[A Louis Vuitton signage. Photo credit to Unsplash]

In an unexpected $500 million business deal, Coupang Inc., an e-commerce company in Korea, has acquired Farfetch, a luxury clothing sales platform, potentially establishing Coupang as a leader in the luxury goods market.

Coupang, often dubbed as the “Korean Amazon,” is a dominant electronic retail company located in South Korea.

It provides basic delivery services, video streaming, and payment services in Korea, Taiwan, Singapore, China, and India.

On the other hand, Farfetch is a company that connects luxury brands such as Louis Vuitton, Chanel, and Hermes to consumers online, facilitating the sales of designer clothes, shoes, accessories, etc.

Since June 30, 2023, Farfetch has faced financial challenges due to a slowdown in the luxury industry and a failure to generate expected profit returns from their technology investments.

Many luxury brands specifically refused to sell through e-commerce platforms like Farfetch.

Coupang envisions combining its experience in delivering goods and Farfetch’s expertise with luxury brands to expand the presence of luxury brands in South Korea and revitalize the global luxury goods sales ecosystem.

According to the CEO of Coupang, acquiring Farfetch will help overcome the technological difficulties Farfetch faced by providing tailored state-of-art technology and integrating it with Coupang to better connect with brands on its platform, offering improved overall service.

On the flip side, Farfetch can assist Coupang in expanding its business from selling basic household goods to luxury fashion both domestically and internationally.

According to Digital Commerce 360, an e-commerce research and media company, Coupang may benefit from Farfetch and increase sales by fortifying domestic sales through Farfetch’s influence in the luxury fashion industry.

Speculation suggests that Coupang acquired Farfetch due to its stagnant corporate value, with Coupang’s stock price falling 66% since 2021.

The stock only saw a profit once, rising by 1.92% and stopping at a stock price of $16.46.

Given Korea’s high per capita personal luxury goods consumption, the value of Farfetch is likely to be realized in the market.

While there are existing luxury platforms in Korea like KREAM and Musinsa, acquiring Farfetch, which was once dominant in the luxury market, could help establish Coupang as a global leader in luxury goods.

KREAM and Musinsa offer a platform for individuals to transact luxury goods through careful inspections to ensure authenticity.

In contrast, Farfetch directly links luxury brands to consumers by selling products directly, distinguishing its business model from the prominent luxury platforms in Korea.

In an effort to globalize and maximize Farfetchs’ influence, Coupang plans to invest $500 million to provide technology to exclusive brands, enabling designers to reach consumers around the world.

Coupang’s acquistion of Farfetch is seen as a strategic move to propel the company beyond basic goods markets, aiming to establish itself as a global leader in the luxury goods market.

Experts believe the synergy between Coupang’s technology and Farfetch’s market could revolutionize the fashion market in Korea and position them as leaders in luxury e-commerce globally.

Jeffery Lin, a partner at the communication agency Boh Korea, anticipates that the collaboration of Coupang and Farfetch will create the competition needed to globalize the Korean luxury goods industry.

Mocquee John, founder of numerous internationally successful Korean fashion brands, adds that Coupang’s technology, with its capability for fast delivery times, will aid their success by providing people with easier access to luxury through online venues.