Why is Farfetch shutting down Beauty business? Details explored

Farfetch is currently one of the leading global platforms in the luxury fashion industry. Although the brand stepped foot in the beauty arena, just a year after its beauty debut, it is now exiting the category.

According to multiple sources close to the brand and its internal documents, the luxury brand will stop selling its beauty products from August 31, 2023. This action by the luxury brand reflects online retailers' difficulties when trying to market and sell beauty work.

Farfetch’s tryst in the beauty space began when the brand acquired high-end beauty retailer, Violet Grey, in January 2022. In April of the same year, the luxury brand debuted its online beauty shop with a curation of prestige brands such as Dr Barbara Strum, Augustinus Bader, and Charlotte Tilbury Beauty.

Farfetch also gained traction for stocking progressive beauty brands, including Simi Haze and Isamaya Ffrench, which challenged prejudiced beauty norms.

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Farfetch's decline in this year's profit is one of the reasons for its exit from the beauty business

Beauty is a wide category with constant innovations and new brands. However, the online marketplace and its retailers have found it difficult to gain traction in the beauty sector, especially in the presence of established players like Ulta and Sephora.

Even brands like The RealReal shut down their beauty vertical recently. This is because consumers tend to be conscious of shopping for beauty products online for the first time as compared to experimenting with new products via offline retail stores.

Many beauty lovers prefer to physically engage with skincare and makeup products in terms of texture, smell, and color before buying them. E-commerce players need to work hard to win over shoppers with loyalty programs and saving schemes, as well as giving them as close to a hand-picked and expert-curated shopping experience as possible.

The luxury brand's beauty endeavor consisted of many cult brands and “Violet Code Approved” brands, which, as the name suggests, are given to label's having Violet Grey’s approval. The VIOLET CODE is a testing process under the Violet Grey community wherein top hairstylists, makeup artists, dermatologists, and celebrity influencers distinguish between the finest beauty products in the world from the products in the market.

However, many brands that were available on the Farfetch platform had been available on other platforms as well. Ransley Carpio, a beauty investor working with e-commerce acceleration platform Front Row, commented on the situation stating:

“Farfetch would have started their beauty offering with the best of intentions.”

He added that while the acquisition of Violet Grey was strategic, Farfetch was lacking beauty authority. Ransley continued:

“An e-concession model in beauty is very difficult, because of tight restrictions and distribution agreements”.

Talking about numbers, while the online beauty retail industry soared high during the pandemic, the luxury brand has been struggling with inhibiting factors such as pared-back demand in the US and inventory management. While the label showcased growth in the first quarter of 2023 with an eight percent increase in revenue to reportedly $556.4 million, the profits narrowed down within a year.

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Farfetch’s decision to exit the beauty division is a testament to the fact that online beauty retailing demands thorough planning and quick adaptability to survive and succeed. Following the label's exit from beauty market, Tim Stone will reportedly join the luxury brand as the company’s new chief financial officer from September 1, 2023, replacing Elliot Jordan, whose departure was announced in February.