Earnings Call: Q4 2020

Feb 25, 2021

Good afternoon. My name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Farfetch 4th Quarter and Full Year 2020 Results Conference Call. Thank you. Time, I'd now like to turn the call over to Alice Ryder, VP of Investor Relations. Ms. Ryder, you may begin your conference. Hello, and welcome to Farfetch's 4th quarter and full year 2020 conference call. Joining me today to discuss our results conference call are Jose Neves, our Founder, Chairman and Chief Executive Officer Elliot Jordan, our Chief Financial Officer and also Stephanie Ferrer, our Chief Customer Officer. Before we begin, we would like to remind you that our discussions today will include forward looking statements. Actual results could differ materially from those indicated in the forward looking statements, and forward looking statements made today speak only to our expectations as of today. We undertake no obligation to publicly update or revise them. For a discussion of some of the important risk factors that To cause actual results to differ, please see the Risk Factors section of our Form 20 F filed with the SEC on March 11, 2020, conference call, we will be conducting a presentation and in Exhibit 99.2 to our Form 6 ks filed with the SEC on April 27, 2020. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non IFRS financial measures to the IFRS financial measures in our earnings press release and the slide presentation, Both of which are available on our website at farfetchinvestors.com. And now, I'd like to turn the call over to Jose. Thank you, Alex, and thank you all for joining us today. 2020 was a year in which ViaSatCH leads its values and successfully advanced our Chapter 2 initiatives, executing on our mission to enable the luxury industry. And we did so through a tremendous display of our robust capabilities, resilient operations and utmost This was particularly significant during the height When many boutiques and designers could not operate their physical shops and relied on Farfetch As a significant source of revenue and also as customer demand exponentially moved online throughout 2020. As we look towards 2021 and beyond, we are laser focused on extending our position In doing so, we'll build on our progress in 2020, where our teams executed impeccably to grow full year group GMV 49% to over $3,000,000,000 further cementing our position as the largest global online destination for luxury fashion. This is on the back of a strong 4th quarter As we ended the year with our first $1,000,000,000 GMV quarter, attracted our largest cohort of new customers and achieved a crucial profitability milestone with our Q1 of positive adjusted EBITDA. During the quarter, we also announced a transformational partnership with industry giants Alibaba, Hichmall and Artemis As we enter 2021, we are more determined than ever to execute on our mission to be the global platform for luxury, Connecting creators, curators and consumers, and we are focusing our strategic roadmap across 5 major themes The first three are: 1, strengthening our luxury partnerships 2, China 3, the luxury new retail or LNR platform, which I will talk to And the remaining 2 are 4, the Farfetch brand and 5, 10 Viable global customer experience, which Stephanie will address. Starting with our luxury partnerships, what we are continuing to see is a paradigm shift And looking across the landscape, Farfetch is uniquely positioned to be their strategic partner. Not only are we the only global luxury platform offering eConfashion, brands preferred mode of operating with multi brand channels, But we are continuing to offer revolutionary innovation by advancing LNR, which is what brands need right now. In fact, our top 10 e concession grandpas increased their participation on the marketplace as they grew their stock listings By more than 70% in Q4. And our top 100 brand partners time, we remain lasting partners with 100% retention over the past 3 years. Our enterprise clients have also expanded their businesses via our platform as we powered more than 50% growth On average, in 2020, in the brand.comecommerce channels of our more mature Farfetch platform solutions, Our SPS clients, those who have been on SPS for at least 20 years. Turning to China. Over the next 5 years, Mainland China is expected to become the largest luxury market Our localized operations in China position us well to attract valuable Chinese customers by enabling them to shop a global supply of luxury fashion From up to 3,500 of the best brands via our app, website and social commerce channels such as WeChat In their native language, supporting their preferred payment methods and for our private clients via a local stylist who is attuned to their local podcast. As a result, we are one of only a few Western e commerce companies who are succeeding in China. This is evidenced by the fact that Mainland China is our 2nd largest market for the marketplace and has continued to be a growth Additionally, in another demonstration of our technological and operational excellence, we are delighted To have soft launched Farfetch on a dedicated storefront in Timo's Luxury Pavilion, RTLP, The selection of luxury products on Tmall. Of the 2,400 plus brands we have already made available, More than 90% did not previously have a presence on this channel. As a result, Tmall's consumers are now able to shop The broader selection of luxury fashion online at the time when they are unable to travel to their favorite luxury shopping destination, and we believe these conference, we'll increasingly repatriate their luxury purchases to domestic channels such as the Farfetch app or We will continue to add more brands to the Star front up until the official launch on the 1st March, At which time, we will begin deploying significant marketing resources to promote our brand with Tmall's 770 9,000,000 consumers. In 2021, we will lean in And the best behind building our audience in the TLP channel as well as overall Fast Edge brand awareness in China across all channels, Including apps where most of our business is conducted, as we believe this is the time to invest in brand awareness From day 1, we set out to be a platform for the luxury industry. And over the past 13 years, we have been expanding our platform capabilities To address the needs of our marketplace and branded sites as well as those of the broader luxury industry, Our vision also encompasses And since 2016, we have been building out our Star of the Future capabilities, We will leverage These technologies are pursuing our L and R strategy to address the needs of luxury businesses such as Harrods, our largest enterprise client. This time last year, we launched harrows.com on SPS. Since then, our capabilities have been instrumental In enabling the iconic luxury department store to continue serving its global clientele throughout the pandemic. We have also continued to expand our solution set for our enterprise clients. 