Moody’s Investors Service on Tuesday cut its rating for Farefetch’s debt to Caa2, deep in junk territory, and put the luxury marketplace on review for another downgrade.

The credit rating firm cited Farfetch’s deteriorating financial position and grim prospects. Farfetch cancelled its planned earnings results on Nov. 28, after The Telegraph reported that the company’s chief executive José Neves was in talks with  top shareholders, including Alibaba and Richemont, and JP Morgan to take the company private, a move Moody’s attributes to Farfetch’s dwindling cash flow. Farfetch’s share price has fallen to less than $1, a potential hurdle for the company to raise money to keep operating. (Farfetch traded at more than $70 at its peak in 2021). A broader luxury e-commerce slowdown also means the e-tailer likely won’t reach its sales targets for this year.

Moody’s downgrade comes as Farfetch explores options amid its worsening cash position, including tapping existing partners for new investments and selling off assets like its brand incubator New Guards Group, BoF previously reported.

But Farfetch’s ability to secure capital from existing investors remains unclear. Richemont, which invested $1.1 billion in Farfetch in 2020 in partnership with Chinese e-commerce giant Alibaba, has said it does not plan to invest further in Farfetch. A deal to sell a 47.5 percent stake in Richemont’s e-tailer Yoox Net-a-Porter to Farfetch appears to have stalled. Alibaba’s president J. Michael Evans departed Faretch’s board on Nov. 30, inciting more uncertainty about Farfetch’s relationship with Alibaba. The two companies have been in a joint venture in China since 2020.

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Farfetch Seeks ‘White Knight’ to Avert Collapse, Sources Say

The e-commerce giant is seeking a cash injection to avert a collapse that could send shockwaves across the fashion industry. So far nobody has come to the table and time is running out, but founder José Neves may yet have a move up his sleeve.

Zara said on Tuesday it regretted the “misunderstanding” over an advertising campaign featuring mannequins with missing limbs and statues wrapped in white that triggered calls for a boycott by some pro-Palestinian activists.

“Unfortunately, some customers felt offended by these images, which have now been removed, and saw in them something far from what was intended when they were created,” Zara said in a post on its Instagram account.

That account had seen tens of thousands of comments posted about the photos, many with Palestinian flags, while “#BoycottZara” was trending on messaging platform X. Critics said the images resembled photos of corpses in white shrouds in Gaza.

“Zara regrets that misunderstanding and we reaffirm our deep respect towards everyone,” Zara said. Six posts showcasing the campaign were scrubbed from Zara’s Instagram page.

Zara said at the launch of the collection on Dec. 7 that it was inspired by men’s tailoring from past centuries. The photos appeared to show an artist studio with ladders, packing materials, wooden crates and cranes, and assistants wearing overalls.

By Helen Reid; Editors: Andrew Heavens and Kirsten Donovan

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Zara Pulls Advert From Website Front Page After Gaza Boycott Calls

Zara pulled an advertising campaign featuring mannequins with missing limbs and statues wrapped in white from the front page of its website and app on Monday after it prompted calls by some pro-Palestine activists for a boycott of the fashion retailer.

JD.com Inc. founder Richard Liu urged staff to address deep-seated issues within his e-commerce company, in an internal memo that echoed a call to arms issued by Alibaba Group Holding Ltd. founder Jack Ma last month.

Liu was responding to an employee’s post on a JD.com forum over the weekend, in much the same way Ma addressed and amplified an Alibaba staffer’s views about rising competition. The unidentified employee listed a litany of problems from poor merchant support to an overly pricey item list, according to posts confirmed by a JD spokesperson. The billionaire founder, apologizing for typing while in a car, agreed with that assessment and called for change.

“I feel our brother has said it all too well,” Liu wrote. “Every word hit upon the company’s pain points, they’re all existing problems. We need to change, or there’s no way out for our company.”

JD and Alibaba have long been the leaders in China’s e-commerce arena, but have rapidly ceded ground to up-and-comers from PDD Holdings Inc. to ByteDance Ltd.’s Douyin. JD’s shares have slid more than 50 percent this year, outstripping Alibaba’s roughly 19 percent decline and a far cry from PDD’s 75 percent rally.

This month, eight-year-old PDD surpassed Alibaba in market value for the first time to become China’s most valuable e-commerce firm — a wake-up call for the twin incumbents of the country’s online retail arena.

Ma, the once outspoken billionaire who faded out of the spotlight after Beijing targeted Alibaba in an anti-monopoly investigation, broke his silence in November to urge corrective action while lauding Temu-owner PDD.

