How to build a website like Farfetch

Farfetch is one of the leading global luxury fashion online marketplaces, with a valuation of over $1.03 billion and a market cap of $160,757. The company connects boutiques, brands, and consumers from over 190 countries with items in 50 countries and nearly 1,300 of the world’s best brands.

While Farfetch has achieved massive scale and success, the online marketplace model has simultaneously opened up opportunities for many smaller, niche players to thrive alongside giants like Farfetch. 

In this article, we'll explore how you can build an online marketplace website similar to Farfetch. We'll cover the essential features and outline the step-by-step process, from validating your idea to launching a Minimum viable platform.

Key takeaways from this article:

• Why build a website like Farfetch? Marketplaces are growing, the barrier to entry is low, and you can learn and improve your ideas along the way.
• How does a website like Farfetch work? Farfetch connects luxury fashion boutiques with buyers globally and makes money mainly through commission fees.
• Why did Farfetch become so successful? Farfetch identified a market gap and problem and provided a realistic solution.
• What are some successful Farfetch competitors? Examples of successful Farfetch-like marketplaces include Net-a-Porter, Mytheresa, and MatchesFashion.
• Steps to build a business like Farfetch: 10 steps from identifying a strong marketplace idea to building a platform and scaling into new markets.

The online marketplace model continues to grow rapidly each year. Marketplace sales made up 67% of all global e-commerce in 2021, and the top 100 marketplaces alone produced more than $3.2 trillion in revenue.

But that’s not all. By 2027, online marketplaces' third-party sales will be the biggest and most rapidly expanding retail channel worldwide.

Interestingly, there are many opportunities for smaller, nimble players to enter the market and thrive. These niche marketplaces can compete with giants like Farfetch by providing a more curated, specialised experience tailored to their audience.

Apart from its promising future, building your own online marketplace is now easier than ever, and you don't even need a large team or a huge budget to get started. Here's why:

1. No inventory is needed: You simply connect buyers and sellers—your role is facilitating transactions rather than holding inventory yourself. This asset-light approach significantly reduces your overhead and startup costs.
2. There’s a low barrier to entry: No-code platforms like Sharetribe let you launch a fully functional minimum viable platform in just a single day without any coding required. 
3. You can test and iterate quickly: Since marketplaces are now easy and fast to build, you can quickly test your ideas, validate business models through real transactions, and iterate—all without burning substantial capital upfront.
4. Marketplaces are customisable and scalable: As your business grows, you can expand the features of your Sharetribe-powered platform by adding custom coding and integrations on top of your no-code core.

In a nutshell, the massive market potential, ability to start lean without inventory, and accessibility of no-code tools like Sharetribe create an ideal space for ambitious entrepreneurs to launch the next breakout online marketplace like Farfetch.

Farfetch is a two-sided online marketplace connecting luxury fashion retailers or brands (sellers) with consumers (buyers) globally. The platform provides the essential features to facilitate transactions between the two sides of the marketplace.

On the seller's side, retailers and brands create accounts and list their fashion inventory for sale on the marketplace. Sellers can access tools for managing product listings, tracking inventory levels, processing orders, and viewing payouts. Farfetch also offers marketing support and handles payment processing and logistics, allowing sellers to focus on their craft and expand their business effortlessly.

For buyers, the Farfetch website and mobile apps serve as a large online mall of luxury fashion items aggregated from thousands of sellers worldwide. Customers can browse the catalogue using search and filter capabilities to find specific brands, categories, sizes, price ranges, and more. 

Moreover, Farfetch has detailed product pages with high-quality images that let buyers make informed purchase decisions before adding items to their shopping carts and securely checking out. The platform also ensures authenticity and quality, allowing buyers to shop confidently. Plus, they offer convenient features like personalised recommendations and secure payment options to improve the overall shopping journey.

So, how does a website like Farfetch generate revenue? Farfetch has various revenue streams in its online marketplace, but the primary one is the commission fees charged to sellers. This is typically a 25% commission on each sale, plus another 8% if they fulfil the order. 

