(Reuters) – Alibaba Group Holding Ltd 9988.HK And Swiss group Richemont CFR.S Online luxury fashion retailer to invest $ 1.1 billion in Farfac Limited FTCH.N And its new market in China, in the form of online demand for luxury goods in the Asian country.
Alibaba said on Thursday that it will launch the Farfach shopping channel on its e-commerce sites Tamel Luxury Pavilion and Luxury Soho, while the newly formed Farfach will also invest in China along with Rickmont.
Meanwhile, Farfetch will cease operations with JD.com 9618.HK, According to a source with knowledge of the case, after receiving investment from Alibaba and Ricmont.
JD.com and Farfetch reached a strategic partnership in 2017, with JD.com investing $ 397 million in Farfetch. In 2019, Farfetch merged its China sales platform with JD.com and its store on the Chinese platform is still operational.
The source said that JD.com will remain as a shareholder of Farafek even after the end of their partnership. JD.com did not immediately respond to a request for comment.
Farfach’s shares jumped nearly 11% in pre-market trading.
The Chinese luxury market, which is expected to account for half of global luxury sales by 2025, has seen a strong recovery this year as shoppers coming out of the COVID-19 lockdown splashed online or in stores.
Versace owner Capri Holdings Ltd CPRI.N, Coach Owner Tapestry Inc. TPR.N And Louis Vuitton parents LVMH LVMH.PA There are some companies that have been able to spew mud after lockouts in global fashion capitals as demand has increased in China.
Alibaba and Requiem invested $ 300 million each in Farfetch, and $ 250 million each for a 25% stake in the joint venture that would include Farfac’s market operations in China.
The new collaboration with Alibaba will enable Farfac to expand its reach to Alibaba’s 757 million consumers.
Separately, controlled shareholder of Artemis, Gucci-owner Kering PRTP.PA, According to a joint statement, plans to increase its stake in Farfetch.
Rickmont posted an 82% drop in net profit for the six months to Friday, September 30.
Reporting by Nivedita Baloo in Bengaluru, Sophie Yu and Brenda Goh in Shanghai; Editing by Mark Potter