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Farfetch Limited (NYSE:FTCH)
Q1 2020 Earnings Call
May 14, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Jessie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Farfetch First Quarter 2020 Results Conference Call. [Operator Instructions] Thank you.

I'd now like to turn the call over to Alice Ryder, VP of Investor Relations. Ms. Ryder, you may begin your conference.

Alice Ryder -- Vice President, Investor Relations

Hello, and welcome to Farfetch's first quarter 2020 conference call. Joining me today to discuss our results are Jose Neves, our Founder, Co-Chair and Chief Executive Officer; and Elliot Jordan, our Chief Financial 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 sections of our Form 20-F, filed with the SEC on March 11, 2020 and in Exhibit 99.2 to our Form 6-K filed with the SEC on April 27, 2022. 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.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Thank you, Alice and thank you all for joining us today. In the short period since our last earnings call, we've seen the world become engulfed by this global pandemic. And I hope you and your loved ones are all healthy and well and staying safe. Our thoughts are with everyone who has been impacted by COVID-19 and we extend our heartfelt appreciation to the front line healthcare workers and first responders, all the employees who are providing essential services and many other workers and scientists who are helping us all manage through this difficult situation. Since the outset of this crisis, our top priority has been the health and well-being of our Farfetchers, our boutique and brand partners and our consumers. With this in mind, we took proactive steps in line with government guidelines including temporarily closing our retail locations and most of our offices and temporarily closing or reducing capacity in our production studios to implement safety measures and ensure social distancing while maintaining operations.

Most of our impacted personnel have been able to safely work from home and we have continued to compensate all our employees regardless of closures or reduced hours without availing ourselves of government loans or furlough schemes. Throughout this period of significant change we have been laser-focused on adapting our operations to continue serving our community of luxury sellers and consumers, and I am very pleased to report we had a strong Q1. We saw positive GMV and Digital Platform GMV growth each month of the quarter to deliver an overall growth of 46% and 19% respectively. On a constant currency basis, Q1 Digital Platform GMV grew 20% and we believe we continue to capture market share of the online luxury fashion industry and extended our lead as the largest global online destination for in-season luxury fashion. We also delivered strong performance on the bottom line. Q1 adjusted EBITDA loss of $22 million significantly outperformed our guidance for an adjusted EBITDA loss of $30 million to $35 million as we continue to maintain our focus on achieving adjusted EBITDA profitability in 2021, and scale our operating costs.

In light of COVID-19, we also initiated some cost saving actions in Q1, and we plan to continue looking for opportunities to trim discretionary costs and prioritize projects focused on delivering either growth or cost savings in the near-term. Our strong operational and financial performance against the backdrop of the challenges presented by the pandemic highlights the resilience of our business model, which is underpinned by three key aspects: First, unlike most other businesses in the luxury fashion industry, our revenues are primarily generated by digital channels, which enable us to reach a global consumer base across the 190 countries we serve. This has proven particularly powerful in the current environment, as we have been able to adjust our demand generation efforts in real-time in response to fluctuations in the evolving situations. For example, when we saw a slowdown in late Q1 in customer activity in our larger markets in Europe and North America, we pulled back our demand generation efforts in those regions.

On the other hand, in the China region, where lockdown measures began in January, we increased our marketing efforts as customer interest began to accelerate starting February, which resulted in faster growth in this region by the end of the quarter than for all of 2019. And second advantage of our model is our geo-diversified supplier network of more than 1,200 partners representing thousands of stock points across 50-plus countries. While we have seen as many as 350 different sellers go offline due to lockdown measures at some point since mid-March, we have still been able to offer our marketplace consumers a broad range of products, as 85% of our main in-season offerings are available from multiple sellers within our supplier network. In fact, total stock units grew sequentially and we continue to offer our consumers a product selection from more than 3,400 brands in Q1.

Finally, as an at-scale business, we are able to leverage our long-standing relationship with major global logistics providers. Throughout its sizes as logistics providers are rightly prioritizing essential shipments, our operations teams have been working closely with our partners to access the remaining capacity to ensure our ability to deliver customer orders around the world. As a result, while we have encountered some minor distractions, they have not materially impacted our operational performance. Our unique business model has enabled us to remain operational throughout the COVID-19 crisis, which have in turn allowed our tens of millions of monthly marketplace visitors to continue to shop for a beautifully crafted fashion items and enabled our suppliers to continue selling their curated collections during a period when most have had to shut their physical retail businesses.