For instance, its commission model contributed 62% of Farfetch's revenue in 2021. However, the platform also generates revenue through other means, including:

• Its white-label services that provide technology and logistics solutions to luxury brands to power their own e-commerce websites. 
• Advertising and marketing services to brands to promote their products to a wider audience.
• Subscription-based loyalty program called "Farfetch Black & Platinum," which provides exclusive benefits to its members for a monthly fee.
• Its physical retail stores and partnerships with luxury brands, including Browns, and Stadium Goods

Despite Farfetch’s dominance, several other companies are competing alongside them. Here are the five main Farfetch competitors:

1. Net-a-Porter
   
   Net-a-Porter is also one of the luxury fashion e-commerce sites, operating as a retailer selling inventory directly to consumers. It offers a curated selection of designer apparel, shoes, accessories, and beauty products from top brands. However, the main difference is that while  Farfetch acts as an intermediary that connects brands and customers, Net-a-Porter owns the goods that are up for sale in its store.
2. Mytheresa
   
   Mytheresa is another notable competitor to Farfetch. It specialises in luxury fashion and offers different designer brands. While both platforms provide a seamless online shopping experience, Mytheresa places a strong emphasis on customer service and personalised styling advice. 
   
   Also, Farfetch offers over 3,500 brands, and Mytheresa has only 250. This focused number could help Mytheresa offer a more personalised and intimate shopping experience, especially to customers looking for a meticulously chosen assortment of luxury fashion items.
   
   While Mytheresa holds inventory from these brands in its wholesale warehouses, it still belongs to the brand. Instead of buying from them, Mytheresa simply ships it directly to customers whenever they make a purchase.
3. MatchesFashion
   
   Recently acquired by Frasers, MatchesFashion offers a diverse selection of luxury fashion items across apparel, shoes, accessories, and lifestyle categories from established and emerging designers. While Farfetch facilitates transactions between customers and boutiques worldwide, MatchesFashion operates as a standalone retailer with a more centralised shopping experience. MatchesFashion also offers a unique "MyStylist" service, where customers can receive personalised fashion advice from expert stylists.
4. SSENSE
   
   SSENSE is also a competitor to Farfetch, which caters to a younger, more fashion-forward audience. While both platforms offer a wide range of luxury fashion products, SSENSE focuses more on avant-garde and streetwear-focused selections. 
   
   Regarding pricing, Farfetch often sells products at prices about 10-15% lower than those on SSENSE. Also, Farfetch allows customers to return items for free within 14 days of purchase, whereas SSENSE offers a longer return period of 30 days. SSENSE also provides a unique editorial platform featuring interviews, articles, and fashion content that appeals to its target demographic.
5. Moda Operandi
   
   Moda Operandi offers a unique pre-order model that lets customers purchase runway pieces straight from the catwalk. While Farfetch focuses on connecting customers with boutiques, Moda Operandi collaborates directly with designers to provide exclusive access to their collections. This approach helps Moda Operandi attract customers who seek the latest and most exclusive fashion offerings.
   

Overall, Farfetch's unique selling proposition is its large inventory from over 1300 boutiques in more than 50 countries. This makes it easy for shoppers to find and buy rare and exclusive items that may not be available on other platforms.

Portuguese businessman Jose Neves founded Farfetch in 2007. The marketplace officially launched in 2008 and has been growing since then. It raised $885 million as an IPO in 2018 before being officially sold to South Korean group Coupang in 2023 for a whopping $500 million.

From its beginnings as an e-commerce marketplace for luxury boutiques, Farfetch now connects tens of thousands of users in over 190 countries. It has major branches in Porto and Lisbon and its headquarters in London.

What started as a simple way to enable local boutiques to sell globally quickly has become one of the most successful luxury fashion marketplaces. 

Here are some reasons why Farfetch succeeded:

1. Farfetch addressed an unmet market need by providing a marketplace platform for luxury boutiques that lacked the resources and expertise to build an online presence and sell globally. Similarly, you must ensure your marketplace idea solves a specific problem. 
2. Farfetch concentrated on a niche market by curating a vast yet carefully selective catalogue of high-end and exclusive merchandise from boutique sellers that are not easily found online. This created a differentiated value proposition compared to larger, more generalised e-commerce players like Amazon. You, too, must identify a specific niche where you can offer specialised products or services and position your brand as a leader in that area.
3. Farfetch focused on providing seamless user experiences by offering full-service logistics like packaging, shipping, returns, etc. This enabled rapid seller onboarding by removing operational barriers. 
4. Farfetch scaled and innovated continually: Farfetch consistently evolves its marketplace platform, adding new features and tools to better serve luxury brands and shoppers. For instance, they have introduced initiatives like Farfetch Second Life, a resale service for luxury fashion, to meet the growing demand for sustainability and second-hand luxury items. 

Next, let’s look at how these success tips translate into practical, actionable steps that will help your building process.

