Farfetch Ltd (FTCH) 2021 Q4 法說會逐字稿

Hello, and welcome to Farfetch's Fourth Quarter and Full Year 2021 Conference Call. Joining me today to discuss our results are José Neves, our Founder, Chairman and Chief Executive Officer; Elliot Jordan, our Chief Financial Officer; and Stephanie Phair, 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 could cause actual results to differ, please see the Risk Factors section of our Form 20-F filed with the SEC on March 4, 2021, and our annual report on Form 20-F for 2021 to be filed with the SEC.

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 José.

Thank you, Alice, and thank you all for joining us today. I will provide a brief review of 2021 before discussing how we see in 2022 and beyond develop across our platform, marketplaces and brand platform. Over the course of the COVID-19 pandemic, the luxury industry has once again proven its resilience with most luxury houses reporting 2021 revenues above 2019 levels. During this time, the secular trend of the move from offline to online also accelerated, and we believe this shift is permanent.

With digital sales mix expected to grow from an estimated 22% in 2021 to 30% by 2025 as the leading global platform for luxury, we see tremendous growth ahead for Farfetch. We exited 2021 with a business almost double the size in GMV as compared to 2019. This is on top of the ambitious targets we have been delivering on as we've exceeded our targeted 30% CAGR in each year since our 2018 IPO and we expect to continue delivering on this targeted CAGR through 2022. I believe this is absolutely remarkable and unrivaled in the luxury industry at our scale.

In achieving this strong growth, we also stayed disciplined as we navigated many external headwinds, including digital services taxes, and the greater-than-expected impact of Brexit, inflationary pressures across our cost base and IDFA. The full cost of this amounted to tens of millions of products in 2021.

This focused execution resulted in an expansion of our adjusted EBITDA profitability. And I am delighted to share Farfetch achieved a historical milestone with our first full year of profitability at the adjusted EBITDA level, following a decade of strong growth and reinvestments to build what is today the leading global platform for the luxury fashion industry.

But what makes us most proud is the fact that we stood by our global fashion community, supporting our partners right from the start of the pandemic via initiatives such as our #SupportBoutiques campaign and leveraging our platform to enable the continuity of their businesses while their other channels were unavailable. They have reported that Farfetch is a crucial channel, particularly so throughout the unprecedented crisis, highlighting the very core of our mission to be the connector between curators, creators and the global community of fashion levels.

We emerged from this pandemic stronger than ever and in Farfetch style, an industry leader with more strategic brand relationships and an unmatched proposition for our consumers.

Our Marketplace business is also healthier than in 2019. Like many luxury groups, we have taken the last 2 years as an opportunity to shift our business increasingly to full price sales, away from markdown. This has been a deliberate strategy stated clearly by us in 2019 and executed brilliantly as we reported over 30% annual growth even as we transitioned to a slower growth of markdown products.

In Q4, 2021 full price GMV growth significantly exceeded overall digital platform GMV growth at 33% year-on-year and 118% on a 2-year effect. Markdown by contrast, grew mid-single digits in Q4. And 2-year full price GMV growth for full year 2021 and grew a staggering 5x as fast as markdown GMV.

As always, we take a long-term view and operate in alignment with luxury brands and have supported many brand strategies to move to full price only. Of the top 10 brands on our Marketplace, five now follow a full price strategy for the e-concessions. And our own BrownsFashion.com has eliminated all markdown sales for over 1 year. And is now a 100% full price destination.

In 2022, we expect to continue to deliver market share capturing digital platform GMV growth while executing on our strategy to continue driving a much larger full price mix towards an even healthier business.

With that, I would like to turn our focus to our long-term opportunities across our platform, our marketplace and our brand platform in pursuing our vision to be the global platform for luxury.

First, our platform. In 2021, we made significant strides in our platform capabilities, including expanding our e-concessions as a service model which Harrods as leverage to significantly increase the number of SKUs they can offer from Gucci, Burberry, Brunello Cucinelli and Zegna and announcing plans for the JV with Clipper Logistics to build out our fulfillment by Farfetch proposition and offer a dedicated fulfillment solution for the broader luxury industry.

And with respect to connected retail, where we continue to expand with Chanel, Thom Browne and BrownsFashion, we further broadened its use case via our boutique's pilot that enables online to off-line activations for our boutique partners and signed on to design future retail experiences for Matarazzo and Printemps, new luxury retail development in Sao Paolo and Doha respectively.