1 new, exciting and we believe unique capability, I would like to highlight is SPS's recent launch of eConcessions as a service. This solution enables department stores and retailers to directly plug into brand stock systems and effectively Our first implementation is now powering Burberry's e concession on harrods.com, And the results over the initial couple of months indicate that the future is delivering a meaningful lift to Verbra's performance on harrows.com. Our enterprise grade operating system proposition powers some of the largest and most prestigious luxury brands From Chanel to Harrods and is endorsed by Alibaba, Hishma and Atemis In the category of digital enablers and reinforces my belief that Farfetch is The platform that will enable the entire industry to thrive, a unique position we have To not only go after the online luxury market, but also to address the digital strategies of our enterprise partners offline channels Clearly, we are at the start of this journey, but we are tremendously excited about luxury new retail, its relevance today for luxury And the spectacular reaction we are getting from the luxury industry to our vision. We will continue, therefore, to invest In our technology and also start investing in our B2B brand and pursue enterprise sales efforts While we remain committed to achieving profitability for the full year of 2021, we have also earmarked a portion of our anticipated profitability to fund these growth initiatives. Before passing to Stephanie, I'd like to update you on the important work we are doing around ESG. Our positively fast hedge initiative integrates a multitude of programs throughout the business to further our vision in a sustainable way. In 2020, a year that highlighted more than ever the importance of using our global platform to be an enabler Since committing in April 2020, we have been carbon offsetting all deliveries and returns. We also significantly increased our offering of sustainable products, our conscious edit, Which now represents 1 in 10 products on the marketplace and more than 5% of 2020 group GMV. And importantly, made clear our platform is a platform for everyone through initiatives such as our black Designer edit, which helped drive 66% GMV growth for these brands on the marketplace. These Just a few examples of the positive changes we're driving. I would invite you to visit the ESG tab on our Investor Relations site At syphetchinvestors.com to access an infographic we've published with some key highlights from 2020 I'll now let Stephanie walk you through our 2 other pillars, brand and unrivaled global customer experience. Stephanie? Thank you, Jose. Hello, everyone. It's great to speak with you all today and give you a whistle stop overview of Chapter 2 initiative as we redouble our efforts to build a truly customer centric organization. To touch on our brand pillar first, As Jose summarized, we had an incredible 2020. It was a pivotal year for our brand as we introduced our new brand identity I launched a full funnel brand marketing campaign. The campaign was focused on building brand love and an emotional connection to Farfetch conference call, we have a very strong financial performance in the conference, we have the ambition to be the most loved brand in Luxury and the first and last destination As such, in 2021, we intend to invest in to bolster our brand awareness and cement our unique positioning. Some of these initiatives include our 2nd brand campaign going live in conference call, we will be conducting a call to our Our strategy to differentiate our brand by playing to our unique strengths with an ongoing focus on our boutique proposition, on leveraging our NGG acquisition And delivering exclusive brand partnerships, while deploying all our capabilities from our global reach to our innovation features. This This follows our successes with brands like Gucci, Burberry and Marni Homeware in 2020, but also in fine jewelry with Chabab, who made Farfetch their platform of choice And already in 2021, we've executed on the launch of Richemontin concept with Albera BAZ, AZ Factory, Among other partnerships, I'm hosted the live stream of the men's shows for Dolce and Gabbana and Off White's new season concept, Imaginary TV. These are examples of partners who, in addition to seeing Farfetch as one of their sales channels, also recognize targeted luxury audience and marketing capabilities we offer to support their own efforts to grow their brand. We continue to invest in full funnel marketing and driving efficiency in existing channels, while adopting new ones such as programmatic TV, By leveraging our unique data capabilities, we aim to create a balance between paid efforts and cost effective owned channels And to do this more sustainably and build brand love, time, we will continue to focus on delivering an unrivaled global customer experience, our 5th strategic pillar. Starting with our private clients, Here, we will continue to lean into new ways of shopping enabled by technology and accelerated by COVID, Such as live stream events and virtual styling appointments. We will continue to scale our fashion concierge service, which secures any item on demand, Whether on Farfetch or not, and provides a fantastic retention tool and unique differentiator in our overall proposition. The team regularly sells items with a value above $100,000 and on occasion much more. You might remember our $1,000,000 sale earlier in 20 time And importantly, we continue to invest in our stylist team, which spans 29 global cities And who build brand love by providing even more personalized service to the customer wherever they are. In 2020, we acquired almost 2,000,000 