In a nutshell, the process to build a service marketplace like Farfetch follows 10 steps:

1. Identify a strong marketplace idea.
2. Choose the right marketplace business model.
3. Start with a focused scope.
4. Pre-validate your marketplace idea.
5. Build a marketplace platform, starting with an MVP (Minimum Viable Platform).
6. Onboard your first sellers.
7. Launch your marketplace.
8. Reach problem-solution fit.
9. Reach product-market fit.
10. Scale into new markets.

We’ve seen this process work repeatedly with hundreds of marketplace founders we’ve worked with at Sharetribe. 

Next, we’ll discuss the ten steps and how they can help you build a successful marketplace like Farfetch. However, If you want more information and useful resources, check out our complete guide on building an online marketplace.

Like Farfetch identified the luxury fashion niche, finding a marketplace idea is the first step. One approach is to examine verticals or segments already on Farfetch that are currently underserved by existing marketplaces and platforms. 

For example, you may find frustrations around limited selection, poor seller vetting, high fees, shipping issues, etc. These pain points represent opportunities for you to come in.

Other potential areas you may explore could include:

• Niche luxury niches like watches, jewellery, handbags, etc., that are overshadowed on larger platforms
• Regional marketplaces for luxury fashion/goods targeting specific locales 
• Specific consumer segments like sustainable/ethical luxury, plus sizes, etc.
• Complementary products/services like personal styling, authenticators, repairs, etc.

You can also look at luxury fashion areas you are familiar with or passionate about. As an industry insider, you'll have valuable insights into what buyers and sellers truly want. 

However, ensure whatever idea you finally come up with does the following:

• Solve a real problem for both sides of your marketplace (supply and demand).
• Targets a large enough market that matches your business goals.
• Has a market that is fragmented (many suppliers and customers).
• Has a potential for frequent usage (repeat purchases).

Like Farfetch originally did for boutique sellers, your goal is to pinpoint an unmet need you can profitably address and build a marketplace solution for it.

At Sharetribe, we found out that the top one hundred marketplaces in the world make money through at least one of six different business models:

• Commission
• Subscription
• Listing fees
• Lead fees
• Freemium models
• Featured listings.

As mentioned earlier, Farfetch primarily operates on a commission revenue model, which is the most common and lucrative model among marketplaces. The platform charges sellers a percentage fee on each transaction facilitated through the marketplace. 

If you are choosing a commission model, you may need to consider these three things.

• The side of your marketplace to charge (supply or demand)
• The amount or percentage of your commission 
• The measures to prevent users from circumventing your payments. 

In addition to the commission model, Farfetch has additional revenue streams like fulfillment fees for logistics services, marketing fees from brands for promotional services, and even direct sales of inventory sourced from brands.

However, for new marketplaces, we advise our customers at Sharetribe to avoid overcomplicating their offering with too many services or fees at the initial stages. 

As your business grows, you may add other revenue streams as your marketplace matures to create diverse, sustainable income sources.

While a massive market is tempting, investors are now more interested in companies demonstrating real traction and their ability to reach liquidity quickly. In other words, getting transactions happening on your platform is more important than theoretical market size projections.

One way to achieve this is to have a narrowly defined scope—a specific niche, geography, or use case. It makes it much easier to rapidly build critical mass and liquidity on your marketplace's supply and demand sides. 

Although Farfetch later deviated, the company initially practised this by focusing exclusively on luxury fashion marketplace for boutique sellers online rather than the generalist marketplace like Amazon or Aliexpress.

The greater your initial scope, the higher the liquidity threshold becomes for achieving viability. Starting narrow lets you quickly reach that tipping point with less cash burn while refining your processes.

Once your core product operates smoothly, you can always expand into adjacent markets and use cases. But first, pick a tight segment you can own and reasonably capture and execute until liquidity takes hold.

Before you spend a lot of time and money building your marketplace, you must ensure that all your assumptions about your idea are realistic and accurate.

One way to do that is to talk to boutique owners or brands and their customers separately, including the ones on Farfecht. Ask them if there is a true demand for the type of marketplace you want to build.

You can also analyse indirect data like online discussions, query volumes, competitor performance metrics, and market research reports to gauge interest levels.

For Farfetch, founder Jose Neves had his "lightbulb moment" at Paris Fashion Week in 2007, where he actually got and saw the idea play out in a real scenario. According to him:

"I was meeting lots of boutiques, and noticed that the ones that were growing had strong online operations. Other designers didn't have any online presence because they either lacked the ambition, funding, or know-how."

This first-hand observation of boutiques struggling to go digital shows that there’s a real pain point that Neves could solve by enabling small designers and retailers to become global players through a unified online marketplace.

Like Neves, you should proceed to build out your minimum viable platform only once you've prevalidated your idea.

