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LISBON - It’s the end of an era and a moment of mourning for corporate Portugal. On Thursday, José Neves was ousted from Farfetch, the marketplace he founded in 2007 after it was acquired by Coupang, a South Korean marketplace and fast delivery company. Around half of Farfetch’s executive team resigned and the rest are expected to leave in the next few weeks or months, sources close to the company said. Neves continues to act as a consultant for Coupang.

The management exodus comes as Farfetch is slashing up to 30 percent of its workforce, or around 2,000 people, starting with more than half of that number in Portugal, Neves’ homeland and where the company has the most staff. Farfetch employs more than 6,000 worldwide (after a peak of 6,800 end-2022) and between 3,000 and 4,000 in Portugal. It nearly doubled its workforce in 2021 and 2022 after the pandemic-led boom in e-commerce.

The collapse of Farfetch and the resignation of Neves, one of the southern European country’s most prominent company leaders, has shaken corporate Portugal. Farfetch’s hiring spree made it impossible for other companies in Portugal to hire software developers and IT specialists. Many of them were corralled by Farfetch, which offered attractive terms and share rewards. Now they will be free to join other companies but as many of them will land on the job market at the same time, they may be scrambling to find work. Video calls with people being fired at Farfetch started on Friday, Portuguese media reported.

A NATIONAL HERO

Neves’ exit dominated the headlines in Portugal, where he was considered a national hero particularly among the younger generations. Farfetch was the country’s first unicorn, or a company worth more than €1 billion. Neves was awarded many medals and prizes by politicians who used Farfetch to promote Portugal as an attractive country for setting up businesses.

Portugal counts now just a handful of unicorns, including Sword Health, a company that provides virtual and digital physical therapy. “At Sword, it’s thanks to Farfetch’s example that we started to believe in the possibility of creating a billion-dollar company,” Sword Health CEO Virgilio Bento commented on LinkedIn in reaction to Neves’ exit from Farfetch. In spite of what happened, he said Portugal had to be grateful for what Farfetch had achieved. In the past few days, LinkedIn has been inundated with comments from people praising Neves’ leadership and vision, even though, ultimately, he destroyed his own company.

Had Neves moved to a chairman position nine months ago and appointed a CEO who would have made some order and cut losses, Farfetch could have been saved, several former Farfetch managers told Miss Tweed under condition of anonymity. But Neves did not want to give up control – as often happens with founders of a company.

“Neves was a great visionary, but the market wanted execution and focus on profitability which he never delivered,” a former senior Farfetch manager told Miss Tweed. “Many executives have left already but the entire executive team eventually will leave, it’s just a matter of time.” The reason is cultural. The company’s managers believed in Neves’ vision and the Farfetch he built. They are not ready to be bossed around by South Koreans who have already made clear that maximizing revenue was the focus, not building the Farfetch brand.

Farfetch was worth as much as $21 billion back in February 2021. It saw its entire market value wiped out after the company was delisted from the New York Stock Exchange at the end of December. The deal with Coupang became effective on Jan. 31. All shareholders, including Neves, Farfetch staff, Cartier owner and former business partner Richemont and Artemis, the Pinault family investment company, lost their entire investment. Chanel, which was once a Farfetch shareholder, sold its stake in 2022, sources close to the company have said. Chanel adopted Farfetch’s Store of the Future technology for some of its flagship stores. It’s not clear what will happen to that relationship.

INVESTIGATION

“There are a lot of people who are angry at José,” a former senior Farfetch executive told Miss Tweed. “I think José will be spending the next few years in court.” Neves did not respond to emails from Miss Tweed asking for comment.

Investors want to understand how it’s possible that, in August 2023, Farfetch told investors it had sufficient funding and the company was doing well and four months later, it escaped bankruptcy by being acquired by Coupang in a deal put together in 10 days. Farfetch bondholders are planning to take legal action to try to get some of their money back. The Securities and Exchange Commission, the U.S. stock market regulator, has declined to confirm whether it had launched an investigation into what happened.

“I don’t think anybody did anything illegal but there were clearly some issues regarding transparency about the company’s numbers and performance,” one former Farfetch manager said.

Now that the deal with Coupang has been closed, Farfetch will be able to go ahead with the sale of some of its prime assets, including New Guards Group (NGG) which owns the license for several fashion brands including Off-White and Palm Angels. For sale are also the Reebok distribution business in Europe, the sneaker resale website Stadium Goods and the London multi-brand boutique Browns. These businesses are not strategic for Coupang.

