José Neves begins each day with Buddhist meditation. “I’ve been meditating since I was 13, when I wouldn’t code,” says the founder of Farfetch, an online luxury fashion marketplace. “Neither of them made me popular in school.
Neves, now 47, started Farfetch two weeks after Lehman Brothers collapsed in 2008. It started with a handful of programmers and operations staff in a cramped office in London’s Clerkenwell district.
The company gained ground by first attracting small boutiques in need of an online presence and then, when it reached critical mass, by using its size to attract brands such as Chanel.
Farfetch is now a global company, listed on the New York Stock Exchange, with more than 5,400 employees and more than 1,300 salespeople, but there have been obstacles in the way.
London remains Farfetch’s home base, but there are now large offices in Portugal, Neves’ homeland, as well as China, Italy, Brazil and the United States. In 2018, the company launched an initial public offering in New York, trading 42.3% above the offer price on day one and valuing Farfetch at more than $ 5.8 billion.
Then, in August 2019, Farfetch announced the $ 675 million acquisition of New Guards Group, owner of high-end streetwear brands such as Off White, to form the basis of a own-brand platform that would fuel new brands sold exclusively on the Farfetch market. The ad sparked a sell off, the share price 40 percent plunge in one day.
Neves admits that at the time, he didn’t explain the strategy well enough – which he compares to Netflix’s getting into the production of original content. “It’s our role to communicate,” he says.
When Covid-19 emerged, investors backed down to a retail outlet offering a non-essential product. The stock price, which hit $ 28.45 on the first trading day, fell to $ 7.05 in March 2020.
“I experienced all the emotions you can expect, from surprise at the reaction of the markets to disappointment on our part that we were not able to get the right message across,” says Neves.
“For me then it was about moving from that emotional state of ‘OK, it happened, it was disappointing, it wasn’t what we expected’, to ‘what are we doing at this topic?’ “
We speak inside Farfetch’s headquarters, a glass tower in Old Street overlooking Silicon roundabout.
Neves arrived in a cab from his home near Regents Park, carrying an iced coffee from Starbucks while office cooking is still off-limits.
“We only reopened this office last week,” he says, adding that all employees have been retained and have worked from home throughout the pandemic. This includes staff at Browns, the fashion boutique that opened in Mayfair in 1970 and which Farfetch acquired in 2015.
“We’ve always said that the biggest problem for us is attracting talent, so we don’t want to lose people,” he says. “But we didn’t put anyone on leave and we didn’t claim any benefit from the government to pay them. We didn’t even have to cut bonuses. I am very happy that thanks to the efforts of everyone in the company, we can afford to do this. “
In 2019, the building was packed to capacity as employees gathered to hear Neves update them on the controversial New Guards acquisition. All Farfetch staff were named shareholders during the IPO and Neves holds a town hall after any market announcement. This was particularly well attended, he says.
“Communication at such times is very important and the message was very clear: we don’t exist to please shareholders. But our responsibility is to be very humble and explain to our shareholders, listen to them, and then do the right thing.
He thinks the reaction, or rather the lack of action, from employees – almost all of them held onto their stock rather than selling it after the New Guards announced – was proof the message was the right one. “I think people were galvanized. They said, “Let’s prove the short sellers wrong.”
After speaking to the workforce, Neves went to explain the strategy to the portfolio managers of one of its major shareholders, T Rowe Price.
“At the end of the meeting, one of these PMs led us to the door, which is very unusual,” Neves recalls. “He said, ‘Look, I don’t remember any company that did that. When that happens, normally people put their heads in the sand, they disappear. And we were surprised that you wanted this meeting. We were curious. What is he saying here? It was really good. It makes us believe in the company even more.
There was also a strategic reason for the meeting. “It served us again to keep our cool,” says Neves. “Our reaction was, let’s take a deep breath. We have the trading data every hour. Most importantly, our decision was to support the creative community.
In March 2020, as the global pandemic was setting in, Neves assembled his team of executives to create a campaign for small businesses selling luxury goods, with the tagline #supportboutiques.
It was launched a month later, with Farfetch offering free shipments to its retail customers from the company’s six regional distribution centers, as well as an advertising campaign using the hashtag #supportboutiques.
The recovery in luxury sales in the following months more than offset the costs of the campaign, says Neves, as well as the goodwill of Farfetch’s global customer base.
Three questions to José Neves
Who is your leadership hero?
I should choose Gandhi simply because of his ability to bring people together and resolve conflicts with a commitment to zero violence.
What has been your most important leadership lesson?
Being open-minded is the most important leadership lesson because I don’t think there is one style of leadership that works for everyone. Every business needs a different type of leader. But even in a company with a specific leadership style, that leader has to adapt. There are times to be more assertive, there are times to be more collegial, there are times to be a leader on the human side of things, there is a time to be a leader on the performance side, so it shouldn’t be either of those things, but have the humility to keep changing.
What would you do if you weren’t the founder of Farfetch?
When I was little I wanted to be an astronaut, but Portugal doesn’t have a space program, so I quickly realized that was not going to happen. Now that it’s possible, I’ll wait until the prices drop and the technology is a little more reliable or at least tested and proven. I’m not afraid of a little turbulence in planes, but rockets are totally different.
Revenue in 2020 rose 60% to $ 1.67 billion, although the pre-tax loss fell from $ 372 million to $ 3.35 billion. Neves says this year’s growth, driven by the growth of the online luxury market, will see Farfetch record its first annual profit in 2021.
The company also strengthened its position at the end of last year with a $ 1.1 billion in investment Chinese e-commerce company Alibaba and Swiss luxury goods group Richemont.
Farfetch is also betting that brick-and-mortar stores will always remain essential for sales of luxury goods. In April of this year, Browns opened a new flagship store in London, mixing cutting edge technology, such as augmented reality in the store’s mirrors, so you can see yourself wearing clothes for sale, with a luxurious refit.
“There is still a place for physical retail, but we are digitizing it,” says Neves.
The opening of the new Browns store is an endorsement for London as the base for a luxury brand, although the growth opportunity for Farfetch resides in China, while its capital is sourced from US markets.
“We’re staying in London,” says Neves. “Obviously the fact that the UK is leaving the EU has made it much more difficult with visas and work permits for the people we hire from other parts of Europe. But London is an amazing city and it doesn’t take much to convince people to come from elsewhere to live and work here.
He expects to create more jobs this year as the pandemic has left Farfetch in a much stronger position. “What we said would happen in three, five, maybe seven years was compressed into a much shorter period of time,” says Neves.