market folly

We're posting up notes from the Sohn San Francisco 2018 investment conference.  Next up is Glen Kacher of Light Street Capital who pitched a long of Farfetch (FTCH).


Glen Kacher's Sohn San Francisco Presentation: Long Farfetch (FTCH)

Company

•    Long Farfetch (FTCH), an online personal luxury goods marketplace based in London
•    Marketplace model with 1,000 total suppliers: 40% brands, 60% boutiques

Thesis

•    Complex supply chains and high end brands do not translate well to Amazon’s scale and price driven business mode
•    Compared Neiman Marcus's position in the 1990s as category winner to Farfetch as category winner now in the 2000s
•    Also compared similarities to Zozotown in Japan, whose gross profit as a % of GMV increased over time and took EBITDA margins from 25% to 35%
•    Personal luxury goods market is large and expected to be $450bn TAM by 2025
•    Luxury goods are underpenetrated online versus apparel
•    Farfetch runs a lot of the ecommerce websites for large luxury brands (e.g. Shopify for luxury)
•    Recent margin decline driven by investment in online sizing technology
•    Multiple drivers of success: Increasing TAM (3% to 10%), online penetration (9% to 15%), share of online TAM, take rate increase (from 33% to 38%), and margin expansion (from -19% to 35%)
•    Attractive repeat customer spending.  Initial purchase: $619 on site, in year 5 same customer spent $2,853 annually
•    Believes it is a double over next few years


Be sure to check out the rest of the Sohn San Francisco 2018 presentations.