The app interface of Farfetch, a global luxury fashion platform acquired by Coupang Inc. early last year, captured from the App Store.

Farfetch, a U.K.-based luxury platform acquired by Coupang last year, is expected to return to profitability soon.

According to industry sources on Jan. 22, Farfetch sold Wannaby Inc., a virtual try-on technology company, to Perfect Corp. on Dec. 24. Wannaby’s augmented reality (AR) 3D viewer enables detailed product views during online shopping and is used by over 30 renowned brands, including Balenciaga, Dolce & Gabbana, and Valentino.

Farfetch originally acquired Wannaby in 2022 for $24.5 million in cash and $5 million in shares. While the sale terms remain undisclosed, the deal is expected to accelerate Farfetch’s recovery.

Farfetch is a global luxury company that sells products from 1,400 luxury brands to consumers in 190 countries. Coupang’s parent company, Coupang Inc., acquired Farfetch for $500 million early last year. In 2021, Farfetch had a market capitalization of $23 billion when it was listed on the U.S. stock exchange, but just before Coupang’s acquisition, its market cap had dropped to $250 million, close to bankruptcy.

Farfetch posted operating losses of $847.16 million in 2022 and $406.43 million in the first half of 2023. The company delisted in the second half of 2023 before Coupang’s acquisition.

The app interface of Wannaby Inc., a virtual try-on technology company sold to Perfect Corp. last month by Farfetch. Users can virtually try on bags or shoes while shopping online. /Courtesy of Wannaby Inc.

After acquiring Farfetch, Coupang focused on strengthening the company’s fundamentals through restructuring and streamlining inefficient operations. Last August, it closed Farfetch Platform Solutions, which had provided technology and logistics solutions to luxury brands globally.

According to Coupang, Farfetch’s adjusted EBITDA loss decreased to $2 million in the third quarter of last year, down $29 million from the previous quarter’s $31 million. Net losses also fell by 61%, from $113 million in the first quarter to $44 million in the third quarter of last year.

Coupang Chairman Kim Bom-suk said during a conference call at the time, “Farfetch has made significant progress in improving operational efficiency,” adding, “Our goal was to achieve near break-even profitability, and we’ve reached that milestone this quarter.”

R.LUX, a luxury beauty vertical app launched by Coupang in October last year. /Courtesy of Coupang

Industry experts predict Coupang will expand its luxury business once Farfetch stabilizes. Coupang entered the luxury market last October with the launch of R.LUX, a dedicated luxury beauty service. Operated independently from Coupang’s main application, R.LUX maintains the company’s signature Rocket Delivery service while providing a differentiated shopping experience.

Though R.LUX currently focuses on cosmetics, analysts expect it to collaborate with Farfetch to expand Coupang’s luxury business. Despite Coupang’s dominance in South Korea’s e-commerce market, it has been perceived as weak in high-value segments like fashion, beauty, and luxury.

However, opinions differ on the potential synergies between the two companies. Some argue that integrating Farfetch into the Korean platform could be challenging, as the acquisition was made by Coupang Inc., which owns 100% of Coupang. The business models also differ, with Coupang and R.LUX operating on a direct-purchase model, while Farfetch follows an open-market approach.

An industry insider noted, “Coupang has quickly stabilized Farfetch through aggressive restructuring, with possible profitability in last year’s fourth quarter,” adding, “Still, success in the luxury market will require more technical collaboration between Farfetch and Coupang.”