Over the last 6 months, we've also acquired 3 small but exciting tech businesses aimed at further cementing us as the platform for the industry, Jetti, Luxclusif and Allure. These bring to bear respective capabilities in Marketplace as a service technology, B2B expertise for luxury resale and the virtual creation of higher quality or model images.

The significant momentum behind our platform in combination with the fact that the industry has really taken notice of the unique capabilities of the Farfetch platform at the time when large companies have once again opened to significant technology partnerships to bolster their digital capabilities, we need to feel increasingly confident that 2022 will be a transformational year for FPS.

I want to spend a moment on the previously disclosed discussions with Richemont, following our announcement on November 12, 2021, Farfetch remains in discussions with Richemont about the potential expansion of our existing luxury new retail strategic partnerships. We were continuing to discuss a potential deal, which includes the leveraging of Farfetch platform solutions to power Richemont's Maisons and Yoox Net-a-Porter YNAP, the participation of Richemont's Maisons in Farfetch's marketplace and a minority investment in YNAP by Farfetch.

However, there can be no guarantee that we will be able to sign this deal or any of the options under consideration. We will make further announcements if and when refires.

In parallel, we are also in discussions on several other enterprise-grade FPS deals in our exciting pipeline, watch this space.

Turning now to the marketplace. While it is the largest global destination for online luxury fashion within the grand scheme of the $300 billion luxury industry. The Marketplace represents less than 2% share of the personal luxury goods market, and we see significant growth potential behind this business. This incredible growth potential is also broad-based geographically as we have a presence and then to be a leader in all major luxury markets in the world. U.S., our largest market, continues to be a huge opportunity and an area of focus. In 2021, the U.S. performed very well, growing above the average of our Marketplace, driven by our unrivaled luxury range, which is especially appealing to the sophisticated American luxury consumer.

In 2021, we also continued to gain customers and grow Mainland China GMV ahead of the marketplace, predominantly through our proprietary app. Although we are pleased to share that less than 1 year into our launch on Tmall, our newer channel already represents more than 10% of 2021 GMV in this market.

Our strong performance in China and discuss the differentiation we offer through our cross-border supply, making available brands that are not readily available in China. This is an advantage that we plan to lean into, particularly in 2022 when international travel options out of China are expected to remain limited.

Our third leg of our platform strategy is within New Guards, our brand platform. New Guards has a history of exciting collaborations including creating one of Nike's most powerful collaborations ever, Nike Off-White. They are 1 of the few teams who have the DNA to being a crossover of luxury and sports to life.

We are tremendously excited about New Guards recent addition of Reebok with portfolio via an agreement with Authentic Brands Group, ABG, to become the exclusive partner to create, curate and bring to market luxury collaborations upon their announced acquisition of the brand as well as a car operating partner for Reebok across Europe and distributor for older brand's premium lines in over 50 countries, including U.S., Canada and most of Europe.

Reebok has an incredible heritage, and we have developed a fantastic rapport with ABG we have a very strong strategy to reignite this iconic brand. The addition of the Reebok premium exclusive license is also double down on our strategy for New Guards to create significant buzz and organic traffic to the Farfetch marketplace as well as additional business for FPS, which will power the digital sales and these licenses.

As we approach the 3-year anniversary of New Guards acquisition, this strategy has been tremendously beneficial to Farfetch as well as the individual brands themselves, with direct-to-consumer sales on Farfetch channels, growing from 2% of NGG revenues at acquisition to be, by far, the largest single channel for these brands to reach consumers globally.

On the 28th of February, New Guards will stage a celebratory Off-White show during Paris Fashion Week, honoring Virgil Abloh's unique contribution to the history of fashion.

I will now hand over to Stephanie to update you on all things brand and customer. Stephanie.

Thank you, José, and hello, everyone. It's great to speak with you all today and give you an update on our progress on the demand side of our Marketplace business.

Over the past 2 years, we have acquired on average 500,000 new active consumers each quarter. And as we remain focused on retaining these customers, I'm pleased to share that in Q4 2021, we continue to see improved retention compared to 2019 levels. Our Access loyalty program provides a framework for us to build a strong relationship with our customers. And in 2021, we saw customers upgrading tiers at a higher rate as compared to 2020. And as customers move up the tiers, we see increased average order values, frequency and retention all the way up to our most valuable customers or private clients.