new customers at a lower year on year cost of acquisition. Our investment in marketing tech over the years And our wide data sets enabled us to invest efficiently and nimbly as search volumes and market demand shifted throughout the year. While we continue to lean into customer acquisition and particularly app downloads, 2021 is a year for retaining these through our CRM efforts, increased personalization and our access loyalty program. This is in the context of our updated survey Where 66% of customers polled state that they will do more or most of their luxury shopping online. So the opportunity is clearly there. In 2020, we brought our consumer tech products even closer to the customer by orienting ourselves toward And looking to the future with new ways of shopping. In 2021, we will create new opportunities for growth through the expansion of our pre owned offer And launch pre order as a way to continue offering newness to our customers and extend the full price selling window for our partners. I am also very excited to announce that we will be laying the foundations for launching the beauty category on the marketplace in 2022. Beauty has been one of the faster growing personal luxury goods categories and represents approximately 25% of the nearly $300,000,000,000 luxury industry. Conference call, we will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief survey of our Q1 results. We will be conducting a brief overview of our Q1 results. We will be conducting a brief survey To offer features such as virtual try on for the makeup category. And finally, from a business model point of view, allowing beauty brands to launch their products on Farfetch And now, I'll hand the call over Thank you, Stephanie, and hello, everyone. I am pleased to be sharing with you the latest financial results of the Farfetch Group. In particular, time, the important milestone of achieving profitability at the adjusted EBITDA level for the first time in Q4, Which was also our first ever $1,000,000,000 GMV quarter. We have closed the year in a strong financial position with cash reserves We outlined to you on our last call with group GMV growing 43% year on year to $1,100,000,000 Digital Platform order contribution margin increasing 3 10 basis points year on year to 35.1%. Total G and A and technology expenses, our operating costs are lower year on year as a percentage of adjusted revenue by 5.40 basis points. We achieved positive adjusted EBITDA of $10,000,000 Against negative $18,000,000 1 year ago and we delivered $201,000,000 of positive cash flow from operations This completes a remarkable full year 2020 performance of group GMV growth of 49%, Ahead of our initial 40% to 45% growth expectation, digital platform GMV growth of 42%, An acceleration from 40% growth in 2019, an increase in digital platform order contribution margin by 3 50 basis points year on year, expansion of brand platform gross margins by 3 25 basis points year on year, A reduction in operating costs as a percentage of adjusted revenue by 5.70 basis points year on year, Adjusted EBITDA of minus $47,000,000 versus minus $121,000,000 in 20.19 Looking at Q4 by business segment and starting with the digital platform, which grew GMV by 49% year on year $939,000,000 Within this, 3rd party GMV grew 40% year on year, Led by growth in Farfetch platform solutions and a more than doubling of brand e confession sales on the marketplace. The 3rd party take rate was 28.8%, a slight decrease year on year due to the increased mix of FPS 3rd party gross margins were 66 versus 68% in the prior year quarter, reflecting the impact of higher fulfillment costs per order On our free shipping and free returns proposition, GMV from our first party business grew 96% year on year Ann represents a 16% share of GMV supported by our direct to consumer first party original proposition At 4% of GMV, 1st party gross margin stepped up from 24% to 36% year on year Due to a higher mix of full price sales and growth of our first party original offering, digital platform order contribution margin expanded 3 10 basis points year on year to 35%, Driven by efficiencies in demand generation spend, which reduced from 23% of digital platform services revenue in Q4 2019 time, we are pleased to be able to achieve the full year 2019 guidance to 19% in Q4 2020. These efficiencies were achieved While we also acquired over 500,000 new customers in the quarter, our highest ever The work is paying off with lower customer acquisition costs year on year, Despite increasing costs for paid media across the luxury fashion space, high adoption of the Farfetch app At now 55% of marketplace GMV, payback on the Q2222020 cohort within 6 months And the Q3 2020 cohort with higher 3 month lifetime value than the previous 10 quarters. We continue to focus on full price sales across the marketplace with fewer promo days in Q4 2020 as compared to 2019. This helped drive better economics for sellers on the platform. As a result, we drove higher average selling prices, but fewer items per basket, which The brand platform outperformed expectations with GMV and revenue of $104,000,000 and gross profit of $52,000,000 At a 50% gross margin, this was due to relatively strong wholesale demand for spring summer 2021 auctions, time, particularly within the Palm Angels collection, in store revenue grew 40% year on year Due to the opening of direct to consumer off white stores in key locations, however, as expected, Like for like sales were down approximately 20% year on year due to pandemic related store closures. Turning now to our operating costs, which were stable quarter on quarter at $172,000,000 This demonstrates the leverage we are able to achieve from our platform infrastructure, which has supported a 32% increase As a percentage of adjusted revenue from 42% in Q4 twenty nineteen to 37% in Q4 twenty twenty. This culminated in our first ever profitable quarter with Q4 adjusted EBITDA of $10,000,000 $223,000,000 primarily due to share based payments of $119,000,000 And depreciation and amortization of $60,000,000 One final point to note regarding Q4 We have seen a $38.65 appreciation of the Farfetch share price during the quarter. It's important to note this increase in Farfetch's valuation as it translates to a non cash $2,100,000,000 revaluation on items held