VOGUE and GQ Have "Outsourced" Their Retail Business — Content and E-Commerce Have Never Been This Close

Condé Nast makes the content, Farfetch makes the sales. What could be a more ideal pairing than that?

We just reported that Farfetch is accelerating its IPO process. On the evening of June 13, the London luxury e-commerce company, valued at $5 billion, announced something else: it has become Condé Nast's global content and commerce partner.

Specifically, Condé Nast's site style.com will shut down and send its traffic straight to farfetch.com. Farfetch has also bought style.com's trademark, intellectual property and customer database, though neither side has disclosed the price.

According to Farfetch's own announcement: Condé Nast's editorial content and Farfetch's merchandise will be joined in a "seamless technology collaboration"; Condé Nast will write and curate shopping guides to individual items on the Farfetch platform; and Condé Nast's digital and social platforms will open up a "read-and-buy" function. The partnership starts with VOGUE and GQ in the United States, and will expand from there.

Jonathan Newhouse, chairman and chief executive of Condé Nast International, will also join Farfetch's board. In 2013, Farfetch took a $20 million "strategic investment" from Condé Nast. The change means Condé Nast moves from being purely an investor to a seat in Farfetch's management.

In the press release, Newhouse called the partnership "an industry first." Farfetch founder and chief executive José Neves told The New York Times: "Both sides are very excited, because together we're going to solve a big problem the fashion industry faces: how do you successfully connect content and commerce?"

A few years ago, people still talked about luxury e-commerce as a thing of "the near future," or treated it as a showcase project for "demonstrating brand innovation." Now the business is a prize everyone covets, with luxury conglomerates and media groups alike wanting a share.

Condé Nast president Bob Sauerberg told The Guardian last year that fashion e-commerce "is a $1.5 trillion market that can grow at high double digits every year." And four days ago, when LVMH's own e-commerce site went live, Ian Rogers — who left Apple to become LVMH's chief digital officer — cited a Bain & Company report: "Luxury e-commerce will become the third-largest market after the United States and Japan. So if you want to know 'where is the double-digit growth going to come from? Where is the 30% growth going to come from?' — it's the e-commerce channel."

For now, the players in this market hold different views and are at different stages. Richemont bought British luxury e-commerce company Net-a-Porter outright in 2010, but has only just started building its own digital team. France's Kering set up a joint venture with Italian luxury e-commerce company YOOX in August 2012, dedicated to running the e-commerce sites of Kering's brands. LVMH has not put much money into e-commerce, but this year it launched two of its own sites at once — Clos19, a vertical site selling wine and spirits, and 24 Sèvres, a department-store site.

Net-a-Porter and Farfetch, the two big luxury e-commerce companies, have both been around for more than a decade, and they win on breadth and speed. Yoox Net-a-Porter carries 350 brands, has built seven logistics centers worldwide, covers 180 markets, and guarantees same-day delivery once an order is placed. Farfetch carries more than 3,000 designer brands, employs 1,200 people, and in April launched a "Store of the Future" program — an open operating platform that tracks what customers buy and browse, online and off.

If Farfetch wants to pull in more traffic, jump an order of magnitude in size, and make its brands stand out in a crowded field, content may be its most glaring weakness.

Net-a-Porter had already launched magazines such as The Edit and Porter years ago. Farfetch, by contrast, is better known by its nickname, "the geek company," and has no editorial department of its own. José Neves told QDaily in a 2015 interview: "By the end of the year we'll have 200 engineers. That's an enormous investment. If a company has $1 billion in assets, it might be able to do this, but it also takes a lot of courage and resolve, because many of these companies are publicly listed."

Since 2014, though, Farfetch has been spending more on content. In October 2014 it released an app called Farfetch Discover (iOS version), pitched as a "travel shopping guide" that recommended boutiques at a traveler's destination and regularly featured editor-picked shops, with a built-in Google map to locate both the traveler and the stores.

In March this year, Net-a-Porter founder Natalie Massenet announced she was joining Farfetch as non-executive president, a move also read as an important step toward strengthening Farfetch's content. But according to what Neves told The New York Times, she would not be working with Condé Nast's artistic director and editor of American Vogue.