As we aim to continue to improve retention, some of our core initiatives are centered around leveraging our first-party data for a continued focus on personalization, including personalized communications, which have delivered a conversion rate 50% higher than non-personalized messages over the past few quarters. And we are also increasing Access loyalty program engagement during early stages of the consumer life cycle to drive repurchase rates, which have a high correlation with customer retention.

More generally, I would like to spend some time today outlining 3 main areas of focus for 2022 on the customer front. Firstly, driving a balanced and efficient approach to performance marketing and brand investment. Secondly, driving advertising sales by our Media Solutions business unit. And thirdly, the launch of Beauty.

Starting with our approach to marketing. We want to be the most loved brand in the industry, building an emotional connection with our existing audience and acquiring new customers by playing to our only on Farfetch strength around choice, global community, our millennial Gen Z customer base, and as a marketplace, our ability to serve multiple points of view and stay on the leading edge of innovation. To do this, we continue to implement a full funnel marketing strategy, combining our performance marketing expertise with mid and upper funnel brand building activities.

This strategy has delivered our highest-ever brand preference and consideration in Q4 2021. And this is also reflected in the partnerships with brands who see us as a preferred marketing partner for product launches and exclusives, leveraging our editorial positioning, our global reach, access to multiple channels in China and our innovation capabilities, thus creating a flywheel between our seller brands and our customers.

Just yesterday, we partnered with Balenciaga to be their exclusive global multi-brand channel for the highly anticipated YEEZY GAP engineered by Balenciaga collection. We're thrilled to be able to offer this much hyped colab to Farfetch consumers around the world, including in China, where we also launched the collection on Tmall via Farfetch. These partnerships are as important as ever as the digital marketing landscape is changing, and we see the importance of balancing paid traffic with organic traffic-generating initiatives.

On our last call, we discussed these changes in the digital marketing landscape, including challenges related to IDFA and laid out the initiatives we are taking to mitigate these headwinds. And as we had expected, these actions drove a sequential recovery in demand generation to 21% of digital platform services revenue in Q4, an improvement from 23% in Q3 2021. Specifically, we have continued to develop and enhance our digital marketing capabilities, leveraging our 1P data and tech resources to drive efficiencies across multiple channels, broadening our lower funnel channels and increasing our investment in mid-funnel activities.

In 2022, we plan to continue this approach to marketing, focused on being top of mind across different customer touch points with both paid and nonpaid activities. This includes also leveraging our media solutions capabilities and brand partnerships which, in themselves, provide valuable marketing moments to the customer.

This leads me to the second area of focus for 2022, advertising sales via Media Solutions. As luxury brands increasingly recognize our 1P data capabilities and the value of our relevant community of luxury fashion shoppers, Media Solutions continued to gain traction in 2021. Throughout the year, we served campaigns for a diverse mix of over 85 partners, including brands such as Gucci and Prada which run multi-part campaigns. Through these campaigns, customers are able to engage and interact with their favorite brands while our partners amplify the reach and success of their collections. With 1 of our recent campaigns delivering a total reach of over 20 million visitors, more than double the monthly traffic estimated for some major brand.com sites.

As an example of how brands leverage our innovation and editorial capabilities, in Q4, we partnered with Netflix and Balmain on the launch of their capsule collection for the release of the movie, The Harder They Fall, which was exclusively launched on the Farfetch marketplace, Netflix shop and Balmain's direct channels. The campaign included social content featuring 3D visuals woven into the recreation of the movie set pieces combined with editorial elements highlighting the limited edition Balmain collection. This resulted in a 66% uplift in Balmain product listing page views during the campaign period. Additionally, 88% of campaign clicks were from new to Balmain visitors, with an average order value of more than $950, around 50% higher than our marketplace average.

This year, we will continue to lean in to our Media Solutions business investing in developing our ad tech and programmatic capabilities, which will allow us to further scale our ad inventory, paving the way for media solutions to become a more material part of our business.

Finally, on Beauty. We remain on track to launch this category on the Farfetch marketplace in Q2. We will take a unique approach to beauty for both supply partners and customers, offering a differentiated experience and a curated offering.