An MVP is a basic version of your platform with just enough features to be usable by early customers. The goal is to validate your product idea early in the development cycle by getting real user feedback.  

This lets you learn what works, what doesn't, and what features are most important to users before investing a lot of time and money.

Even a juggernaut like Farfetch had very humble beginnings. The first versions of the Farfetch website and marketplace experience were hardly feature-rich or visually stunning. 

As you can see from this early screenshot, the focus was on core functionality over bells and whistles. 

If you’re not a developer yourself, there a 3 options for building an MVP like Farfetch:

• Get a freelancer or an agency to build your MVP from scratch.
• Get a technical co-founder to build an MVP for free.
• Build the MVP yourself with no-code tools.

Actually, the last option remains the easiest and fastest. No-code platforms like Sharetribe, for instance, let you launch a fully operational MVP marketplace in just a day without writing a single line of code.

Plus, you get all the essential functionality for onboarding sellers, listing inventory, facilitating checkout/payments, order management, and more–out-of-the-box. This way, you can start facilitating real transactions and analysing how users actually interact with and adopt your marketplace.

Once you’re ready to scale, you can add custom-coded elements to the no-code builder, especially if it is Sharetribe-powered.

One of the biggest challenges new online marketplaces face is the typical chicken and egg problem. How do you attract buyers without an established seller base, and how do you get sellers with no buyers to sell to? It's a Catch-22 problem that can strangle a marketplace's growth before it ever gets off the ground.

Successful marketplaces like Farfetch have solved this problem by prioritising the seller side first to build a strong supply before working on demand.

But how do you onboard those critical first sellers for your marketplace? In the Farfetch case, founder Jose Neves said in an interview with BBC that it was difficult to convince his first seller, but he noted the network effect it triggered:

“when one signed up it convinced the rest to follow”

This means that the first boutique essentially provided social proof that opened the floodgates for the rest. 

Here are some tips for finding those initial sellers:

• Target the ones you think will be the perfect ambassadors and fit for your brand.
• Check for them in Luxury fashion online forums and groups
• Visit local fashion meetups and events
• Visit them in person
• Maybe become a supplier yourself
• Fake initial supply (scrape listings from the web or find the listing your customer booked manually)

After you've found them, here are some ideas to convince your first sellers to join your marketplace before buyers:

• Make initial outreach personalised, focusing on sellers you can directly build relationships with. 
• Explain clearly the value you want to provide them.
• Offer incentives like being a featured launch partner with exclusive perks, discounted fees, premium positioning, and more. 
• Find creative ways to reduce participation hurdles, like automating the listing process.
• Prioritise responsiveness and deliver value in those first interactions.

It may start slowly, but once you cross a liquidity tipping point on the seller side, you'll gain powerful social proof that attracts more organically. 

Solve the supply side first, and demand will follow for a thriving marketplace.

7 - Launch your marketplace 

Launching your marketplace doesn't have to be a huge, splashy event initially. This is when you start attracting buyers to transact with your already onboarded sellers. Those first buyers are important for early traction and validation. 

If you've onboarded sellers who were previously on Farfetch or other platforms, you have an advantage. Those sellers likely already have existing customer bases and marketing channels where they promote their offerings. 

If you can convince them they're better off on your new, more specialised marketplace versus Farfetch's fashion model, they'll have an incentive to cross-promote. The point is to leverage your sellers' trusted voices with their audiences.

You can also:

• Offer your sellers co-marketing support, advertising credits, etc. 
• Encourage them to tell customers about their presence on your platform organically.
• Run promotion across relevant communities, social channels, affiliate partners, or brand outposts where your target buyers are online and offline. 
• Attend events, get press mentions, offer referral incentives—get scrappy with low-budget marketing tactics.

The point is to get your marketplace running with buyers and sellers. Real money changing hands, even at modest volumes, is what breathes life into new marketplaces.

Reaching problem-solution fit is validating that your core product offers a solution that users actually perceive as valuable and addresses a real problem they have.

In other words, a problem-solution fit is a stage where you:

• consistently facilitate transactions between buyers and sellers and
• collect revenue from those transactions.

But problem-solution fit does not necessarily mean your marketplace is profitable yet. It simply means you've nailed the fundamental value proposition and user experience enough that people derive real utility from your platform's current capabilities.

On the other hand, if your marketplace has enough users but no transactions, it's an opportunity to review your market structure and service. In that case, we advise you to talk to your users directly and get feedback on questions like:

• Is the site's purpose clear to your visitors?
• Does the supplier network offer what users seek?
• Is the process for finding products efficient?
• Are there issues with the checkout flow or pricing structure?