at fair value, this additional $5.88 loss time, Per share is the result of revaluing the liability in place over our convertible notes and joint venture in the Middle East, Before we outline guidance for the next 12 months, I wanted to remind everyone about our previously stated financial goals for the business, including delivering a 30% Adjusted EBITDA margin over the longer term. We expect to achieve this by capturing significant market share, time, delivering further expansion to our unit economics and continuing to leverage the platform infrastructure. Our 2020 results demonstrate execution in line with these goals. As a result, since our IPO year of 2018, GMV has grown from $1,400,000,000 to $3,200,000,000 primarily due to a doubling in GMV on the digital platform. Adjusted revenue is 2.9 times higher and adjusted EBITDA margin has improved from minus 19% to minus 3% and we expect to deliver positive adjusted EBITDA for the full year of 2021. As we look to increase brand awareness, build our large TLP audience and ensure Farfetch is the destination for luxury fashion Globally, we will also invest in building our brand and continue to invest in our platform technology To deliver functionality to offer new categories such as beauty and additional enterprise level platform functionality, time, particularly supporting the luxury new retail vision. We are also anticipating higher unit shipping costs And some additional expense for European Digital Services taxes as well as some short term impact All of which will put pressure on our order contribution margin. We actually see an opportunity to leverage our planned Fulfillment by Farfetch infrastructure in Europe to support UK based department stores, boutiques and brands, Including Browns over the longer term. More on this in the coming quarters as we expand our European warehouse capacity And begin diverting our own first party inventory to Continental Europe. Taking time, we will take all of this into consideration for the full year of 2021. We are targeting digital platform GMV growth of 30% to 35%, Adjusted revenue is expected to grow a little faster than digital platform GMV As we anticipate faster growth of our first party original sales, we expect digital platform order contribution margin time, we are pleased to report that we are in the range of 35% to 37%. Our operating costs are expected to leverage further to be between 38 time, we will be conducting a quarterly dividend of 1% Looking at Q1 2021, we expect digital quarter, GMV growth of 50% to 55%, a slight year on year step up in digital platform order contribution margin time, we will be conducting a $105,000,000 at circa 48% gross margin and adjusted EBITDA to be marginally ahead of Q1 2020 Thank you, Elliot. In summary, 2020 was a landmark year where Despite the unimaginable challenges encountered, we exceeded our own initial expectations in terms of driving growth None of this would have been achieved without the dedicated efforts of all our Farfetch's, And I want to thank them for living our values day in and day out, being brilliant, revolutionary and human, thinking globally, amazing customers and working through the jauntdouch for the sake of the creators, curators and consumers Looking forward, 2021 will be a year We are laser focused on being the platform for this global industry, Helping brands and retailers in a spirit of win win partnership to fully digitize their businesses Whilst we remain focused on profitability for full year 2021, We will redeploy some of the gains from our continued growth behind these 5 main pillars: Luxury Partnerships, China, Luxury New Retail Platform, Brand and customer experience as we continue to go after our chapter 2 vision and the long term opportunities ahead Thank you. Our first question comes from the line of Oliver Chen with Cowen. Go ahead please. Your line is open. Hi, thank you. Regarding the environment that you're seeing now, what are you seeing with the promotional environment? And what do you think may happen as stores We open and the vaccination pathway takes hold globally. Elliot, would also just love your take on your guidance Oliver, I'll take the first part of your question. What we're seeing in terms of Promotions is actually quite encouraging. We think the market last year Became more disciplined. Brands are increasing their moves stores e concessions, you've seen Kering publicly and Moncler and other brands clearly saying The e concession model, which is a model that we pioneer in this industry, is the model to go. Obviously, e concession sales, Where brands control pricing and promotions, they tend to be less promotional. In our case, the strategy is clear. And independently of what's on in the market, we said 1.5 years ago that we would focus on a full price strategy, And we've had drastically less promotions and much, much less promotional days In 2020 than what we have in 2019, that is working really well. As you could see, growth is, In fact, accelerating now in Q1 even. And the e concession business, for example, is Growing at close to triple digits, and we continue to see a much bigger full price You asked about stars reopening. Obviously, we all hope that happens as soon as possible. I think what we're witnessing is a paradigm shift in this industry. It's an industry that remains Still today, very underpenetrated. It was online sales were 12% of Luxury sales in 2019. That jumps to 23% in 2020, but it's still a low number. And McKinsey, Bain And other analysts predict this to continue to grow very fast up to 35% in a few years' time. So we will continue to see this secular trend of consumers discovering the benefits of online shopping. And therefore, we're very confident that it's a sustained growth and a paradigm shift for And also for brands who have seen the need to elevate digital strategies to their number one priority. And here, we're incredibly positioned As the only platform specializing in this sector and offering a suite of capabilities both on multi brand, monobrand, which is their own brand.com, also online and offline solutions with Star of the Future. So that vision, luxury and new retail is really what the industry needs. And the recession has been spectacular to all these progress that we bring into market, including the e concession as a service