Source: Farfetch shares jump 6% after $250 million Stadium Goods acquisition announced
Marketplace explained that Farfetch’s share price increased after acquiring Stadium Goods. Without any real detailed information on several aspects of how the acquisition works it’s hard to make a real assessment, but there are several factors that need to be discussed:
LVMH invested into Stadium Goods in February. This was after Mark Cuban had invested into the company. Farfetch recently IPO’d and the UK company is operating in the luxury market as a third party marketplace. As Amazon is the ultimate third party, it is also a place where luxury brands have found it neccessary to create brand registries to offset the extensive counterfeiting found there. Stadium Goods is doing something that can be akin to a balloon being inflated with a machine vs a human blowing. While the machine does the job more thoroughly and faster, the expansion is quick and can contribute to overconfidence and a lack of insight into what is being expanded.
Stadium Goods raises $4.6m with Mark Cuban – That’s Two NBA Owners Invested in Sneakerhead Resale
In a recent interview I discussed that companies like StockX and GOAT which are showing considerable growth and are being invested into do so on shaky platforms. Stadium Goods falls into the same category. Stadium Goods doesn’t own anything. They don’t have an account with the brands so there isn’t a consistent stream of inventory flowing in and out of the shops. The store at its core is a consignment shop. Although I said that StockX is on shaky ground, I wasn’t exactly right because what they have built is a User Interface that allows for a fair marketplace to take place. This marketplace can transition from sneaker resale to watches to purses as it has done, particularly at the high end with its authentication process. More important the technology behind the site has an added bonus that I don’t even think the company is aware of (I discuss this in a book I’m working on about Third Party and StockX). The billion dollar industry of sneaker resale is shaky. At any point if both Nike and adidas introduce enough inventory into the market sneaker resale dies.
When LVMH invested into Stadium Goods I saw it as an opportunity to reach a luxury buyer who affiliates Stadium Goods with authentic merchandise. I’ve spent the last year on StockX solely as a sales platform and in my opinion that site has contributed to the demise of the resale business. We touch on this in the interview on the link below:
The Current State Of The Sneaker Market Part 2- Resellers via Housakicks Livestream
Stadium Goods has brick and mortar and a strong online presence, but they are operating in a space where the margins are becoming razor thin. Farfetch may have people in place to look at financials, but without a true understanding of this market they may be buying into something that isn’t as vital as it seems.
Does LVMH want to be in bed with Farfetch which has IPO’d and will look to grow at all costs?
We can’t know the answer because the details of this investment haven’t been made public. What is evident is that there is a lot of money being moved around and it seems that no one is looking at the core of what could go wrong and that is a bit troubling, but this is exciting as well.
I will keep an eye on this.