As you will have read in the ramp-up to this launch, we recently announced the acquisition of Violet Grey, which will bring industry authority as well as a curated selection of products to the marketplace. Violet Grey is a cult favorite beauty destination with elevated content, which has built a devoted community who trust and love the brand for its expertise.

Our overall strategy for this new category is to partner with beauty brands through an e-concession model, which differentiates us from other multi-brand online channels and aligns well with brand's own direct-to-consumer strategies. Combining this with our 1P business via Browns and Violet Grey as well as exclusive supply from New Guard, we'll be able to offer a relevant mix of both larger established and Indie brands.

Our expansion into beauty will also provide brands an opportunity to reach our audience of tens of millions of targeted luxury visitors through co-branding and advertising sales opportunities.

And now I'll hand the call over to Elliot to discuss our financial results and outlook.

Thank you, Stephanie, and hello to you all. It is good to speak with you today. I'd like to share with you the key points from our Q4 2021 financial performance a quarter that demonstrates our overall strength, leadership within the industry and our ability to quickly adapt to a changing environment.

Before looking at Q4 in detail, I'd like to summarize the 2021 full year position. We achieved profitability at the adjusted EBITDA level across 2021 as a whole, making 2021 a milestone year for Farfetch. We added over $1 billion in GMV to deliver $4.2 billion of group GMV in 2021, achieving 33% growth over 2020 and driving 35% growth in revenue.

Our operating expenses, which include G&A and technology expense, increased at 17% compared to 2020, half the rate of growth in revenue, achieving significant scale and leverage and moving the group into full year adjusted EBITDA profitability for the first time.

In terms of fourth quarter 2021, we delivered group GMV of $1.3 billion, an increase of 22% year-on-year. Adjusted revenue of $571 million, an increase of 23% year-on-year. Gross margins of 47%, 95 basis points above the prior year quarter and adjusted EBITDA profitability of $36 million versus $10 million in Q4 2020. These results reflect strong performance across all 3 business segments.

First, within our digital platform, GMV was $1.1 billion, an increase of 22% year-on-year or 82% compared to 2019 as we continue to make significant share gains within the overall luxury industry. Most importantly, our digital platform powered $891 million of third-party GMV, up 23% year-on-year, which is an acceleration on growth from Q3. This GMV generated $271 million of revenue at a 30.4% take rate, a 160 basis point year-on-year increase which contributed to the 100 basis points year-on-year increase in the third-party gross margin to 67%.

GMV from first-party transactions on the platform grew 16% year-on-year to $161 million as we started to refocus first-party original towards a full price offering rather than attracting sales from higher levels of markdowns that were in place in Q4 2020. And we delivered growth from Browns in line with the overall marketplace. First-party gross margin decreased to 30% due to stock clearance activity.

Fulfillment GMV increased 26%, outpacing overall GMV growth, reflecting a higher pass-through to consumers of shipping and GT's costs. These costs to us reported within our cost of revenue increased 19% year-on-year. The revenue growth -- sorry, the higher growth in revenue versus the growth in costs represents the first time in several quarters that we have been able to reduce rather than increase our investment in subsidized or free shipping, improving our recovery on these costs and our platform gross margins.

Digital Platform order contribution margin increased 580 basis points between Q3 and Q4 to 32.4% for the quarter, reflecting several initiatives taken to improve profitability in the quarter and the years ahead. First, we updated consumer shipping rates and free shipping policies to reflect the cost inflation we have seen over the past year as well as sharing, shipping and packaging cost increases with our sellers.

Second, we implemented measures to address recent changes in the digital marketing landscape. As a result, demand generation as a percentage of digital platform services revenue was 21%, a 236 basis points sequential improvement from Q3 '21.

We continue to benchmark strongly on our lifetime value over customer acquisition cost ratios and I'm pleased to report that the Q2 '21 cohort of customers has recovered its initial acquisition spend within the first 6 months. Additionally, we have successfully renegotiated increased commissions to reflect the inflationary environment with circa 65% of our brand e-concession partners. And those brands have not only remained on the platform, but also increased their spring/summer supply by more than 100% year-on-year. In recognition of the unique value and attractive audience Farfetch delivers towards their own digital strategies. The financial impact of these increased commissions will be phased in throughout 2022.