To this end, last month, we also launched our #SupportBoutiques initiatives aimed at bringing our broader community together in further support of our boutique partners most of which are small businesses. Online is currently a vital lifeline for them. We put our weight and voice behind the movement by launching social initiatives and highlighted this as the main content on our marketplace. And what we found is that by standing up for an important cause in an authentic way, we also drew a strongly positive response from our customers who also care about our boutiques and want to help small businesses manage through the challenging period. Looking toward the medium to long term, I am more confident than ever in our prospects at the global platform for the luxury fashion industry.

Over the course of the past decades and economic downturns, the luxury fashion industry has proven to be extremely resilient and we expect that to remain true. But one thing that has become evident over the past weeks is that the world will not go back to the same normal as we knew with pre-COVID-19. I believe we have six key differentiating advantages which position us to emerge from the current situation in an even stronger position. One, the resilience of our business model, which has enabled us to continue serving the industry and our consumers throughout the pandemic with minimal disruption. Two, our market leading Digital Platform, with shops and department stores remaining largely closed today and likely to have a reduced footprint and presence going forward, we expect online luxury penetration will accelerate, as physical store shoppers seek to make even more of their luxury purchases through digital channels.

Similarly Bain is now expecting online to grow from 12% in 2019 to 30% of the personal luxury goods market by 2025, up from 25% previously. We continue to make market share gains and strengthen our leadership position within the digital landscape with the lesser rankings across the various online luxury destinations demonstrating that our competitive lead has been widening. Three, our expertise and localized operations in China and other key markets; industry sources indicated that Chinese consumers represented 35% of luxury consumption in 2019 of which approximately 70% was made while traveling. This amounts to approximately $70 billion of personal luxury goods purchased by Chinese nationals while traveling outside Mainland China. Demand which with all else being equal will now need to be repatriated as international travel is expected to decline up to 80% in 2020.

We believe the same scenario applies to other major luxury groups markets where we also have localized operations such as the Middle East, Brazil and Russia. Farfetch is ideally positioned to fill this gap by enabling luxury consumers to continue shopping a global supply without needing to travel. Four, our unique e-concession model; even prior to COVID-19 brands listed digital transformation among their top priorities along with the transition away from wholesale distribution channels. In the current environment we believe there is even more urgency behind these initiatives, which favors Farfetch's direct-to-consumer approach. Five, our Enterprise Solutions business, Farfetch Platform Solutions or FPS, we expect this path of our business to accelerate as brands and department stores focus more closely on their digital strategies. A perfect example of this is Harrods, a multi-billion dollar business and perhaps the most iconic luxury department store in the world. Within one year we replatformed our e-commerce business.

In hindsight, the replatform was impacted with time as their London store was temporarily closed one month later due to COVID-19 lockdown measures. By leveraging the Farfetch platform capabilities Harrods.com not only managed to continue to serve customers around the world with very high service levels throughout the ongoing lockdown of its London department store, it has been trading well above expectations since launch. This has not gone unnoticed and in light of the current environment, which is heightening the urgency for luxury businesses to implement digital strategies we have seen an acceleration of conversations with other leading department stores and brands. Watch this space.

And finally our augmented retail strategy; we believe that a key structural change that will result from the COVID 19 crisis will be the need to digitize retail market luxury when customers can safely return to retail stores. We expect it will be paramount in the new normal for physical retailers to continue to offer an enjoyable and personalized shopping experience and also implement new approaches to remain financially viable in a world where sales per square foot could otherwise drastically decline. We have been investing behind this including our Store of the Future solution launched with CHANEL last June. We have been adapting the Store of the Future product and we're pleased to see many of the functionalities developed for CHANEL pre-COVID 19 also have the potential to be incredibly powerful for a COVID 19 world and beyond.

We believe this digitization of physical retail was a distant innovation for many luxury brands and retailers but may now be promoted from nice to have to must have status. This is the vision we have believed in for many years and one that we are uniquely positioned to develop for the global luxury industry. Looking back over the past few months we can clearly see that the investments we've made over the past 12 years to build the global platform for the luxury fashion industry are paying off and position us well for the future. I am optimistic that together with our boutique brand and department store partners, we will emerge from the current situation even stronger.

And with that, I'll turn it over Elliot to provide a financial update.