Italian private equity firm Style Capital is in talks to buy NGG while British retailer Frasers Group is interested in acquiring Browns, industry sources have said. Frasers Group bought online fashion retailer MatchesFashion in December, hours after the Coupang deal was announced, a deal Miss Tweed was first to report.

For now, Farfetch’s Group President Stephanie Phair is still in place and will remain so for the foreseeable future, sources close to the company said. Phair is also chairman of NGG, which is a company based in Italy. She has to stay put until NGG is sold. “I am delighted to confirm that I will continue in my role as NGGH (NGG Holdings) Chair and I am dedicated to serving the business and supporting the teams,” Phair wrote in an email to NGGH staff on Thursday of which Miss Tweed obtained a copy. “It is undeniably an unsettled time for us and in the industry,” she stated in the note. “But there are also a lot of positives that we should celebrate – the Off-White appearance at the Super Bowl half-time being just one example.”

Farfetch bondholders are hoping to force Coupang to give them some of their money back once the company raises funds from selling various assets, as Miss Tweed reported last month.

“The entire multi-brand Internet ecosystem is in a state of flux,” one senior fashion executive told Miss Tweed on Friday. “Neves did not only run his company to the ground, he actually killed the reputation of the digital channel.” The clear winner, industry insiders say, is online fashion retailer Mytheresa, as Miss Tweed reported in a deep dive analysis of the industry published last year before Farfetch’s woes became public. Mytheresa targets mainly affluent customers who can afford the online retailer’s carefully curated looks in spite of the tough economic environment.

More than 500 Italian multi-brand boutiques sell stock on Farfetch. During the crucial holiday shopping season in November and December, they were afraid they would not get paid by Farfetch for the clothes they sold on the marketplace during that period. Had that happened, some of them would have gone bankrupt, several industry sources said. In the end, they were paid. This highlights to what extent Farfetch plays a central role in the fashion retail ecosystem.

Most of Farfetch’s partner brands and retailers are in a “wait and see” mode, industry sources say. As of now, only Gucci owner Kering has stopped working with Farfetch’s platform on a concession model. Other groups or major brands could follow suit. Customers for now do not see the difference. Products by Kering brands such as Saint Laurent, Gucci and Balenciaga continue to be sold on the Farfetch marketplace by wholesalers, not by the brands themselves. Kering co-CEO Jean-Marc Duplaix told investors last week during the group’s annual results presentation that the group had done “a recent internalization of some e-tailers’ accounts” but stopped short of referring to Farfetch by name.

Earlier this month, U.S. retailer Neiman Marcus Group announced it had abandoned plans to use Farfetch’s e-commerce software to power Bergdorf Goodman’s online storefront and mobile application. It’s not clear if Harrods, which uses Farfetch’s technology, will continue working with the company. Harrods and Neiman Marcus did not reply to requests for comment.

THE ESTHE, NEVES FAMILY’S NEW STARTUP VENTURE

In an interesting twist, José Neves’ wife Daniela Cecilio Neves is actively promoting her fashion brand The Esthe, which launched in London in December, just days before the collapse of her husband’s company. The Esthe has already received prominent reviews from various publications including Another and the Financial Times’ HTSI(How to Spend it) magazine, which published a feature on the brand on Feb. 14.

“The living room in Neves’ South Kensington stucco house, with soaring ceilings, parquet floors, abstract artworks and curvilinear Mario Bellini sofas, serves as an ideal improvised showroom,” the luxury supplement of the FT paper said about José and Daniela Neves’s house. “The clothes, meanwhile, made with ethereal linens, Brazilian organic fabrics and UK-made underpinnings, are cool. There’s a dash of Vionnet via Calvin Klein and John Galliano in the many iterations of slip dresses and the languid air of Daisy Fellowes in the silhouettes.”

Daniela, with whom José has two children, helped build Farfetch in Brazil and worked for the company a few years before she founded a mobile application called ASAP 54, that was meant to be for fashion what Shazam was for music. As she struggled to monetize her application, she transformed it into a shopping concierge service which Farfetch acquired in 2017 for $2 million in shares. It was integrated into the website’s VIP proposition.

José and Daniela have been the target of much flak on social media, so much so that Daniela had to make her Instagram private and close some accounts, sources close to the former power couple said. Not easy to launch a fashion brand when your husband is being accused of mismanagement and massive value destruction.

José Neves sold $10 million worth of Farfetch shares in 2022. Some of that money may have helped finance the launch Daniela’s fashion brand. The Esthe is still a tiny brand, but it may help the 49-year-old Portuguese entrepreneur think about something else than the messy court cases in which he is inevitably going to be stuck for quite a while.