Farfetch Ltd (NYSE:FTCH) To End Partnership With JD.Com (NASDAQ:JD) After $1 Billion Investment For Chinese Expansion

Farfetch Ltd (NYSE:FTCH) is terminating its partnership with JD.Com (NASDAQ:JD) following a $1 billion investment from Alibaba Group Holding (NYSE:BABA) and Swiss jewelry and watch group Richemont.

Farfetch ends partnership with JD.com

The online luxury fashion retailer reached a strategic partnership with JD.com in 2017, with JD-com investing $397 million in Farfetch. In 2019, Farfetch combined its Chinese sales platform with JD.com, and its store on the platform is still running. According to a source, JD.com will still be a shareholder in Farfetch despite the termination of the partnership.

The $1 billion investment will help Farfetch expand its new marketplace in China as luxury goods demand continues to grow. As per the agreement, Richemont and Alibaba will invest $300 million each in the fashion retailer and $250 million each for 25% interest in the joint venture. This includes Farfetch’s operations in China.

According to the three-way collaboration, Farfetch will assist upmarket and fashion brands in launching their online stores on Alibaba’s Tmal Global and Tmall Luxury Pavilion. These platforms are already attracting millions of Chinese customers. Currently, Richemont, which owns brands like Van Cleef & Arpels, Cartier, and Chloe, runs a joint venture in China in partnership with Alibaba. For the quarter ended September 30, the company repaired a 2% drop in like-for-like sales.

Chinese market vital for luxury brands

Interestingly China has surpassed the US as the biggest market for Richemont products for the first time. The Chinese luxury-goods market will account for around half of the sales globally by 2025. The COVID-19 pandemic has affected the luxury products industry, with wealthy spenders delaying purchases and travel restrictions, also limiting free-spending Chinese consumers.

The good news is that the pandemic accelerated the shift to digital spending. Therefore the partnership of competitors indicates the desire to dominate the booming online luxury market in China. Pre-pandemic, Chinese customers drove almost 75% of the growth in the luxury goods sector. Most luxury goods brands have managed to offset lockdown-induced slumps as demand in China grew.