Revolutionizing Luxury Shopping: The Future of Digital Experiences | Farfetch | PI Apparel

Hello. Hi, everyone. It's a pleasure to be here today with you. I'm Filipe, and I'm head of open innovation at Farfetch. We are identifying new growth opportunities for Farfetch, testing them, piloting them, and scaling them, always in partnership with the startup ecosystem. I'll just need some hands up. How many of you know about Farfetch? OK. Most of you, but still some hands, don't know what we do. So Farfetch is the platform for the luxury industry. And we are connecting curators, creators, and customers. And pretty much the most visible part of our work is made available on farfetch.com, which is the marketplace. But since then, since the beginning, a lot has happened. And the company has developed to become a larger group. And we also offer our white-label e-commerce solutions for brands and retailers like Harrods, for example. So today, we're going to share with you our journey in terms of the digital experience evolution and the work we've done so far in 3D and virtual try-on as well. These are just some of the examples of the collaborations we have done with brands. So you might recognize some of the products, from Chopard watches to Burberry handbags, and these have all been part of campaigns. Let's go through the overview. So first of all, why is Farfetch investing in digital fashion? What it is, what is the large opportunity here? The second point is how we actually are executing and delivering on this opportunity. And the third point is around what do we see as next? For this space. I think it was very interesting that before someone asked about when are we going to be ready to leverage 3D assets in a PDP, in an e-commerce experience, and for Farfetch, we are doing it already now. And we are doing it with quality and scale. So we want to share that with you. So why is this such a large opportunity? And what does it mean, digital fashion, for Farfetch? So for Farfetch, the digital fashion opportunity encompasses all of the extended reality experiences. So at the core, of course, we have the 3D assets. But then with these 3D assets, we are able to build incredible experiences from augmented reality to mixed reality and then also virtual reality. In terms of augmented reality, we are just superimposing these virtual objects in a real world. When we talk about mixed reality, our most common use case, it's about virtual try-on. Here, what you'll see is again, there is a superimposition of the object, of the virtual object. Let's say here's some sneakers in the real world, but there's also some interactivity. So as the body moves, the object moves. Then the virtual reality is a fully virtual environment. So probably what would be the most common use case would be gaming, for example. And this is all an extension of the real-world environment. So when we looked at this space in 2019, we started realizing in terms of trends that this is a large-scale opportunity in terms of customer adoption as well as a commercial opportunity. So more than ever is important to capture Generation Z wallet. And by 2025, it is expected that 75% of global population would have adopted AR at some level. The second pillar, it's really about elevating the shopping experience, and in this case, the digital shopping experience. So in the past, probably you've heard about AR use cases and mixed reality use cases within the entertainment space. So pretty much on social media applications, filters. What has now changed is actually that AR is a powerful tool in terms of product validation. So when customers are going online, they now want to use these applications in order to validate that they're doing the right purchase before they actually buy. So the majority of users already has this expectation from AR and not just simply an entertainment kind of experience. And then the third bucket, it's really about all the endless opportunities. So beyond the 3D AR experiences that you see today, there's also endless opportunities in terms of the virtual reality world. More than 80% of the users have told Vice that they already purchased a virtual goods. And not all of them are actually crypto users. So it's not a niche thing anymore. It's pretty much here and now. Right. Okay, perfect. In terms of industry trends, we see this is going mainstream. When we look at Google, you now can embed 3D assets within your search experience. We also can see that large retailers like Amazon are adopting these experiences at scale. And the same with Snap. Snap has done a lot of partnerships as well as acquisitions in the last year. We also see that although the trend is global, Asia is still ahead. And this is because of the tradition with gaming and so on. And then in terms of the third bucket, we are starting to see the emergence and success of digital-only fashion houses. And we have here an example with the House of Blueberry, but we could also be talking about companies like DressX. They're selling millions of digital assets to be used in these virtual worlds or in your social media platform. And why is luxury so interested in digital fashion? So, luxury is the perfect playground to be able to build incredible stories through the creativity of these maisons, and make the technology shine. It's also the space where there is a lot of space in terms of return on investment because actually the price of the items allows for this. And of course, customers have high expectations about how they will see the items, how can they imagine these items. So we are going back in time. So the first example we have here is from 2018. This is the Balmain collection where the brand decided to use virtual models. So these models do not exist. They are just virtual models, as I said. Then a bit closer to now, we have Balenciaga, where they showcase their runway show in a gaming experience. This is, again, an immersive way to really tell the story about the products, about the collection in a more interactive, immersive, and as well as an experience