TT Vol. 27

Nov 08, 2020

Clockwise from Top.

The big fashion world news this week was from China: leading luxury consignment website Farfetch is entering into a joint venture with Alibaba, China’s leading e-commerce site frequently billed as the “Amazon of China.” As part of the arrangement, Farfetch’s global inventory will be made available on Alibaba’s luxury TMall platform. This will give Farfetch better access to the world’s fastest growing luxury market, and significantly increase Alibaba’s luxury inventory available for sale in China. If this wasn’t already big news, there is more: as part of this arrangement, Richemont (owner of luxury brands like Cartier and Van Cleef & Arpels) and Kering (owner of luxury brands Gucci, Saint Laurent and Balenciaga, among others) will invest a combined $550M into Farfetch. This new arrangement raises a lot of questions. What is to come of Net-A-Porter (NAP), one of the world’s biggest luxury e-commerce sites and owned by Richemont? If I was on the NAP team, I would be pretty disappointed to see my ownership group investing so much money in a rival. It seems to show that Richemont is growing impatient with the losses piling up at NAP, and that it sees Farfetch (which as a consignee, owns little inventory) as the better luxury e-commerce bet going forward. Indeed, Farfetch has seen strong sales during COVID, while NAP has been losing money for years as it scaled. Secondly, Richemont and Kering are typically seen as rival luxury conglomerates, and yet they are both investing significant sums in Farfetch. Could this portend a combination in the future? Their businesses are quite complimentary (Richemont’s strength is in its “hard” luxury business in Cartier, while Kering’s strength is in ready-to-wear brands like Gucci and Saint Laurent). I would imagine Bernard Arnault, the head of rival luxury conglomerate LVMH, sees this as a shot across the bow. Above all, it certainly cements the idea that Europe’s luxury brands are focused on winning the battle for China and its growing affluence.

Salem’s New Album “Fires In Heaven”

This week has lent itself to a lot of Twitter doom scrolling. Fires In Heaven, the new album from witch house pioneers Salem, was the perfect soundtrack. Their best known song is King Night from 2010, which rocketed them to notoriety in the music world, and led to Jack Donoghue working as co-producer on Kanye West’s Yeezus album. The duo took a 10 year hiatus between its last album and this new release. It’s unclear what was going on for Salem, but given their history (their first EP was called “Yes I Smoke Crack”) I think we can safely assume it was a drug induced hibernation. Fires In Heaven is a really tight, 30 minute mash up of vibey, shoegaze and DJ Screw style chopped hip hop. I especially enjoyed Capulets, sampling Prokofiev’s Dance of the Knights, which is the soundtrack to the famous Romeo & Juliet ballet fight scene and one of our favorite pieces of classical music. More info from Carrie Battan’s excellent piece in the New Yorker is here.

Introducing TT Mart

A small programming note: we are starting to catalog some of the specific products we have recommended here in something we are calling TT Mart. You can click through each item and purchase on the individual retailer’s site should you so choose! We’ll continue to add to this over time, and hope you find it useful for holiday gift giving. And if you have any recommendations for us to add, give us a shout! We are of course always looking for new goodies to test out.

GucciFest Coming This November

As leading design houses announced plans earlier this year to deviate from the traditional fashion calendar, we are starting to see this come to fruition. Gucci announced that it will release GucciFest, a seven part film that will be released later this month on YouTube Fashion, Gucci’s own YouTube channel, Weibo, and GucciFest.com. This will be in place of what would have been a traditional runway show, and seems to be a much more polished, thoughtful marketing exercise than some of the slapdash digital presentations that were hurriedly put together over the summer. It’s also a big win for Derek Blasberg and YouTube Fashion, as Instagram’s IGTV will not have this content. We’re curious how the budget works for something like this; while organizing a film by a marquee director like Gus Van Sant surely isn’t cheap, we imagine it may, in the end, actually be cheaper than a traditional runway show.

Amazon’s Favorable Supplier Payment Terms

This will probably only appeal to a niche audience, but I found this article on Amazon’s vendor payments incredibly interesting. Typically, companies attempt to pay their vendors within 30 days of receipt of inventory, but given the nature of the fashion industry, that often slips to 30 or 90 days. According to Marketpulse, Amazon’s cash conversion cycle (which is, time to sell inventory minus time to pay vendors) is an astounding -35 days, its lowest in two decades. A negative 35 day cash conversion cycle indicates that Amazon is paid by its customers on average 35 days before it pays for that inventory that was sold to those consumers (compare Amazon’s -35 to +12 for Walmart, +4 for Costco, and +71 for Macy’s). This shows not only that Amazon is selling inventory at a lightning quick pace, it’s also lengthening payment terms with vendors. As noted in the article, Amazon is essentially using its suppliers as banks; rather than borrow money from banks to pay suppliers while waiting for inventory to be sold, Amazon is taking inventory with longer and longer net terms, obviating the need to borrow. Given the scale of Amazon, suppliers will be hard pressed to demand pre-payment from Amazon, and will likely be stuck waiting longer and longer to be paid.