The grey market for luxury watches is fed by an imbalance in supply and demand in different regions of the world. Oversupply in one area pours into countries with pent up demand, often at destructively discounted prices.
Farfetch thinks it can solve that problem for watches in the same way that it is managing for fine fashion, but is facing significant structural challenges, as Rob Corder discovered in conversation with the ecommerce giant’s vice-president commercial and watch supremo Stephen Eggleston.
WatchPro: Take me back to the beginning of Farfetch so that we can put the company today into some sort of context.
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Stephen Eggleston: Farfetch was founded in 2008 by José Neves and current chief technology officer Cipriano Sousa, who had the idea of creating a platform for the global luxury industry. They saw a massive opportunity to connect disparate stock sitting all around the world with a global luxury audience. They wanted to break down some of the supply and demand barriers that had existed in the luxury space for an awfully long time.
José felt the way to do this was to develop a marketplace platform. His aim was to help customers by curating the experience and taking control of every element of the customer and the seller experience. He saw three things in the luxury fashion industry at the time that pointed to imminent change. First, he thought that the internet was going to disrupt the luxury fashion industry in fundamental ways over time. The fashion industry then was like the watch industry today, which has barely started on the same journey. Secondly, he thought the luxury sector would need a platform that aggregated stock and would provide a breadth of product selections that could not be found anywhere else and could be presented in a beautiful and intelligent way that would inspire people to buy. Thirdly, he thought that traditional marketplaces, which had been around for quite a long time by 2007, were not suited to serving the luxury end of the industry where we are competing on more than just price. There is emotion, history, craftsmanship, stories to tell. You have to get these things right if you are going to persuade somebody to part with thousands of pounds for a dress or watch.
He turned these thoughts into a business that started in 2008 and has been growing rapidly for the past 10 years. Today Farfetch.com sells products from about 50 countries to customers in around 190 countries. We have over 1000 suppliers ranging from multibrand independent boutiques to luxury brands that supply us directly including the likes of Gucci, Prada and Burberry. Most recently we have started working with large department stores as well, such as Harvey Nichols and more recently Harrods.
WatchPro: Was it only last year that you added luxury watches and fine jewelry?
Stephen Eggleston: Yes and no. We had jewelry and watches before last year, but it was 2018 when we decided to create a specific category focus around that sector. Obviously there are a number of the fashion brands — for example Gucci — that have their own jewelry and watch lines, and these were already selling on Farfetch. What developed last year was the fine watch and jewelry offering.
This was a relatively simple decision for us because of the potential size of the market. Plus we know our customers are buying these products and we want Farfetch to be a place where they can buy everything that they want. Finally, we see huge potential in the categories. While the watch sector is not in the same place as fashion in terms of digital penetration and online shopping, we feel the industry is heading that way at its own pace and digital touch points are rapidly developing for customers. We want to be part of that digital journey.
WatchPro: Do you think that the resistance you faced in the early days with fashion brands is similar to what you face now with watch brands?
Stephen Eggleston: We do not know how quickly watch brands will move, but the position is very similar to what José faced in the early days. Brands are reluctant and hesitant. They understand digital in different ways. Most of the watch brands I speak to, certainly the big watch groups, understand the importance of digital and ecommerce. They all know is it crucial to their future, they are just not sure how they are going to embrace it and work with it rather than fight it.
Some brands we speak to cannot wait to do more online, others tell us that they love Farfetch, but are not ready to sell online yet. Any yet, if you search for the brands that say they are not ready for online — and I don’t think I need to name names — you find them available to buy online in 10 different places in a totally uncontrolled way. It is all out there: grey market, certified pre-owned and brand new watches sold directly by retailers.
Brands need to start taking more control of this. Ecommerce is inevitable.