The Farfetch Marketplace, which accounts for the bulk of GMV on the digital platform accelerated its year-on-year growth compared to Q3 on the back of our unparalleled third-party stock position and strong growth across a number of our key luxury markets.

Brand Platform revenue grew 13% year-on-year to $117 million. This was below expectations due to shipment delays we experienced in December. Palm Angels was the fastest-growing brand in terms of delivered wholesale orders in Q4 and now accounts for just under 30% of brand platform revenue.

Brand Platform gross margin was particularly strong in Q4 at 59%. This reflects a higher mix of Palm Angels' revenue and the state that we no longer recognize royalties on this brand in cost of revenue following our acquisition of 60% of the brand company as well as onetime benefits from cost recovery on current season collections and rebates from manufacturers in relation to shipping delays and production volumes.

Our third segment, In-store physical retail generated revenue growth of 64% year-on-year to $22 million and gross profit of $14 million at a margin of 63%, driven by an expansion of the higher-margin New Guards store network expenses.

The impressive GMV and revenue growth across the group in Q4 '21 was achieved with just 9% year-on-year growth in our operating expense base, which resulted in 410 basis points of operating cost leverage when compared to Q4 2020.

When looking back over the last 2 years, we see the investments in our technology and operational platforms have paid off and enabled us to nearly double group GMV against 68% growth and operating expenses over the same time period.

I'm happy to report a successful quarter and a successful year, which allows us to now focus on our outlook for 2022. At this point, it's worth reminding everyone that our mission is to be the platform for the global luxury market. Our long-term financial strategy has been to maximize our share of the $300 billion in sales within this market each year by compounding GMV growth of 30% per annum, strengthening unit economics and expanding our EBITDA margins. The strategy has been in place since our IPO and remains unchanged. Executing on this strategy and delivering steady progress towards this mission over the medium term is what motivates us and sits how we run our business.

Moving forward, we will align our guidance to this strategy, focusing our forward-looking statements on our annual targets rather than our quarterly outlook. We believe conversations with shareholders will be more productive if they are better matched with the way we operate and execute the business.

As such, looking at the year ahead, we expect to see continued growth in digital platform GMV of 28% to 32% for continued market share capture. GMV growth will be lower in the first half. In Q1, we are comping against 60% growth from Q1 2021, which was achieved due to a boost from first-time adoption of consumers to Farfetch during COVID-19 lockdowns and the incremental trade from Harrods in its first full year as a platform client. Growth from this partner became like-for-like from Q2 2021. GMV growth on the brand platform is expected at 20% to 25% in 2022.

We expect to see an improvement in unit economics over 2021 levels with digital platform order contribution margin in the range of 33% to 35%, driven by higher take rates on the platform and lower cost overall in relation to customer engagement and retention. Brand Platform gross margins are expected at 50% to 52%.

We expect 2022 operating costs to continue to grow slower than adjusted revenue, achieving further operating cost leverage. This is despite a reinvestment of a proportion of brand platform profitability into important brand-building activities, including runway shows and seasonal campaign initiatives. Including our hotly anticipated shows in Milan and Paris in the coming weeks.

Operating costs are expected to decline from 38% of adjusted revenue in 2021 to 35% to 37% of adjusted revenue in 2022. And therefore, in balancing growth, investment and overall profitability, we expect to see a further increase in adjusted EBITDA margins to 1% to 2% in 2022.

I look forward to speaking to you in May to update you on our progress towards these very exciting financial goals. José?

Thank you, Elliot. The Q4 numbers clearly show the strong momentum behind our mission to be the global platform for luxury as we enter a post-pandemic environment. During these last 2 years, the luxury industry proved its resilience, and we continue to execute on our strategy. As we transition to a new normal in 2022, we are the largest global destination for luxury fashion and are growing faster than the runner ups, capturing market share and profitably so.

All of this growth is even more impressive in light of our strategy to favor a full price strategy and shrink the markdown mix of our business significantly. With 2021 demonstrating our execution of our path to profitability, we now look forward to 2022 and beyond as a period of expected EBITDA margin expansion. All in all, we're looking at 2022 from a position of incredible strength.