that resonates with the new audiences. We also have the example of Louis Vuitton, where they use these beautiful videos and experiences to tell the story about their iconic trunk in hundreds of windows of Louis Vuitton across the globe. And the last example that I think is quite interesting is actually a pivotal moment, I would say, in terms of the digital fashion experience. Is when we start seeing not only AR experiences and 3D experiences for the storytelling, branding use case into actually the initial tests of AR for the shopping funnel. And this is the Gucci virtual try-on experience already a few, a few years ago. So it's very, very exciting to see brands going from just a use case in terms of inspiration to actually a shopping journey use case. And as you see here, in this case, the app installments increased 3 times, and there were 20% conversions from the Virtual Try-On users. So what has been our journey with 3D and Virtual Try-On? So before going into that level of detail, I want to share with you pretty much what is the open innovation model for any of you who have not heard about it before. So pretty much what the Farfetch open innovation team is doing is we have an incredible team of 2,000 product people and engineers that are building incredible infrastructure for commerce, the backbones to make these sales and this operation work at scale. Having said that, as an innovative company that is supporting the industry disrupt new technology paradigms, we need to keep pace, right? And we need to be able to play with different technologies and integrate these technologies and go fast and offer this to the industry. So what the open innovation team is doing is pretty much identifying what are these type of opportunities that we want to explore, but we don't want to build it ourselves. We want to partner, invest, or acquire. Okay, and how do we do this? We have a small team that is pretty much identifying the trends, validating them, identifying who are the right partners, the best founders, the best teams that we want to work with, and then testing. And if our tests are positive, scaling them and thinking about what is our scaling strategy. Is it just to continue through partnership? Is it a mix between partnership and investment? Is it an acquisition play? And pretty much we look at around 500 companies every year. We have made more than 30 investments in the last 5 years. We do around 30 active partnerships right now, 7 follow-on investments and acquisitions, and we do 2 accelerator programs every year. Right now we are focusing in terms of Web3, um, as a team. So in terms of the open innovation methodology, so we split our, um, methodology at 3 stages. We have the initial stage where it's source and create, we're identifying the area of opportunity. We have the test and learn phase where we're doing several tests at different scale, and have— and then we decide on what is our scale and grow Plan. So in 2019, we started seeing the incredible adoption of AR in applications like Snapchat. We're talking about hundreds of millions of users using these lenses. But there was still no thesis and no hypothesis around, does this work for the shopping journey? Do actually people shop more if you offer them this type of experiences, not in a social media environment, but in a commerce environment? We also had no internal solutions and we knew this was very, very specialized and very, very expensive to build it ourselves. We're just not well positioned to do it. At that moment in time, we also encountered through our ecosystem analysis a team called Moana and we were very impressed at the initial stages what they were able to do in such a short time in terms of realism. So we felt actually we found a partner that can set up the standards for the luxury experience, which is very, very dear to our hearts since we operate in the luxury market. So there's some key considerations we need to have when we sell luxury products. And this realism is very, very important, especially if you're supporting your clients to understand if that product really looks good on them. We drafted a proof of concept proposal. We worked with our internal product teams as well to really understand if this would fit the problem statements that our customers have when shopping online. In 2020, we launched a very limited-scale pilot. We had 16 sneakers available in virtual try-on in a campaign with one of our brands, part of the group, so Off-White. With a very short integration cycle, it took around 4 weeks to do the integration of the SDK. The most challenging part I can tell you was all the 3D asset creation. Back in the days, we were shipping items abroad to be scanned, and then items needed to come back. So it was an interesting first project. And I'm very happy that since then, a lot has happened and a lot of evolution has happened in terms of 3D asset creation. The metrics were incredible. We saw an uplift in add to bag. We saw uplifts in conversion rates. In terms of the experience, customers loved it. And this is the kind of experience and feedback we wanna hear. It was very, very obvious and visible there was something here. We then went into 2021 and what we wanted to test was a bit different. We knew customers loved it. But now the question was, can we actually produce more 3D assets? Does it actually work at higher scale? And would we see the same type of results and unit economics if we would scale this experience? So pretty much, we were able to achieve the 500 sneakers in virtual try-on. And instead of a before and after methodology in terms of our analysis, we were able to start drafting the A/B test which is very, very important from our perspective when we work at scale and we need to make larger decisions on what we do next because it allows us to have statistical significance. So we're testing scalability but also commercialization. We also asked a few of our brand partners, would they be willing to pay to actually have these experiences available on the marketplace to differentiate their