Farfetch’s Jose Neves urges against luxury discounts

Chief executive officer and founder of Farfetch Jose Neves advised
luxury brands to stop offering discounts at department stores. Neves
shared this advice with a gathering of c-suite level executives at the
New York Times International Luxury Conference, which took place in
Hong Kong last week.

Neves argued that the common approach of department stores to offer
frequent sales and promotions to entice consumer interest doesn’t
benefit brands in the luxury realm that base their value on high
prices and the factor of exclusivity. According to Neves, luxury
brands often ask department stores to stop discounting their items,
though these requests typically go unheard by the retailers. Neves’
suggestion is that luxury brands should take a stand to ensure their
products don’t see frequent discounting.

“While it makes sense to offer consumers the occasional well-timed
promotion, the discounting season has widened from just a few times a
year to close to ten months a year,” Neves said.

The Farfetch founder suggested brands consider converting online
wholesale relationships to concession models that allow the brands
autonomy on how their items are distributed and priced within the
department stores.

While department stores likely rely on sales and discounts to pique
consumer interests on high-priced luxury items, Farfetch’s sales have
proven that there is are consumers willing to pay over two thousand
dollars for a handbag. The digital retailer announced its third
quarter earnings earlier this month, which displayed a gross
merchandise value of 306 million dollars. The retailer’s active
consumers also increased by 42 percent to a total of 1.2 million.
Farfetch has quoted data from global consulting firm Bain & Company
that estimates that 85 percent of the sales growth in the luxury
fashion market last year came from millennial and Gen Z consumers. If
luxury brands heed Jose Neves’ advice, they will likely have success
in this large market of consumers willing to pay top dollar.