Alibaba, Richemont to invest $1.1 billion in Farfetch with focus on China

(Reuters) - Alibaba Group Holding Ltd 9988.HK and Swiss group Richemont CFR.S will invest $1.1 billion (839.1 million pounds) in online luxury fashion retailer Farfetch Ltd FTCH.N and its new marketplace in China, as online demand for luxury goods booms in the Asian country.

FILE PHOTO: Branding for online fashion house Farfetch is seen at the company headquarters in London, Britain January 31, 2018. REUTERS/Toby Melville/File Photo

Alibaba said on Thursday it would launch Farfetch shopping channels on its e-commerce sites Tmall Luxury Pavilion and Luxury Soho, while also investing in newly formed Farfetch China along with Richemont.

Meanwhile, Farfetch will cease operations with 9618.HK, after receiving the investment from Alibaba and Richemont, according to a source with knowledge of the matter. and Farfetch reached a strategic partnership in 2017 that saw invest $397 million in Farfetch. Farfetch merged its China sales platform with’s in 2019 and its store on the Chinese platform is currently still operational. will remain as a shareholder of Farfetch even after their partnership is terminated, the source said. did not immediately respond to a request for comment.

Farfetch’s shares jumped about 11% in pre-market trading.

The Chinese luxury market, which is expected to account for half of global luxury sales by 2025, has seen a strong recovery this year as shoppers emerging from COVID-19 lockdowns splurged online or in stores.

Versace owner Capri Holdings Ltd CPRI.N, Coach owner Tapestry Inc TPR.N and Louis Vuitton parent LVMH LVMH.PA are some companies that have been able to offset slumps following lockdowns in global fashion capitals as demand in China rose.

Alibaba and Richemont will invest $300 million each in Farfetch, and $250 million each for a 25% stake in the joint venture that will include Farfetch’s marketplace operations in China.

The new cooperation with Alibaba will enable Farfetch to expand its reach to Alibaba’s 757 million consumers.

Separately, Artemis, the controlling shareholder of Gucci-owner Kering PRTP.PA, also plans to increase its stake in Farfetch, according to a joint statement.

Richemont on Friday posted an 82% drop in net profit for the six months to Sept. 30.

Reporting by Nivedita Balu in Bengaluru, Sophie Yu and Brenda Goh in Shanghai; Editing by Mark Potter