Farfetch is a secular winner in a multi-hundred billion dollar opportunity and we're still just in the early innings of this exciting journey. I want to take this opportunity to thank all Farfetchers for continuing to build this incredible company. And now the team and I would be happy to take your questions.

(Operator Instructions) We will now take our first question from the line of Lauren Schenk of Morgan Stanley.

Great. I guess bigger picture, I think there was a lot of fear heading into the release today that you'd have to walk away from your long-term target of 30% annual GMV growth. It looks like you're on track to achieve that this year. But could you maybe discuss if there's been any change in how you're thinking about the medium to long-term targets or goals of the business? And then sort of near term for 2022, is there any way you can help us think about the contribution assumed from Beauty from Tmall, any other new partnerships you may have?

Thank you, Lauren. Look, I think first of all, this is an incredible secular growth opportunity, right? This is a $300 billion industry. Very resilient, recovering in 2 years and already back to growth. This is going to be a $500 billion industry in the next few years. It's still very underpenetrated even after COVID. So we're talking 23% online penetration, much lower than other apparel and other categories. This is going to change and grow to 30% plus by 2025 and with the leading platform. So this is a tremendous opportunity for growth for many, many years to come. We always said that our IPO that the target was to grow at 30%.

Of course, this needs to be seen in the terms of 2-year cases through these periods. But I think what is absolutely extraordinary is that we exit 2021 with strong momentum. We had 2021, which was great. Our business is twice the size as well in 2019 in terms of GMV. We ended the year with 33% growth, achieving profitability. And this is whilst we were executing on a transition to a full price strategy that we announced in 2019.

To give you an idea, just in Q4, full price grew at 33% and full price grew 118% on a 2 years effect, right? So these are very, very strong growth rates. And we are therefore very, very confident about 2022. You've touched on multiple vectors of growth. We have Beauty coming. We have what I think is going to be a transformational year for FPS.

We have, obviously, the announcement for the [rebar] license, which is still in a transition period in 2022 from Adidas to ABG and NGG. But in 2023 is a multi-hundred million business that we're going to add to the NGG portfolio.

We're building -- obviously, Stephanie talked about Media Solutions, very, very exciting. We're building multiple, multiple, multiple layers of growth in this business. And that's not just for 2022, it was the medium and the long term, right? So we're -- we look at our business in years, and we're executing on this strategy, which is a strategy of capturing market share. And now with expanding levels of positive EBITDA profitability. So again, we're coming into 2022 from a position of incredible strength.

Our next question is from Luca Solca of Bernstein.

Yes. Thank you very much. One question about your logistics architecture. The multipoint-to-multipoint architecture that Farfetch has been using seems to suffer in an environment where transportation costs are soaring. This is because the number of items that you can send in the same box is probably lower than if you were starting from a regional or a central warehouse.

I wonder whether this is particularly serious in the case of serving different customers like the Chinese, for example. What are you doing? And what can you do to offset this issue, please?

Luca, it's a great question and in fact, a great opportunity for Farfetch. For me, that's a glass half-full question. our very agile distribution model has served us well and continues to serve us well, allowing us to have between 5 to 10x the SKU count of our competitors without any additional risk for the boutiques and the brands that participate on the platform. It allows us to offer super fast delivery. We have same-day delivery in 20 cities to give you an idea, none of our competitors can even match anywhere close that. It allows us to -- we're just launched recently a pilot, connected retail pilots where we can direct customers to nearby stores. So this is a tremendous innovation that we bring into this industry.

Having said that, you correctly point out to efficiencies and cost efficiencies. And that's, in fact, a huge opportunity for the contribution, and we are absolutely laser-focused on that.

And there are essentially 2 ways to optimize the other contribution at the logistics level. The first is developing local supply were in major territories where our customers are. We have been very successful with that. We're now shipping from 50 countries.

Brands like Prada, for example, is an idea has 70 inventory points that we connected to in Brazil, in Tokyo, in several cities in the U.S., several cities in Europe, China, et cetera. And this is just an example. So the other super brands have dozens of inventory points as well. And this obviously means that we are in this case, shipping in a much more cost-efficient way.

And the other big bet is fulfillment by Farfetch. And so this is -- the great news is now being used by major super brands for the likes of the Kering Group, all the brands in the Kering Group now, (inaudible) Moncler, Prada, Valentino, they are now consigning and being fulfilled by our network of warehouses globally. So this is obviously the starting point, and we're developing that test with those brands.