that we launched with Harrods and Burberry, I think that can be revolutionary For the industry that can really accelerate brands moving very quickly to econcessions with e tailers and department stores alike To the benefit of all parties involved. Oliver, hi. Great speaking to you. So Just following up on the second part. So on the Q1 outlook, I mean, we've bounced out of Q4 in a really position, particularly on the GMV side of things. So we're expecting to actually step up order growth year on year to achieve an acceleration between Q4 to Q1, 50% to 55% GMV growth, particularly strong on springsummer 2021. The options that we're getting through from all marketplace participants has really seen good strong growth. And so on the order contribution, there's underlying savings that are coming through. As always, we're getting a better full price mix On product, which will help drive the gross margins on the 1st party business in particular, obviously, the 1st party original product, Palm Angels, in particular, is very strong, helping drive the direct to consumer gross margins. The SPS side of Our direct to consumer offering is now actually as big as sales on the marketplace. So we're really managing to attract customers across a number of different We're also seeing savings coming through from our use of data within marketing to drive down the cost of acquisition and use more low cost channels, the app is driving fantastic levels of engagement to keep costs down as well. So So underlying things are in the right direction. We do have to manage those some short term pressure. We are seeing shipping costs Obviously, the growth of e commerce recently is putting a lot of pressure on supply demand for global shipping And that is flowing into higher charges for us. The team is doing an amazing job to mitigate as much of that as we possibly can, working with our carriers, time, I'm working with some innovative solutions around shipping routes and packaging and those sorts of things. But I do think there will be some on the order contribution margin there. We're also seeing pressure because of this digital services tax that's been introduced across European Countries we are sharing the cost of that with marketplace participants taking on a fair amount ourselves, so that will put pressure on order contribution margin. And then lastly, as I said earlier on, the UK's exit from the European Union has caused some operational challenges near term, but also some additional cost challenges as goods move between the UK and Europe. We've got a lot of products for Browns here in the UK, so that has to be sold out. I think there'll be a little bit of impact on gross margin, but That will be short lived as we move into Q2 and beyond. We're going to move product that's not destined for our UK stores and not destined for UK online consumers. We're going to move that to Continental Europe until our fulfillment by Farfetch solutions. That means less cross border to and from the UK. And we're actually looking to roll that out to as many UK department stores, boutiques or other brands That are also seeing the same challenges. So we're actually turning the changes there in terms of regulation to a bit of an opportunity for us as we move forward. And our next question comes from the line of Eric Sheridan with UBS. Go ahead please. Your line is open. Thank you so much for taking the questions. Maybe just 2 parter on the soft launch of the storefront on team all, I know it's early days, but any learnings or things you're seeing in the market as you do that soft launch, I think would be of interest to investors. That's number 1. And number 2, as we look out over 2021, I think that soft launch is maybe earlier than we thought. So in terms of the going forward quarters, Any sense of what investments you still see is critical towards your success in that initiative in China and what sort of elements of contribution are baked into the full year Hi, Eric. Great question. Thank you. It's, I think, an incredible milestone, not just for Farfetch, but I think for the entire industry. Early next week, we are going to move from soft launch to official launch. That means that the vast majority, practically all the 3,500 brands on the Farfetch platform are going to be available to Tmall's 779,000,000 customers, 95% of these brands And this is very, very exciting. I've received messages from CEOs, Rife Western Center, very excited with What is an incredible achievement with one single integration with Farfetch, these brands are able To address the Chinese customer, they were already on our Farfetch marketplace in China through our apps and WeChat Mini Programs. But now they open without any work from their side and without any investment, they open to the TiVo channel with almost $800,000,000 customers. So very, very exciting. It's a channel where, As in any other channel, we have to learn. We have to learn how to utilize the platform and do demand generation. These platforms are Extremely sophisticated, as you would imagine. So we have to apply our data capabilities, our masking tech capabilities To these platforms, the same way we apply them on Google or on Instagram or any other or WeChat. That will take some time to fine tune, but we're very confident that over the longer term, this will be a very, very meaningful And meanwhile, the Farfetch app, which is the vast majority of our sales in China, continues to go from strength to strength, so really fast growth on what is In terms of investments that, as Elliot said, is going to We allocated to that channel, both in terms of brand awareness, professional And also performance marketing within the Alibaba platforms and even external platforms to that channel. We want to do a push Also for the awareness of Farfetch in China overall because I think this is a year where the Chinese luxury customer is not yet And it's really flocking to the online luxury channel, And so we think this is an unmissable opportunity to capture brand awareness in that market. I think it's early days in terms of baking those elements into guidance. And therefore, we are going to continue to learn with our channel and update you Our next question comes from the line of Douglas Anmuth with JPMorgan. Go ahead please. Your line is open. Hey, thanks for the question. It's Corey