Clarifying these areas will guide you on where and how to improve and iterate.

That said, if your goal is Farfetch-level success, it can be tempting to scale operations, marketing, and growth too quickly once you have some initial traction. Resist that temptation; instead, focus on iterating to strengthen the problem-solution fit before scaling.

Overall, This is the stage where you find out what motivates your highest-value users and remove continued friction points.

Achieving product-market fit means you have a validated and repeatable business model that can scale successfully.

But the question is, how do you know you have reached a product-fit market? Here are some key metrics to look out for: 

• Liquidity
• Repeat-purchase rate
• GMV retention
• Unit economics (customer acquisition costs vs. customer lifetime value)

You should especially pay close attention to liquidity. It measures the likelihood that a seller gets their listing sold and that a buyer finds what they’re looking for. 

To increase liquidity, you need to build a growth engine for your marketplace through marketplace SEO, network effects, viral marketing, etc.

Moreover, if you want to build a large-scale, category-leading marketplace like Farfetch, you’ll likely need venture capital or external marketplace funding at this stage. This is where you really need to double down on developing a repeatable playbook for investors.

For Farfetch, things were not too smooth initially. Neves used his own funds to launch the business, which, unfortunately, was during the global financial crisis. So, due to the slowdown in business lending, they couldn't get any outside investment for almost three years before they finally secured one in late 2010.

Since then, Farfetch has raised a total funding of $709M over 14 rounds from 31 investors, including an IPO in 2018, which raised $885 million. Despite that, the company has faced significant challenges with its external funding. 

Farfetch's share price has plummeted over 97% since going public in 2018 as the company struggles with profitability. At its peak in February 2021, Farfetch had a market capitalisation of $26 billion, which has now dropped to around $250 million today.

Analysts cite concerns like lack of differentiation, high marketing spending, and shipping costs eating into margins, which result in investors having little faith in the company. 

But the truth is, the current VC landscape is much more discerning about fundamentals, like the route to profitability versus just growth at all costs. Investors will drill into your playbook to see how you can achieve product-market fit and unit economics in new geographic or category markets you pursue.

Luckily, using a platform like Sharetribe, you can bootstrap and validate your marketplace concept to product-market fit without initially needing institutional investors. The no-code model allows a capital-efficient path to de-risking your idea before raising money to scale operations.

But if you do want to pursue VC funding for growth after product-market fit, you'll need to clearly demonstrate your unique market positioning, a proven, scalable acquisition model, and a credible roadmap to profitability. 

Farfetch's struggles show that focusing on growth alone is not enough in today's climate.

Once your initial online marketplace offering achieves product-market fit, you can scale into new markets.

However, when scaling into a new market, ensure you note the following:

• Reach product-market fit in your first market.
• Scale one market at a time.
• Create a playbook of what works.
• Repeat the process until your business goals are met.

Farfetch didn't actually follow this rule of scaling. After going public in 2018, the company began a spree of acquisitions, acquiring up to eight companies. 

In addition to these acquisitions, Farfetch now runs different business lines—including white-label platform solutions for several major retailers together with its original luxury marketplace business, which serves over 1,400 sellers across 50 countries. Recently, the company was acquired by Coupang in a $500 million deal.

The key point here is that while investor funding can provide growth capital, you must maintain focus. Farfetch rapidly stitched together so many separate acquisitions and business units that it drifted from its original core vision as a fashion-tech platform. 

As tempting as it is to raise funds and buy scale, combining too many products can result in failure.

The wiser approach is taking a test-and-learn methodology—rolling out into new markets in phases, closely monitoring traction, and doubling down on what works through each market's unique nuances.

Launching an online marketplace like Farfetch is no longer exclusive to those with technical expertise, thanks to no-code platforms like Sharetribe. If you follow the right steps, you can bring your marketplace vision to reality with remarkable ease, even without any prior coding experience.  

Here’s the summary of what it takes:

• Start by niching down–find an underserved local service vertical or region to focus on.
• Pre-validate real demand and supply before building.
• Launch a Minimum viable platform quickly using a no-code platform like Sharetribe.  
• Prioritise onboarding quality supply before marketing to demand.
• Iterate based on user feedback to reach problem-solution fit
• Codify a repeatable playbook to achieve product-market fit efficiently
• Raise funding to fuel expansive growth into new markets and verticals

And the most important takeaway—start today, be scrappy, learn quickly through iterating on real user behaviours, and continually improve your ability to deliver a remarkable marketplace experience. That's how disruptors like Farfetch were built.