supply against others? And the answer was yes. That year, we closed several campaigns that we sold to brands on Virtual Try-On. And we also tested new categories. Is this only a sneaker play, or can we actually leverage the same technology to really cover different types of categories? And we had a big success with the launch of the watches Virtual Try-On that we launched with Chopard as we shared an image before. So pretty much we were ticking all the boxes. And we knew very, very few players in the market could actually have this experience and could build it with that level of realism. So in 2022, Farfetch acquired Wanna to scale these experiences. So Wanna Fashion basically allows us to create, create, scale, and commercialize these innovative digital experiences that bridge the gap between the physical and the digital. And we're not just doing this for Farfetch.com. Because we are a platform, we do this for the love of the industry, and we make it available to our B2B partners. And this is to make our platform go from transactional into experiential. And we can proudly say that some of the best brands already were working with Wanna. Which gave us a lot of comfort and really made sure that actually this is luxury vetted. Some of these brands include Gucci, Valentino, Dolce Gabbana, and many more that are not here. The reason why we made the acquisition is we saw this was a huge commercial opportunity. There were only very few people doing it well. The second bucket was we knew this is a paradigm shift for the industry and we need to support the industry adopt a new technology. The third bucket is, we knew alone we would not be able to do it. We needed highly specialized teams, and Moana had an incredible team of 80 people that would help us build this vertical internally but for the industry. So here's a case study. So this is a case study that we did on our iOS app it's an A/B test with 1,200 sneakers, so different styles. And these A/B test results talk for themselves. When an item has Virtual Try-On available, it has 22% more engagement than the same item without Virtual Try-On. So that means if you're a luxury brand, you will have a lot more clients engaging with that product just because it has this feature available. So from a media opportunity and product engagement opportunity is outstanding. Then when we look at revenue, so we measure it in GTV for Farfetch because we are marketplace, so gross transaction value, we are also seeing on the A/B tests we were actually selling more, 3.4%. And we knew this was ROI positive. So this is the kind of experience when you move from 2D flat into 3D personalized and immersive. You can really tell, does this look good on me? Do I like it? And more than 2,000 sneakers have now virtual try-on available, and we will continue to scale it. Beyond the sneakers, we are scaling a lot more categories. So the first image you see is some espadrilles from Jimmy Choo, which pretty much is one of the expansions we are doing beyond sneakers. The second video is our makeup virtual try-on, which is quite unique because it's very, very light from a performance perspective. It's very fast and very realistic, which may not be very significant if you're a very small brand. But if you have hundreds of millions of clients going into your app, it is extremely important that this SDK is performant. Otherwise, we are talking about millions in opportunity costs. And the third image you see, which is the watches. So we are scaling all of what we call mature virtual try-on categories to 10% of our SKU coverage of farfetch.com. Not only is this a great opportunity in terms of product validation conversion rate, but as I mentioned before, this is a media opportunity. This is a way to have more clients engaging with your product and therefore then shopping more. But this is not only what we're doing. There is iteration after iteration after iteration on how to make sure people move from a single-item type of experience into a multiple-item immersive virtual shop. So we recently launched this experience where you can try for sneakers, watches, and beauty in this immersive world. And you can basically swipe and try on, let's say, different styles and compare. There's endless opportunities here. The recommendations can be powered to suit your aesthetics. The list of products can be monobrand with just one brand featured on the carousel. And we are seeing that people just continue to engage with more products and they really like to see the comparisons. And again, this is on top— the results we are seeing here are on top of the already positive results we shared with you of the A/B test. I love this picture. I love this experience. I think it's probably made me fall in love with this bag that I didn't like it so much before. So we also launched the 3D bag viewer. So we're expanding again the categories, the experiences that we are launching. So on the left, what you see is usual imagery when you go to a website. 2D, and on the right, we're not only giving a more immersive experience, but all our experiences are now solving as well for a size and fit opportunity. So what do you see in the first screen? You basically are able to see the measurements of the item, and you can also see what items can the bag actually hold. So again, this is just very practical and from a user perspective is enhancing how the shopper feels about the confidence on purchasing this item. So right now this is not in A/B test, but we can share with you that 20% of the conversions that we see on bags are assisted by Virtual Try-On. So pretty much 20% of the purchases interacted with the 3D bag viewer, when we look at a 2-week window before. Beyond talking about virtual fashion items, we also are digitizing 3D models. So as part, again, of expanding the digital fashion opportunity, Farfetch has also tested and later on acquired a company called Allure Systems. What they do pretty much is they virtualize a model in 3D, and then we no longer are leveraging human models in our shoots for part