on for Doug. 2 from us. First, just curious what you're seeing in markets that have started to reopen and maybe how that's Shaping your thinking for growth in 2021. And then you mentioned earlier on the call the beauty category launch. So just hoping to circle back to that a bit. Maybe if you could talk a bit about the opportunity that you see in the beauty category longer term, and then any specifics Hi, Doug. I'll take the first part of the question, and then Stephanie will talk about Beauty, very, very exciting new pathway that we're going to launch in a big way in 2022. Look, I think This new paradigm shift that we've seen with consumers is really here to stay. This is not just a belief, Right. We can go through the data points, both macro and macro. So on the data points, we have a Farfetch. I think the strongest data points are the cohort data. So we added, as you know, 500,000 customers in Q2, 500,000 in Q3, over 500,000 new customers in Q4, which was a record. We now have cohort data from Q2, and it's incredible that data. So the retention is very strong. We have lifetime value Lifetime values for those customers which are higher than the previous 10 quarters. Those customers the cost of acquisition of those Q2 customers has been paid back in less than 6 months, And the Q3 cohort of customers is, as I said, showing very strong repurchase behavior, We also conduct surveys. We conducted another one just recently to these new cohorts customers, 66% of customers have confirmed they are going to shop more online or Actually, do most of their shopping online, either more or most, from now on, independently Of stores, closings, openings, etcetera. And then you look at the macro picture, right? So this is a catch rate that is Still very underpenetrated. It's 23%, which is a 2020 number. There's plenty of room for growth with we added here with $3,000,000,000 in GMV in what is a $300,000,000,000 give or take, Probably smaller due to COVID, but let's say $300,000,000,000 at steady state. So that's 1%, right? So this is Huge, huge. We're always scratching the surface here. We have access to markets such as China, where online penetration is even lower. So we're not concerned at all with the reopening of the stores. And in fact, we think it's a great opportunity. It's a great opportunity to help primarily the smaller boutiques and smaller brands to drive customers Back to their shops, we're working on that, how can we support community to get back in their feet because I think in the end, And I'll take the question on beauty. Hi, Cory. Hi, Doug. Thanks for your question. We've always said that as a business, we want to The entire $300,000,000,000 personally luxury goods category, and that includes beauty, which is about 25%, but it's also one of the faster growing categories. And especially we've seen during this last year that Beauty has performed particularly well as people are more comfortable buying online. So We've been thinking about this for a while, and we really want to launch a full proposition end to end and really think about it in a unique way. This is not about just launching And we believe that we can truly lead in this space. So the approach we've taken around beauty is around that framework I mentioned earlier, which is an only on Farfetch way, which is, in other words, what are the unique selling points about Farfetch? What is our unique proposition that means that Customers will come to us as a destination. And we've done extensive research around this user research. And one of the things was An immersive crossover between fashion and beauty. Our customers and Gen Z tell us that they want to shop full looks. So There's investment in content and in our customer journey and proposition around how we want to present beauty. The second one clearly is playing on our USP around innovation, and there's a lot happening in the beauty space around innovation, particularly if you think about the merging of the physical And digital experiences and how do you bring the experience of a physical beauty store online. And there's so much that can be done with augmented reality, so that's something that Farfetch can really play into, not just through our own technology innovations, but because time, we're also able to plug in incredible innovation from start up partners, which really keeps us And then, Thorebit, very importantly, I think from a partner standpoint, We've had huge enthusiasm from all of the partners we currently work with, and many of them have Their fashion business and have a beauty proposition as well, but also beauty brands have been following what we've been able Do for the fashion industry and how we've been an enabler to the fashion industry. And so they're seeing this opportunity Around partnering with Farfetch and in particular, if you think about our unique business model, it's eConcessions, which I believe is unique. Brands beauty brands are very used to concessions and department stores, but it's not really available online, and that gives them Better margins and really control of their products. So we've had a lot of enthusiasm from established beauty brands, but also a lot of conversations with Indie Beauty Brands, which as everyone knows, is incredibly important for the young customer. So, it's a multiyear roadmap. Beauty is incredibly specific. It Our next question comes from the line of Louise Singlehurst with Goldman Sachs. Go ahead please. Your line is open. Hi, good evening. Three questions for me, if I may. Thank you very much. Firstly, just on e concessions. It definitely seems to be the Increasing the preferred dialogue for brands and online. There's also been some chatter, I suppose, in the industry about e this time, Taylor is considering the type of model as well. I suppose the question really is for Jose on thoughts around, you know, Farfetch clearly the leader, but is there a view that The competitive landscape might change a little bit, Farfetch being the global player with dots of local smaller players across regions. And also following on from that, do you think that there's still quite a big change to happen in the traditional kind of wholesale And then a quick follow-up for Stephanie, if I may, on Beauty, just also on the topic of e concession. Just to say at this point on the Beauty strategy, is