Coupang has high hopes for Farfetch and transforming the luxury experience

Coupang, the South Korean e-commerce giant, reported its annual and Q4 results this week with sales and profits both rising. But importantly, it also made some key comments about its thinking around the recent Farfetch buy.

Speaking on a conference call after the results release, founder and CEO Bom Kim said: “Luxury is a very large market segment, and it’s one that hasn’t been captured in any meaningful way by e-commerce players yet. We hope in a few years, we’ll be having a conversation about how Coupang turned Farfetch into a business that transformed the customer experience around luxury fashion, while also providing strategic value for Coupang.”

It’s an interesting viewpoint given how there are currently plenty of established luxury fashion e-tailers out there globally. But Kim is clearly aware of how achieving solid profitability and getting the luxury experience right has been tough for them. The recent knock-down sale of Matches to Frasers Group  and the attempts by Richemont to offload its Yoox Net-A-Porter operation probably support Kim’s view that there’s still more to do in the sector.

Coupang’s $500 million deal for Farfetch certainly raised eyebrows late last year given the Korean firm’s overall mass-market profile. After all, while Amazon (to which it’s often compared) has entered luxury fashion, it’s done so on a much smaller scale than diving right in and buying one of the biggest names in the online luxury fashion segment.

Kim seems to think he can make money from his purchase. And even if Farfetch’s potential isn’t fully realised, he said he thinks the move to buy it “will prove to be a prudent financial decision”.  

He added that “we’re already executing on a plan to make Farfetch self-funding, with no additional investment beyond the announced capital commitment. And we see many paths to making this a worthwhile investment for shareholders.”

And he said the company’s “bar for investments remains incredibly high”. It will “only invest when we have conviction that our opportunities can reach meaningful scale and deliver high returns on capital.”

As for Coupang’s own results, total net revenues were $24.4 billion for the year, up 18%, but they would have been higher without an accounting change. Total gross profit improved 31% to $6.2 billion. Net income was $1.4 billion, and adjusted net income was $465 million.

And for Q4 alone, net revenues rose 23% to $6.6 billion. Gross profit increased 32% to $1.7 billion. Net income was $1 billion, and adjusted net income was $137 million.