The announcement that online luxury fashion platform Farfetch has acquired CuriosityChina, a digital marketing agency that works with luxury brands to gain direct access to Chinese consumers, should be of little surprise. Farfetch sold a significant minority to Chinese e-commerce giant JD.com last year for $397m with the specific aim of expanding its Asian presence. Further Asian acquisitions were inevitable, especially given only 10% of Farfetch’s current revenues come from China. What the deal does highlight is the notorious difficulty of Western brands to execute a China strategy, despite knowing it's where the money is.
The global luxury goods market is worth a reported $955bn, with China representing the second largest luxury market and the fastest-growing market for luxury purchases. Yet gaining access to Chinese consumers and influencing their purchasing behaviours is a highly difficult task. Business practices and digital technology is radically different (just ask Uber), meaning in order to execute a Chinese channel strategy and communicate directly with Chinese consumers, more often than not acquiring local expertise is the only solution.
Farfetch’s purchase of CuriosityChina is the perfect example. The business connects 80 luxury and premium brands wanting to expand into China or influence Chinese consumers whilst travelling the globe. It does this by helping them establish WeChat stores – and in doing so gaining access to over one billion active users. “With this partnership, Farfetch can now provide plug-and-play access for luxury brands to expand rapidly in China via an integrated platform servicing Chinese consumers via web, app, WeChat store and mini-programs,”, according to José Neves, Farfetch’s founder.
The ability to influence the purchasing behaviour of Chinese consumers using their own digital channels is not limited to domestic spending. Accessing WeChat should be a focus of any Western company trying to attract Asian consumers, even if they are only interested when they are on holiday in the West. Giorgio Belloli, Fafetch’s chief commercial and sustainability officer, echoes these thoughts, arguing ‘’Chinese customers are the biggest part of the consumer of luxury fashion. They don’t just buy in their market. They are buying in London – they are on WeChat when they are in London’’.
Given the inherent barriers to entry from a technology and cultural perspective when gaining access to Chinese consumers, combined with with the scale of the opportunity by reaching just a fraction of such a huge market too good to ignore, I expect we will see a host of similar deals in the fashion and apparel space in the next few years.
Fashion “unicorn” Farfetch has acquired digital marketing agency CuriosityChina in a bid to boost its presence in the world’s second-largest luxury market.