Beauty is a new category that will be 100% fulfillment by Farfetch. 100% size items in one single box to your point. And obviously, we've seen the partnership with Clipper, which is very exciting, allows us to scale without investing our own CapEx, scale very fast, the space available in the multiple locations we are and also add new locations in a very scalable way.

So expect in the future, greater efficiencies on another contribution line coming from these initiatives, but also us continuing to leverage what is an incredible innovation in this industry. And when that is inspiring many other industries, you see these superfast delivery services, they are like absolutely incredibly popular with customers, and this is only possible when you have a multipoint-to-multipoint. That's the last thing to do. So we've cracked the has things and now we have an incredible opportunity in terms of size and profitability.

Our next question is from Louise Singlehurst of Goldman Sachs.

If I can ask 3 questions, if I may. Firstly, to Stephanie, please. Stephanie, you gave some really good sound like in terms of the customer loyalty. I just wonder when we're trying to reconcile the net adds versus what we're talking about in terms of the gross adds in the period. I think you mentioned around $500,000 a quarter.

So it implies that the exit rate or the churn rate of customers is going up, if I'm not mistaken. I wonder if you can just help us think about what that means going forward or if those churn levels should normalize now that we're annualizing post COVID. Also, is it possible to give us any metrics around net orders per customer or what you're seeing in terms of customer loyalty, people migrating from bronze upwards to the higher tiers in terms of contextualizing the loyalty.

And then my second question, if I could ask, Elliot, just with regards to the outlook for full year '22. You mentioned about the tougher comps for Q1. The digital GMV growth, I think the consensus is around 25%. I presume from the comments, we should definitely be looking at growth more weighted later on in the year, given that tough comp but I wonder if you could make any comment with regard to around that Q1 level in the consensus forecast.

And then my final question, if I could ask a question to José, please, with regards to China. We haven't had that much detail since the JV has been announced. Can you just tell us where you see the business in -- specifically for the JV in China relative to your expectations and where you hope the business to be at this point in time versus last year?

I'll start with your question, which overall is on the topic of retention, which, as you can imagine, has always been a focus for us at Farfetch, but particularly, of course, given the very high number of customers we've acquired over the past few years. And we're very happy we're exiting 2021 with a retention rate that is above 2019. And through all the efforts we've implemented over the past year.

And in fact, if you look at our active customers, we've increased that year-on-year by 22%, which is in line with growth. So we're really happy with that number and really entering 2022 with strong momentum and confidence that some of the initiatives we're working on are working, and we will refine those.

And so some of those initiatives you mentioned Access. We really are leveraging our Access program. It's a wonderful framework through which we can talk to our customers. And it's a way for us to really think about how we migrate customers up the tiers, and we have seen customers migrating faster up the tiers in 2021. We are looking at getting those customers into Access sooner.

So we've really looked closely this year, and we'll continue to look at our life cycle program to really a more robust welcome program and able to speak to them earlier in their interaction with Farfetch and really drive that repurchase rate, which is a very early indicator of retention.

We're also working on personalization to drive those orders for customers. And we really think about personalization in terms of those product-based ones, those alerts around newness or what you have in your wish list or around particularly effective or when you've already engaged the customer in terms of a purchase they're already making, keeping them updated on tracking their parcel. We find that, that works very well to get them right back in purchasing again.

But we're also thinking about behavioral nudges around how we really get customers to buy into a little bit more to move them up the tiers and show them the benefits. So it's never one answer. It's a whole suite of solutions, and we're seeing how those work and have worked for 2021 and into '22.

And then, of course, Beauty is something that we've really thought about in the context of retention. Beauty is an amazing opportunity to talk to our customers as to have more frequent interactions with them. Not only, of course, does it bring in a new customer, but it allows us to capture a larger share of wallet from our existing customers and really increase their frequency. So lots happening there and a big continued focus for Farfetch.

Louise, your question about outlook, I'm not going to be drawn on the guidance, except to say, as you touched on, we obviously saw a very strong year-on-year growth last year in Q1, 60% in Q2, 40%. And then obviously, the second half of the year was 22%, 23% year-on-year growth on the digital platform in terms of GMV.