JD.com is adopting discounts and lower prices to try and turn the tide at a time consumers are cutting back on big-ticket spending. But growth remains anemic as China struggles with an uncertain post-Covid recovery.

“We often say that in battles we should only be the first, but we have always been defensive and never think about how to take the initiative!” Liu wrote.

By Jane Zhang

Learn more:

JD.com Sinks to Record Low as Wall Street Brokers Turn Bearish

The e-commerce giant’s slump reflects concerns that China’s consumption growth will remain sluggish.

At VOICES 2023, BoF’s annual event where global changemakers gather to discuss the industry’s future and critical innovation, Pierre-Nicolas Hurstel, CEO and co-founder of blockchain-based digital product passport infrastructure Arianee, spoke on the mainstage about the positive impacts of tighter supply chain regulation and digital product passports (DPPs).

Arianee launched in 2018 to enable direct and continuous relationships between brands and their end consumers, placing the ownership of data in the hands of consumers with a focus on openness and decentralisation. Arianee creates DPPs as non-fungible tokens (NFTs) backed by blockchain technology, which can be displayed on smartphones or web browsers, creating a digital link between object and user. Arianee works with over 40 brands, such as Richemont, Moncler, Mugler and YSL Beauty and has distributed more than 1.6 million digital product passports.

This is about “intelligence that is not artificial,” said Hurstel. “We have learnt about the damages of user personal data exploitation by big tech and social media. The incentive of social media is the race for engagement — but what about the business model? Selling user data to advertisers to sell more products? And even though we have learnt about the urgent need for circularity and the incredible potential of second hand, not much has changed.”

DPPs can more easily allow customers to authenticate products, transfer ownership and access services like resale and repair. As a result, the digital passport can unlock new means of income for brands, allowing them to explore user data in a safe and effective manner. This can enable lower client acquisition costs and higher customer engagement.

This gives rise to what Hurstel calls “ownership intelligence”, so that “when someone buys and owns the product, [they] collect this passport, collect a piece of data related to the product, that is controlled by the user.”

Understanding how to leverage the opportunities made available by DPPs is timely and soon, business critical, when product passports become a legal requirement on fashion products. In August 2023, the European Commission announced new regulations that will require fashion and other consumer goods to be fitted with unique DPPs as early as 2026.

Now, BoF shares insights from Hurstel’s talk on how brands can effectively leverage DPPs to build consumer trust and data compliance while reducing acquisition costs.

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Enable Direct Relationship While Cutting Acquisition Costs

Product passports can support circularity initiatives like resale and garment-to-garment recycling by providing detailed data on materials, facilitating easier collection and sorting of garments for recycling at scale.

“Many second-hand purchases are the first step into the brand for a user,” adds Hurstel, explaining how some consumers will indirectly buy a brand’s product through resale platforms. “So distributing pieces of data that people can circulate and transfer is a way to be connected to people that are part of the community, that are already consumers, even though they haven’t bought anything first-hand.”

Second-hand marketplace ThredUp estimates that resale will grow 11 times faster than the overall clothing retail sector over the next five years. As a result, connecting with those end-consumers who have bought into the brand universe through different channels, second-hand, can help better target brand marketing spend.

The value for brands over time will come with the possibility to deploy this new data structure and to create new revenue streams based on ownership.

“This will have an impact on the cost of acquisition and the money we spend paying socials and big tech to reach people and reach them again. Then, in a world where every product will come with a DPP, the possibility to one day add royalties on products, [...] would mean tomorrow, revenues coming from something other than selling something new — and something newly produced.”

DPPs can also help cut costs by streamlining the authentication process in resale. Historically a manual process for brands, the digitisation of this process can reduce reliance on authenticator specialists who have been in significant demand on industry jobs boards.

Meet Consumer Expectations on Data Autonomy

In Europe and the US, most websites now prompt users to allow tracking cookies to harvest their data. Yet, some 45 percent of consumers are uncomfortable with sharing their data to create personalised ads, according to a 2022 survey by Boston Consulting Group and Google. It also found that, in online and traditional retail, only a third of consumers reported trusting companies to protect their personal data and privacy online.

BCG and Google’s 2022 survey results revealed that “many consumers are willing to share their personal data with brands, but the majority want a clear incentive (or ‘value exchange’) to do so.” The data revealed about 30 percent of respondents said they are willing to share their email addresses with a given company for no incentive, while 90 percent were willing to share that data when presented with the right value exchange, like discounts and free samples or access to newsletters or communities.

