- Farfetch reports quarterly results on Nov. 14
- The online luxury marketplace’s stock has plunged by over 50 percent since reporting larger-than-expected losses in August
- High costs are overshadowing rapid sales growth on the marketplace and at other fashion start-ups
It was only 14 months ago that Farfetch exploded onto public markets with an IPO that valued the fashion start-up at $6.2 billion. Today, the company’s market capitalisation is less than half that, amid growing concerns about how — or whether — the marketplace will eventually turn a profit. Farfetch’s situation isn’t unique; plenty of other money-losing start-ups, from Uber to WeWork, have seen their aura of invincibility punctured this year. However, Farfetch has made some moves investors find questionable, including its $675 million acquisition of brand factory New Guards Group in August. Farfetch earnings come on the heels of The RealReal’s troubles last week, where a surge in revenue and active users was overshadowed by questions about the quality of the resale platform’s much-vaunted authentication process.
The Bottom Line: Every e-commerce start-up dreams of emulating Amazon, which expanded from a bookseller to an “everything store” selling cloud computing and streaming video. As the recent turmoil at WeWork, with its distracting forays into preschools and wave pools, demonstrates, businesses need to show they can get the fundamentals right before branching out.