Neiman Marcus Gets $200 Million Investment From Farfetch
Farfetch to power online expansion of retailer’s Bergdorf Goodman brand overseas, while Neiman aims to put some brands on luxury platform
Online luxury retail platform Farfetch Ltd. is investing $200 million in Neiman Marcus Group, in a deal that shows how much the internet has upended luxury fashion.
The agreement initially will allow Neiman Marcus’s Berdgorf Goodman brand to expand overseas digitally by using Farfetch’s technology to power its digital business. The ultimate scope is far broader. Neiman Marcus is considering making some brands it carries—with their permission—available on Farfetch’s marketplace, the companies said. Eventually, Farfetch will use its technology to link Neiman Marcus’s stores more closely with e-commerce by arming sales people with technology that enables them to recognize online shoppers when they enter stores.
“We believe luxury customers will always want the opportunity to have a physical interaction with a human,” said Neiman Marcus Chief Executive Geoffroy van Raemdonck. “We are taking the best components of Farfetch and Neiman Marcus to enhance the experience.”
It wasn’t long ago that Neiman Marcus was the company making investments in a wired future. It bought online luxury retailer Mytheresa.com in 2014.
Behind the glitter, Neiman Marcus struggled under $5.1 billion in debt from two successive leveraged buyouts. When the Covid-19 pandemic temporarily shut its stores, the company tipped into bankruptcy in May 2020.
It had spun off Mytheresa in 2018, putting it out of reach of creditors, who waged a two-year campaign to win back the asset. An agreement was reached as part of a bankruptcy deal, and Mytheresa went public last year.
Neiman emerged from bankruptcy in September 2020 under new owners, including Pacific Investment Management Co., Davidson Kempner Capital Management LP and Sixth Street Partners LLC. Farfetch will hold a minority stake in the company, which now has $1.1 billion in debt.
Farfetch Chief Executive José Neves, a Portuguese businessman, started the company in 2008 as an online marketplace that matches buyers with sellers. It has evolved into a provider of e-commerce technology for luxury brands, including Chanel and Harrods, the British department store. It also owns Browns, which operates two luxury boutiques in London, and Stadium Goods, a sneaker and streetwear retailer and marketplace.
Based in London, Farfetch went public in 2018. For the year ended Dec. 31, it earned a profit of $1.47 billion on revenue of $2.26 billion.
In 2020, Farfetch formed a partnership with Chinese e-commerce company Alibaba Group Holding Ltd. and Swiss conglomerate Compagnie Financière Richemont SA, which owns brands from Cartier to Chloé, to provide luxury brands with greater access to the Chinese market and speed the digitization of the luxury industry.
Farfetch and Richemont, which also owns the online fashion retailer YOOX Net-a-Porter Group S.p.A, are in talks to expand their partnership, the companies have said.
The deal with Neiman Marcus will give Farfetch a foothold in the U.S. For Neiman Marcus, the partnership will make its brands more accessible to international customers, the retailer said. It operates 37 Neiman Marcus department stores and two Berdgorf Goodman stores in the U.S. but doesn’t have any locations overseas. It scaled back online operations in China in 2013.
Mr. van Raemdonck said that to bring the Bergdorf Goodman brand to shoppers around the world requires a host of capabilities from translation to payments to call centers. “All of that will be provided by Farfetch,” he said.
Neil Saunders, managing director of research firm GlobalData PLC, said aligning itself with Farfetch will also give Neiman Marcus access to younger customers and help it transform its digital business faster.
Rival Saks Fifth Avenue last year split its e-commerce and stores into two separate companies in a bid to become more competitive online.
Mr. Neves said that despite Farfetch’s push to digitize luxury, the experience doesn’t always translate well on the internet. “There is an element of physicality and human relationship to luxury shopping that cannot be replicated online,” he said.
Mr. Neves estimated two-thirds of luxury purchases will be made in stores for the foreseeable future. He said he wants to reinvent the store experience by adding more digital elements.
Mr. van Raemdonck recently toured Browns in London, where Farfetch has been putting some of its ideas into action. An app lets salespeople recognize shoppers when they enter the store and gives them access to their browsing and purchase history.
“Otherwise, when you enter a store, no one knows you, and they don’t know what you’re looking for,” Mr. Neves said. “We’re trying to elevate the experience without removing the human element.”