Leading Chinese tech e-commerce and tech company Alibaba Inc. (BABA) and Swiss based luxury goods holding company Compagnie Financière Richemont SA (SWX: CFR) will be injecting a $1.1 billion investment in online luxury fashion retail platform Farfetch Ltd. (FTCH).
Asia online demand for luxury goods has been on the rise forcing Farfetch to create a new marketplace in China. This investment is expected to help the company increase its market share in Asia.
Alibaba announced that it will be setting up shopping channels on its e-commerce shopping websites Tmall Luxury Pavilion and Luxury Soho and together with Richemont they will invest in newly established Farfetch China in a joint venture.
According to analysts, by the year 2025 the Chinese luxury market will be account for 50% global sales of luxury goods. So far the market has been having a relatively stronger growth as shoppers coming from lockdowns and other movement restrictions have been flooding online and physical retail stores.
In the joint venture, Alibaba and Richemont will invest $300 million each and an additional $250 million each. In return both will receive 25% stake in Farfetch each. The stake will be inclusive of newly established Farfetch China.