So all I will say is that, as I said earlier on, we're expecting lower year-on-year growth across H1, and the growth rates will obviously build throughout the year as we start to annualize those comps from 2021.

Louise, on China. We are really, really happy with the JV and so our partners, Alibaba and Richemont. The JV has a target, an internal target, which I'm delighted to share we're beating already. And we always said that we expected this to be a meaningful channel for our business in Mainland China. It's now above 10% of our GMV for the territory. We're not going to break it out more than this as we never break out channels. But I think it's important to celebrate the success in less than 1 year after we launched.

We're seeing it as a very incremental channel actually to the Farfetch app in China, a channel that reaches Tier 2, Tier 3 cities we're seeing the mix of brands that these customers are buying, skewed towards interesting niche, smaller brands which is very interesting to see. The AOVs also lower than the very high AOVs, China is a country where we have an AOV superior to the $600 that we have globally, give or take.

On Tmall is a bit lower, but it's clearly a luxury customer that is shopping our Tmall channel. And we're seeing already many fans, many followers, and we're obviously leveraging Tmall's capabilities in terms of live streaming and brand awareness to create more hype around into Farfetch destination in China.

So all around, a tremendous success in the first year and a very heavy partnership. And we are looking forward to further innovation. As we have already announced, we're working with Alibaba on the retail lab to bring luxury in new retail, connected retail to China, watch the space there's some really cool interesting concepts that we're working on. And we're very bullish on the whole China opportunity as I've said before.

Our next question comes from the line of Ike Boruchow of Wells Fargo.

Just a couple for me. I guess just to stick with China. 10% of regional sales, it sounds like you're above planned, José, that's great. Is there a target of where longer term, do you think that, that percentage should reach? I'm just kind of curious how big ultimately, it could be as a percent of regional sales?

And then maybe for Elliot, on the Reebok partnership, can you quantify the revenue stream that partnership will add? It sounds like you're getting revenue over Europe and then certain luxury drops in North America, but it seems like that should be a pretty meaningful revenue stream for you? And then is that embedded in the 20% to 25% brand platform growth? Or is that not there because you're not -- it's not currently in the P&L today?

So on China as I've shared with Louise and everyone on the call, and we're extremely happy with the results from the Tmall star. For us, what's important is not essentially the mix important for me. I always say I don't care about mixes. I want every dollar out there in all channels. And we are growing very fast.

Our Farfetch China app, our proprietary app, we have 600 boots on the ground. We're the only Western company really localizing the experience. These people are -- the majority are engineers, online marketeers, product and highly specialized e-commerce experts that we have in our China team. So the China app is going to continue to grow and catch our market share as a very unique position we have, I think, unique among other western companies in the luxury space.

And the Tmall channel, I think what great is that it's incremental, right? I mean we're seeing -- we're reaching customers in Tier 2, Tier 3 cities that otherwise, we probably wouldn't reach with our app. We are seeing traction in categories and brands that are different from the ones we've seen in the app. So we see incrementality in both channels. So the idea is really to develop both to their maximum potential and maybe [50%] of our comp.

Yes. So I will touch on the Reebok opportunity. So there is a transition period. So Reebok and Adidas, they are about to complete the acquisition, I think, in the coming days. And of course, upon that, we have signed this exclusive license for the premium collapse and the premium reissues and archive for the luxury space globally as well as car partnerships or distribution in Europe for all the Reebok line.

So in 2023, post transition is a multi-hundred million opportunity for NGG and Farfetch. A very high percentage is already online on Paris to consumer digital channels. In good Farfetch style, we normally boost that once we take over, as we did with NGG went from 2% online direct to 20% online direct in less than 3 years. We plan to do the same with Reebok with growth of the digital capabilities through FPS. We're going to bring more direct-to-consumer digital sales to that business. And we have the DNA because we've launched not just Nike Off-White, which is perhaps the most successful Nike collaboration, but also many others with Ambush and with many other projects under the NGG portfolio.

This year, it's what we've included in the guidance is a fraction of the numbers I'm talking about. So it's really a transition year where we will be working already on the collections on the product on the plant. So a lot of work so that we hit the ground running in the beginning of 2023. But obviously, with still a smaller impact this year.

Perfect. Thank you very much, José, and thanks, everyone, for joining us today. We look forward to speaking to you next quarter to discuss our Q1 results.