of our photography. So this technology has been embedded in our creative operation studios, is now scaling, and it also allows us to have a lot more diversity and model inclusion as well. We've been able to roll it to 3 studios, and it really increased the productivity over all of the photo shoots we can do, maintaining the quality. So once you scale, it's very, very hard to maintain the creative standards. And what technology here is allowing to do is as we scale, we can maintain the quality standards. So we will continue to develop this technology. We'll continue to scale it. As well. But what's next? There are 3 pillars we're focusing on. There are still challenges, of course, in scaling 3D asset production. It's getting better and better. And we are going to move faster and faster. But this is one of the things, is making sure we move from the 10% catalog coverage into much higher. I think what is exciting— and also I wanted to share this with you— is when we talk about 10% catalog coverage, we are not talking about 10% of sales. Luckily, we basically have 10% of our best sellers, which can translate into 40, 50% actually of impact of revenue for that same category. The second one is new experiences. So there's a lot more coming up. A lot of the exciting categories that we cannot share yet, but that I do think people are already looking to test and explore beyond the accessories and bags, watches, makeup that we talked about before. And the third one is we will continue to nurture and invest in the improvements and iterate and continue to measure everything through A/B testing, which I think is very, very helpful because we can then share these outcomes to the industry and build better solutions for everyone. Another big topic are the AI developments. So in general, AI developments will allow for digital fashion experiences to have more quality but also be cheaper. It will be incredibly important to use generative AI to create content and lower the cost of content. It will increase the quality And some of the physics of the materials that we don't have yet today will be able to be done tomorrow in an effective way and scalable way. And then utility. The more experiences there are, the higher the ROI will be. Because with one 3D asset, you can actually leverage it at multiple touchpoints. And this is one of the trends that we are seeing. So I want to thank everyone for coming, and let me know if you have any questions. There's one question, or? Ah, we wait one minute. All right. If there are no more questions, I'm also available outside if you want to reach out. Thank you, everyone. Oh, there— how can brands that already create their 3D assets leverage them on Farfetch? OK. I didn't know. So you had a timer for 1 minute. No, this was all— OK. How can brands that already create 3D assets leverage them on Farfetch? So it depends on the 3D asset you have available. So for example, if you already work with— if you're a brand that already works with Wana, it's very, very easy for us to integrate in the Farfetch.com experience. And actually, we have already some clients that started as B2B clients and then become B2B+ marketplace clients. That's one of the big advantages is it just increases the audience and the exposure. It is very hard without knowing exactly what's the 3D asset specifications because we have certain guidelines. But let's talk outside. And revolutionizing the luxury industry, the future of digital experiences. That's a good question. We're going to be able to share more soon, but I cannot share today around clothing and apparel. And of course, that's the big categories that everyone wants to talk about. But it's coming. How are you creating your 3D products, in-house or via suppliers? It's a hybrid experience. So pretty much we have played a lot in that space, and we have analyzed what is the best way to create 3D assets for each one of the categories. Because sometimes the best way to create a bag is not the best way to create a watch. So pretty much we have a category-by-category approach. We are more and more working with, especially for sneakers, for example, putting some of these structures in-house. Having said that, we have an extended ecosystem of partners that we work with for each one of the categories. And this is just part of Farfetch DNA. We will always partner. I don't see it as we will only do it internally. This is highly complex. There's always great new companies emerging with incredible technology. So we will definitely— if there's anyone in the room with great technology for 3D asset creation, please come and talk with us because we are partnering across the board there as well. What about denim in 3D? It's an interesting one. I don't have an answer for you yet. Maybe this can be connected with the clothing and apparel depending on the use case. I don't recall any use case we have done with denim. Not yet? You showed the example of the Balenciaga. Would that be possible to also see the inside of it with the 3D technology you have? Not yet. But again, we are always evolving, and we know this is one of the big requests. And we are always talking with brands. We're always talking with clients. So pretty much very likely in the pipeline. Thanks for that. Is Farfetch noticing any disproportional interest across digital categories? More interested demand in sneakers versus clothes versus watches. We have different levels of testing then, right? We are more mature on the types of testing we're able to do on the categories where we have more SKUs. It's a different testing approach than the testing approach we have when we launch something new. So, it's for us how we are comparing and what gives us a good sense of this is going in the right direction is the percentage of assisted conversions is not too dissimilar. So it's pretty much we are seeing the same levels of engagement in the different experiences. So people basically that use the experience, they are converting at a similar rate in that 2-week window. That's it. All right. Thank you, everyone.