Keep employees and customers involved in the pandemic

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José Neves starts with Buddhist meditation every day. “I have been meditating since I was 13 years old, when I hadn’t programmed yet,” said the founder of Farfetch, an online luxury fashion market. “None of these made me popular in school.”

Neves, 47, launched Farfetch two weeks after the collapse of Lehman Brothers in 2008. He started with a handful of programmers and operations staff in a cramped office in the Clerkenwell district of London.

The company first attracts small boutiques that need online business, and then when it reaches a tipping point, it uses its scale to attract brands such as Chanel to gain appeal.

Farfetch is now a global company, listed on the New York Stock Exchange, with more than 5,400 employees and more than 1,300 sellers, but there are also bumps on the road.

London is still the base of Farfetch, but now there are large offices in Portugal, the hometown of Neves, as well as China, Italy, Brazil and the United States. In 2018, the company conducted an initial public offering in New York. The first-day transaction price was 42.3% higher than the issue price, and Farfetch was valued at more than US$5.8 billion.

Then in August 2019, Farfetch announced the acquisition of New Guards Group, the owner of high-end streetwear brands such as Off White, for US$675 million to form the basis of a private label platform that will cultivate new brands exclusively sold through the Farfetch market .The announcement triggered a sell-off, and the stock price Plunged 40% in one day.

Neves admitted that he did not explain this strategy well at the time — he likened it to Netflix’s shift to producing original content. “Communication is our duty,” he said.

When Covid-19 appeared, investors were discouraged from retail businesses offering non-essential products. The stock price touched US$28.45 on the first day of trading, but fell to US$7.05 in March 2020.

“I went through all the emotions you expected, from being surprised at the market’s reaction to disappointing at our failure to deliver the right message,” Neves said.

“For me, it was about moving from an emotional state of’well this happened, disappointing, this is not what we expected’ to’what should we do?'”

We talked in Farfetch’s headquarters, overlooking a glass tower in Old Street Silicon Circle.

Neves arrived by taxi from his home near Regent’s Park. He brought Starbucks iced coffee because the office kitchen was still outside.

“We only reopened this office last week,” he said, adding that throughout the pandemic, all employees were kept and worked from home. Among them are the employees of Browns, a fashion boutique that first opened in Mayfair in 1970 and was acquired by Farfetch in 2015.

“We have always said that our biggest problem is to attract talent, so we don’t want to lose talent,” he said. “But we didn’t give anyone a vacation, nor did we ask the government to provide any benefits to pay them. We don’t even have to cut bonuses. I’m very happy that because of the efforts of everyone in the company, we are able to do this.”

Back in 2019, when employees gathered to listen to Neves introducing them to the controversial New Guards acquisition, the building was crowded with people. All Farfetch employees become shareholders at the time of the IPO, and Neves will hold a town hall meeting after any market announcement. He said that this time the attendance was particularly large.

“The communication at this time is very important and the message is very clear: we do not exist to please shareholders. But our responsibility is to be very humble, explain to our shareholders, listen to their opinions, and then do the right thing.”

He believes that the employee’s reaction, or more precisely the lack of action—almost everyone owns their shares, rather than sell them after the New Guards announcement—proves this information to be correct. “I think people are motivated. They say,’Let’s prove that short sellers are wrong.'”

After speaking to employees, Neves explained the strategy to the portfolio manager of one of his largest shareholders, T Rowe Price.

“At the end of the meeting, one of the PMs took us to the door, which was very unusual,” Neves recalled. “He said,’Listen, I don’t remember any company that did this. When this happens, usually people bury their heads in the sand and they disappear. We are surprised that you want this meeting. We are very curious. What does he come here to say? That’s great. It makes us believe in the company even more.'”

There is also a strategic reason for the meeting. “It keeps us calm again,” Neves said. “Our response is, let us take a deep breath. We have transaction data every hour. Most importantly, our decision is to support the creative community.”

In March 2020, as the global pandemic spread, Neves gathered his senior team and launched a campaign for small businesses selling luxury goods under the slogan #supportboutiques.

It was launched a month later, and Farfetch provided its customers retailers with free shipping from the company’s six regional distribution centers and advertising campaigns using the #supportboutiques tag.

Neves stated that the recovery of luxury goods sales in the next few months offset any costs of the event and established a good relationship with Farfetch’s global customer base.

Three questions from José Neves

Who is your leading hero?

I had to choose Gandhi simply because of his ability to bring people together and resolve conflicts through a commitment to zero violence.

What is your most important leadership course?

Open-mindedness is the most important leadership course, because I don’t think there is a leadership style that suits everyone. Every company needs different types of leaders. But even in companies with specific leadership styles, leaders need to be flexible. Sometimes I am more confident, sometimes I am more university, sometimes I am a leader in terms of human nature, and sometimes I am a leader in terms of performance, so I should not be any of these things, but be humble and change constantly.

If you were not the founder of Farfetch, what would you do?

When I was a child, I wanted to be an astronaut, but Portugal had no space program, so I quickly realized that this would not happen. Since it is possible, I will wait until the price drops and the technology becomes more reliable or at least tested and proven. I’m not afraid of a bit of turbulence on the plane, but a rocket is a completely different thing.

Although the pre-tax loss surged from US$372 million to US$3.35 billion, revenue in 2020 increased by 60% to US$1.67 billion. Neves said that this year’s growth will enable Farfetch to achieve full-year profit for the first time in 2021, driven by the online growth of the luxury goods market.

The company also strengthened its position at the end of last year $1.1 billion investment From the Chinese e-commerce company Alibaba and Swiss luxury goods group Richemont.

Farfetch also bet that physical stores are still vital to luxury sales. In April of this year, Browns opened a new flagship store in London, which incorporates cutting-edge technology, such as augmented reality in the store mirror, allowing you to see yourself wearing clothes for sale and luxuriously modified.

“There is still a place for physical retail, but we digitize it,” Neves said.

The opening of the new Browns store is a recognition of London as a base for luxury brands, although Farfetch’s growth opportunities lie in China, and its capital comes from the US market.

“We live in London,” Neves said. “Obviously, the UK’s departure from the European Union makes it more difficult for us to obtain visas and work permits from people employed in other parts of Europe. But London is an amazing city, and it doesn’t take much to convince people to live and work here from other places.”

He expects to create more jobs this year because the pandemic puts Farfetch in a more favorable position. “What we said will happen in three, five or even seven years has been compressed in a shorter period of time,” Neves said.

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