together some of the world’s leading luxury retail and technology platforms, representing another milestone in Alibaba’s strategy to meet the rapidly growing demand for luxury products in China,” said Alibaba CEO Daniel Zhang. “The Chinese luxury market – which is expected to account for half of global luxury sales by 2025 – consists of hundreds of millions of young, digitally-native consumers. By partnering with Farfetch and expanding our existing relationship with Richemont, we will accelerate the digitisation of the global luxury retail industry and transform the luxury shopping experience for consumers.”

The channels will extend Farfetch’s reach to Alibaba’s 757 million consumers and offer luxury brands a multi-brand option via a single integration with Farfetch. For luxury labels, they’ll have an opportunity to elevate brand awareness and expand their market reach. And for luxury consumers, the channels mean multiple ways to shop for favourite brands, whether through the Farfetch integration or Net-A-Porter’s existing integration on the Tmall Luxury Pavilion.

“This announcement is a major step in our mission to connect the curators, creators and consumers of the luxury fashion industry,” said José Neves, Farfetch CEO. “The $1.15bn investment in Farfetch from Alibaba Group, Richemont and Artemis is a strong validation of our position as the global platform for luxury. 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. The luxury New Retail initiative will explore ways we can help the wider industry move forward and thrive in the post-Covid world.”

Apart from establishing the channels, Alibaba and Richemont are deepening their own ties, which date back to 2018, when they announced a joint venture to bring the Swiss luxury retailer’s offerings to Chinese consumers online. At the time, they announced an app and a virtual store on the Tmall Luxury Pavilion.

The pavilion recently celebrated its third anniversary, boasting nearly 200 brands – a different picture from when it first launched. Back in 2017, many top-tier luxury brands viewed online retail with some scepticism, concerned that the exclusiveness of their products and brand equity would suffer. That sentiment has changed greatly in the sector, due in part to smooth collaboration with Tmall’s luxury operations.

In this deal, Alibaba and Richemont will each invest $300m in private convertible notes issued by Farfetch. They’ll also each put up an additional $250m for a combined 25% stake in Farfetch China, a new joint venture that will include Farfetch’s marketplace operations in the China region. And they have an option to purchase a further 24% combined stake in Farfetch China after the JV’s third year.

Separately, Groupe Artemis, a Paris-based company with luxury investments among its holdings, will invest a further $50m to increase its stake in Farfetch.

“Building on our successful joint venture with Alibaba, these developments represent a further meaningful acceleration of our journey towards luxury New Retail,” said Richemont chairman Johann Rupert. “This initiative brings together a powerful combination of highly complementary strengths – notably with our Maisons’ luxury retail expertise and Yoox Net-A-Porter’s deep brand partnerships, expert curation and exceptional customer care – that will help us deliver a seamless omnichannel experience to our discerning clientele.”

Alibaba and Richemont said they would explore additional opportunities to work with Farfetch to offer services to luxury brands.

The investments put Farfetch at the centre of a joint luxury New Retail strategy in China to serve the needs of luxury businesses by leveraging both Farfetch’s and Alibaba’s omnichannel retail technologies. Once in place, through a single integration, luxury companies will be able to pursue their own single brand or multi-brand distribution strategy through ecommerce web sites and apps, omnichannel retail technology, and access to Farfetch and the Tmall Luxury Pavilion.