that purely for the e intention direct with the brands? Or would that also be a multi brand boutique type arrangement? That sounds super exciting. And then my second question, if I may, just if you can tell us anything about what you saw in the surprises maybe in terms of like the cohort in 2020, any changes in terms of average age, demographic, regional changes that may have been a surprise to you? And then my last question, Elliot, if I may, just in terms of the guidance. Obviously, there is a lot of uncertainty and lack of visibility for everybody. But given I wonder if you can just help us understand the breakdown of some of the pieces. You talked a lot about the contribution margin, but I wonder if there's anything you can help us understand about Luis, I'll take the first question, and then Stephanie can take the other 2. So I think it's really important to clarify how our concessions work and how Some of the other deals that you've seen in the market, very early days, Because that's a fundamental difference there. So when the brands So for example, when Harrods let's use Harrods and Burberry because I can talk to the e concessions as a service. When we connected the Burberry e concession on Harrods, that gave Harrods access to Thousands and thousands of Burberry products dropped shipped directly from numerous Burberry integrations. So we have Many, I don't know exactly W-twenty or more, Burberry flagship stores, Burberry distribution centers in Europe, in U. S, in Japan, etcetera, Burberry, e commerce, fulfillment centers. This is something it took us 6 years to build, right? So we have 550 e concessions. It's now over half of the supply available on Farfetch is coming directly from multiple integrations, dozens sometimes of integrations with every single brand. And what happens is that you switch this on and suddenly you see a meaningful lift Because the range is expanded, right? Now this is what I call a true reconcession. Then I don't know what's called the others, maybe let's You're better than me picking the names, which are simply a financial arrangement Where the brand says, I will ship to you the 300 SKUs that you're getting every season. I want the full margin. You shoot me back what you don't sell. So it's a sell or return deal. This is This doesn't change the game at all for the consumer. So the consumer still sees the same 300 SKUs, nothing changes. The retailer has a lower margin. The brand benefits by having a higher margin and control over platinum merchandising. So it's a deal that whilst it is good for the brand, It's not advantageous necessarily for the retailer. It could be in terms of stock risk, etcetera. So the consumer doesn't change absolutely anything. And I think this is where we come in with a fundamentally different proposition to brands. So brands like February today, for example, can go to all their department stores, all their retailers And say, use this integration because this integration gives you access to 7,000 SKUs With one single integration, I think this is very exciting. This can be revolutionary and accelerate the brand's And be a win win proposition for the retailer who expands the range For the consumer who sees an expanded range and many unique products are previously available and for the brand that doesn't need to take risks And allocate parts of stock across dozens of retailers and department stores. So we're very, very excited. We think we have a unique model, we've got 6 years 100 of 1,000,000 of dollars of technology investment that we do every year, as you know. We now have 550 e concessions ready to go, including all the top, I think 90%, something percent of the top 30, 40 brands on our platform are only concessions with us. So we see this as very exciting developments, including in Beauty, but I'll pass the baton to Stephanie on that one. Yes, the idea is to operate mainly as a 3P eConcession business, as we have done with fashion On the market, Jason, those are the main conversations we're having with the brands, the large ones, ZENBA and the indie brands. But the idea is similar again to how we We've done it with fashion, complement that with 1P to really offer unique products and really be able to We're nimble and react to customer demands, and we're planning to do that through brands and also think about some of the 1P original opportunities we might Around Beauty. So we're really thinking about it in a similar way in that respect. But the way we think about it is that really We can enable an industry, so we can enable brands, multi label, And we've really had a good response from the industry. On your second question about customers, 2020 has been really interesting and an incredible year in terms of new customer acquisition. We've acquired Nearly 2,000,000 new customers. Quarter 4 was 500,000 new customers. So you can imagine that we've been monitoring these customer cohorts very closely to try and understand where they're coming from. And importantly, how can we keep them and retain them through our platform? So we've done pre brand campaign surveys, post brand campaign surveys. And we're finding a few interesting data points for you. We're finding that quite a few of them are new to online, and they're coming, for Example, from department stores. And this, I think, speaks to the structural change that we're seeing in the industry where people are moving From offline to online, so what we found supports that. And we're also finding that we're point, we're acquiring a higher proportion of these new customers to our full price business, and this is in line with our strategy, which Elliot and Jose talked earlier about Focusing on full price. But what this means is that this is a higher quality customer, and we've seen increased repurchase rates. And in the same vein, we're seeing more customers acquired through Super Brands. So what we mean is the absolute top tier of brands, and again, those customers are higher quality customers and have better repurchase rates. So we've seen Our 1 month, 3 months and 6 months repurchase rates are higher from 2019 2020. And then in terms of geos, we've seen, as you might expect, You know, huge success in China with the repatriation of spend, but we've also seen, success in emerging markets Where customers have discovered us and so markets such as