“Collecting data is great, but any piece of data expensively collected is immediately obsolete — it is natively static, so [it is] hard to secure and protect against leaks,” said Hurstel. “People don’t care about sharing their lives on social media or with ChatGPT, but they are less willing to leave their data everywhere because it’s just inconvenient. So, the risk is to see first-party data disappear behind social logins and ‘hide my email,’ and other similar features that will reinforce the need for third-party data.”

“Third-party data is less and less efficient, it’s expensive and the regulator is going after it, and cookies are gone and the side effect of data centralisation by Big Tech has proven to be disastrous for the wider world, that brings me to the [next] challenge — compliance,” he added.

Indeed, since 2018, the European Union has passed data privacy regulations and, in the US, the California Consumer Privacy Act (CCPA) has given consumers more control over the personal information that businesses collect about them. While there is no federal digital privacy law in the United States, except to protect children, the Federal Trade Commission (FTA) is challenging the Big Tech land grab approach in buying up start-up competitors, as demonstrated by their efforts to block Meta’s bid for the virtual reality firm Within last year.

You can add the possibility of ownership intelligence by empowering users with the data they control about what they own.

Hurstel said that, when it comes to DPPs, “the value for brands over time will come with the possibility to deploy this new data structure and to create new revenue streams based on ownership. [...] You have the first-party data — the things you know and collect and that are non-dynamic — and then on top, you have user-owned data that you can read. [...] It’s new possibilities to understand new insights, but also new segmentation possibilities.”

“The client account for tomorrow is completely different,” Hurstel said. “Today, it’s all about purchase and returns. Tomorrow, it’s about what I own; [whether bought secondhand or] gifted; specific services that are allowing me to easily resell, repair, recycle, insure; to have specific recommendations, perhaps specific targeted communications around exactly what I own,” he added.

Prepare for Incoming Regulations While Offering Value

Hurstel explained that ecodesign DPP — a cornerstone of the European Commission’s Ecodesign for Sustainable Products Regulation (ESPR) for a more environmentally sustainable and circular approach to products — is going to ensure brands attach this DPP system to every single object they sell in the EU. This is “with the goal to push users to choose better; to push brands to produce better; but also mainly to push to reuse and resell and recycle.”

In order to implement DPPs, Hurstel explained: “First of all, you need connected components on every single object that can be scannable — QR codes [or near-field communication] NFC chips. To add QR codes and NFC chips at every stage in the supply chain is not easy — it takes time. This QR code will have to be linked to a persistent interface showing data about the product that can last forever — or at least as long as the product lasts.”

While a time-intensive process, this will ensure that brands are able to cross-reference and check compliance quickly and easily as different geographies and jurisdictions evolve their stance on compliance and data protection. Indeed, while the EU will have one set of regulations, California and Japan, for example, might require different information.

“Then, there’s an opportunity to add on top a new kind of data — the customer-owned data, about ownership that is neither centralised by the brand nor by any kind of third-party that would want to make any business on top of it,” said Hurstel. “You can add the possibility of ownership intelligence by empowering users with the data they control about what they own. So, you go from collecting, to being compliant, to truly offering value.”

This is a sponsored feature paid for by Arianee as part of a BoF partnership.

The company is one of many hoping to win over the Indian beauty consumer.

The conglomerate has announced a slew of new moves to increase its penetration in the Indian beauty market. Rizman Mulla, formerly at the Chalhoub Group, has been appointed as business development director for the region, and the company has also signed a partnership with local distribution and marketing firm House of Beauty.

Coty said its India business increased 65 percent in the 2023 financial year, with prestige brands such as Burberry Beauty, Calvin Klein fragrances and Gucci Beauty being particular successes, as well as consumer brands Rimmel and Max Factor. The partnership with House of Beauty will see the companies work together to expand Kylie Jenner’s Kylie Cosmetics to the country with a dual distribution and retail marketing programme.

India’s beauty market is expected to reach $17.4 billion by 2025, according to market research firm Euromonitor. It’s become a lucrative target thanks to rising income levels, and improved internet access which has enabled a new generation of affluent, discerning beauty shoppers to come to the fore.

But Coty is just one of many companies trying to make its mark in the region. In November, local player Reliance Retail announced its partnership with LVMH to take over the operations of Sephora’s Indian business, while Shiseido debuted the cosmetics brand Nars to the region in October.

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Decoding the Indian Beauty Landscape

BoF shares product and consumer insights on the growth potential of India’s beauty and personal care market, from a new report by The Estée Lauder Companies’ BEAUTY&YOU programme in partnership with 1Lattice.