Farfetch vs Boohoo
Two pureplay online retailers (ok, Farfetch owns a few subsidiaries with physical stores and are moving towards a multi-channel set-up) compared.
We have written about the Farfetch business model previously. Download our report here.
Our view is that Farfetch has too many employees and should rationalise departments and its development base. At close to a third of revenue, Farfetch's salaries are going to weigh on the company for many years to come. The only hope is that they can grow into a $bn business before they run out of cash (they have a decent amount in the bank).
Figures quoted from the latest FY.
One of the good things is that Farfetch's employee growth appears to have stagnated. However, at its current 3,200 staff (not including seasonal and or the many freelancers the company use) it seems well beyond its $602m revenue (GMV).
Farfetch's business model is primarily charging a commission rate on sales and it is not unreasonable that employees will account for a large chunk of costs. However, the business model appears extraordinarily manual at 3,200+ employees.
The company has a large internal IT development team that should be able to automate most of the manual interference or amendments. Or, could it be that luxury consumers demand manual contact?
We have to be doom sayers, however, we would send out a few emails to employment agencies. With the trade war between China and the US taking some of the heat off growth of the Chinese internet companies it could could be useful to look after number one.