Mexico, for example, where we've acquired lots of new customers. So we really have a lot of pockets of opportunity for 2021, not only to continue doing what we're doing and acquire New customers because COVID was only an accelerant, but everything we were doing has contributed to that, but also retaining this huge base of customers. And then, Luis, on guidance, Elliot here again. Obviously, we think 2021 is a super exciting year for Farfetch. As you point out, there is a lot of moving parts. And what we've done in setting the guidance is really focus our goals on 2 things. The first is delivering sustainable levels of GMV growth, and the second is ensuring we grow ahead of the market and capture market share. And we believe the 30% to 35% year on year growth ticks both of those boxes. We obviously are good at seizing You saw last year, we set out initially to deliver $2,500,000,000 and yet We set up our growth to deliver $2,750,000,000 on the marketplace sorry, not the marketplace, the overall digital platform and growing customers At the same time, so if we see opportunities, we'll obviously chase those opportunities down. But I think it's worth pointing out, As we head into Q2, especially we'll be annualizing the launch of Harrods. So if PS becomes more like for like from Q2 onwards as opposed to incremental growth over the last 9 months so far, we also have on the marketplace An annualization of the very high numbers of new customers that we saw from Q2 onwards. So we're expecting The growth will be front end weighted, as we just said earlier on, at 50% to 55% GMV growth For the Q1 and then as we start to annualize those impacts from last year, what I think you'll see is we're going to skew growth back Towards more retained customers, including those customers we acquired in the last 12 months, obviously, last year, we were skewing growth towards those new customers. This year, we're going to see growth skew back towards customer retention from our customer base previous to 2020 and those acquired in the last year. On returns, I'm not seeing any significant movement either way, to be totally honest with you. I think that's fairly neutral for the year ahead. So it's all about order growth on the marketplace to drive what we're seeing in terms of the GMV year on year. In terms of take rate, a couple of things to point out here. First of all, the take rate includes all revenue across the digital platform from all third parties. On the marketplace, we're actually seeing commissions go up year on year. So despite the some increasing brand concession mix, underlying commissions are actually going up. We're seeing 100% retention of the top 100 marketplace participants at the same time, so they're clearly seeing value that's being created. But as if peers has grown over the last 12 months, we've seen A lower take rate start to flow through. But actually at the end of the day, it's order contribution that matters because FPS drives higher order contribution And you have seen that increase over the last year, up 3 10 basis points in the last quarter. And ultimately, that's what we're focusing on. So guidance for this year is Good sustainable growth, market share gains, improving order contribution, driving through the leverage of the fixed cost base, Allowing us to invest in the brand into China, into the platform and then deliver 1% to 2% And we have time for one last question. Our final question comes from the line of Ed Yruma from KeyBanc Capital Markets. Go ahead please. Your line is open. Hey, good evening, guys. Just two quick ones for me. I guess first, on China, how will it be reported on the P and L going forward, will you segregate what the JV is doing versus Farfetch individually? And then just as a broader question, I know it's been a Ed, I didn't quite catch your second question actually. So maybe we can come back to what that was. On the first question, quite a short answer, no, we won't be breaking out China between the app or Farfetch All the new JV, it will be all reported as our digital platform GMV, as all other JVs that we have and channels. I missed your second question actually, if you're still ready to repeat. Yes. The bigger picture question, you guys have done a great job at reducing demand generation expense, I know you kind of shifted a little bit into free shipping. I guess kind of looking back on 'twenty one's levels, are these sustainable levels going forward? Or do you think you'll need to reinvest in that line? Thank you. The yeah, There's 2 things happening here that are really driving underlying reductions in demand generation. The first is our use of data. We've got more data in terms of luxury participants now than anybody else. And the marketing team has built a fantastic engine to be able to use that data to really target customers and shift them away from High cost channels towards low cost channels and retain via the app or through organic or direct traffic and also allow us to space and really sort of focus on options where we know we're going to get more conversion because the data is telling us we've got customers here that look like customers that will shop with us. So over the that's an inherent saving that we believe will carry on moving forward. And then the second is everything that Stephanie has been talking about in regards to the investment around the brand and our engagement with customers And then only on Farfetch Way, whereby we have so many unique opportunities to speak to customers from our boutiques, our brands, The curation that we have our editorial and content that will allow us to be able to continue to engage with customers, particularly on the app again, Which was 55% of our GMV in the last quarter, and that will allow us to continue to lower that demand generation spend. You saw a significant reduction year on year in Q4. Now I think as we touched on around China, we do want to leverage the asset And we do want to lean into the new opportunity. So we will redeploy some of that short term back into China. But over the longer term, as we push order contributions time, we will see demand generation expense come down. Terrific. Well, I think that brings us to the end of the call. Thank you all for joining us. We look forward to updating you on our next quarterly earnings call in the coming months.