"I can't think of a better moment than now. Condé Nast is the leading company in luxury fashion content, and we're one of the leading companies in luxury e-commerce. To us this already looks like a match made in heaven," Neves said.

For Condé Nast, however, partnering with Farfetch also means admitting that its own e-commerce experiment, which cost as much as $100 million, has failed.

Luxury advertising has long been one of the steadiest revenue sources for traditional media groups. But according to a report from the research firm Tribe Dynamics, the luxury industry spent $1 billion on digital advertising in 2016, up 63% from 2013, while print advertising over the same period fell 8%. For every traditional magazine publisher, then, the pressing question is how to build a new revenue structure as social media bites and the advertising industry shifts.

Take Hearst. Its experiments include selling fashion items directly from online content such as Harper's Bazaar and ShopBazaar, and building its own offline stock points and e-commerce sites. The Japanese edition of Elle even has a store under its own name.

But no media group's e-commerce experiment has drawn more attention than Condé Nast's.

According to The Guardian, Condé Nast has put £75 million into e-commerce (about 614 million yuan). Over the past few years, the sites it has invested in include Britain's Farfetch, the French company Vestiaire Collective, and the German companies Renesim and Monoqi.

At the end of 2013, Condé Nast also set up a separate e-commerce department and poached Franck Zayan, e-commerce director at Galeries Lafayette, to run it. In 2014 it merged its magazine Lucky with the e-commerce platform BeachMint to form the Lucky Group, and ran some e-commerce experiments of its own. By April last year, the group's e-commerce department had grown to about 80 people.

But Condé Nast's real attempt to turn content into sales began with style.com. So far it has spent $100 million remaking the site.

Style.com launched in 2000 as the official website of Condé Nast's fashion magazines VOGUE and W. At its peak it drew 2 million unique visitors a month and 2 billion page views a year. As Twitter, Instagram and other new media overtook it at publishing news, and magazines such as Vogue began building their own sites, style.com left Condé Nast in October 2010 for a new owner, Fairchild, and turned from a website into a print magazine, STYLE. The magazine performed poorly and folded at the end of 2014; that November it returned to Condé Nast.

In April 2015, style.com announced it would become an e-commerce site that fall, with the old site's editorial staff folded into VOGUE.com as a sub-channel, Voguerunway.com. But style.com only went live as an e-commerce site, in Britain, last October. Franck Zayan, head of Condé Nast's e-commerce department, said at the time that style.com had signed agreements with 350 brands; the model carried no inventory of its own, leaving shipping, after-sales and everything else following a purchase to each brand, with Condé Nast taking a cut of the transaction.

Plainly, a media group with deep experience in making content had not worked out how to connect that content to shopping. Burberry, Chloé and Maison Margiela, brands that were supposed to be selling there, never appeared. And the American version of style.com, promised for this year, was never mentioned again.

With Condé Nast now closing style.com and sending its traffic to Farfetch.com, the site is shutting down less than nine months after it opened.

According to The New York Times, Jonathan Newhouse, chairman of Condé Nast International, said in a statement on Tuesday: "Three and a half years ago, Condé Nast created style.com in the hope of building an e-commerce business that could span the globe… Unfortunately, its commercial results fell far short of expectations. We made this decision because we had already tried everything else we could."

Farfetch really can solve the "how do we sell things" problem for Condé Nast. The two also think alike: be a light third-party platform, focused on driving traffic and providing technology, and leave logistics, after-sales and the rest to brands and multi-brand boutiques.

Beyond the e-commerce business, though, one question worth asking seems to have been forgotten: if content and selling are fully joined up, where exactly does Condé Nast's independence as a media group lie? Will its titles look more and more like product catalogues?

On that point, Natalie Massenet, the Net-a-Porter founder who recently joined Farfetch as vice chairman, has already given a blunt answer in the press release: "All the brands and global multi-brand boutiques that work with Condé Nast will, through this partnership, also get more coverage in Condé Nast's own media."

Cover image: letsrestycle