Elliot Jordan -- Chief Financial Officer

Thank you, Jose, and hello everyone. I trust you are all well and keeping on top of your physical and mental health during these challenging times. I'm very pleased to be sharing with you our financial results for Q1 2020, which as Jose stated, underline the strength of our business model. Specifically Q1 2020 GMV was $611 million, up 46% year-on-year and adjusted revenue was $301 million doubling from Q1 last year. On the bottom line, we delivered an adjusted EBITDA loss of $22 million, an $8 million improvement compared with the prior year period or an adjusted EBITDA margin of minus 7% against minus 21% in Q1 2019. And our Q1 2020 operating loss after tax was $79 million. We have also strengthened our financial position with two financings year-to-date.

We closed the quarter with $422 million of cash and cash equivalents and this balance was subsequently increased by the net proceeds of the $400 million financing that was completed last month. Let me take you through some highlights of Q1 by business segment. First in the Digital Platform, GMV grew by 19% year-on-year or 20% in constant currency to $495 million. 86% of this GMV is from third-party sellers using the platform by the marketplaces or Farfetch Platform Solutions at an average take rate of 29.9%. The remaining GMV is from our first-party business of which 2% is first-party original brands developed by New Guards and sold direct to consumers on the Digital Platform. Digital Platform services revenue grew 31% year-on-year to $185 million.

This performance across Q1 reflects a period pre-COVID-19 and the period after various levels of lockdowns were put into place across our markets. I'm pleased to report that the Digital Platform delivered growth in each month of the quarter. Overall traffic grew 41% year-on-year reflecting the acceleration of the shift of luxury online. GMV from new customers grew faster than GMV from existing customers for the first time in three years, as we captured a significant number of new customers during this period. This drove an increase in active customers of 27% year-on-year across the Farfetch marketplace, and the China region grew ahead of the platform average across the quarter and grew faster over the last two months of Q1 than this region did across all of 2019 as a whole. We now plan to leverage this large new customer cohort to drive growth moving forward.

In terms of margin Q1 order contribution margin was stable quarter-on-quarter at 32%. This reflects the following factors: First, continued efficiencies across the marketplace in terms of our fulfillment costs and the lower return rate year-on-year driving up underlying gross margins. Secondly, the growth of third-party original transactions with higher product margins; and third, stable year-on-year demand generation expenditure as a percentage of GMV, reflecting a lower cost per visit and lower customer acquisition costs despite the higher growth in new customers. These factors were offset by lower third-party gross margins where in light of the uncertain trading environment we have taken the decision to provide for and clear out some stock lines where realizable values are likely to come under pressure over the coming months.

And lower AOVs, partially driven by a mix toward lower price categories during lockdown, pricing initiatives by some sellers and the higher mix of new customers as first-time orders tend to be with smaller baskets. The brand platform delivered $107 million of GMV and connected wholesale revenue and contributed $52 million of gross profit at a margin of 49%. This performance was once again underpinned by strong demand for Off-White and Palm Angels. For the third consecutive quarter Off-White was the number one Hottest Brand according to the Q1 2020 Lyst Index. And finally, our In-Store segment delivered $9 million of GMV sequentially down due in part to COVID-19 related store closures. We also continue to focus on our path to profitability at the group level delivering strong operating leverage and efficiencies across the cost base. The operating cost of our technology platform and our G&A cost totaled 46% of adjusted revenue compared to 56% in Q1 2019.

Q1 depreciation and amortization was $51 million in line with Q4 2019 and our share based payment expense was $27 million. Now looking ahead, we believe we are well-equipped to navigate the significant challenges in the coming months. However it is important that we continue to keep one eye focused on our longer term plans and one watchful eye on the near-term uncertainty presented by COVID-19. In particular we do not know how consumer sentiment will be impacted by government lockdowns and the resulting macroeconomic impacts and whether relief measures will be sufficient to boost consumer confidence in the near-term. This will continue to have an impact on demand in some our larger markets including the U.S. and parts of Europe. We also expect the competitive environment will intensify as online and offline retailers assist the current stock position and trading stance in the coming weeks.

Increased discounting and markdowns will require our sellers to assist their competitive position on Farfetch, which could in turn lead to lower AOVs and a higher cost of delivery as a percentage of GMV. The recent news that Neiman Marcus has initiated Chapter 11 proceedings is a leading indicator that pricing activity is likely to increase in the near-term. Plus recent factory shutdowns may lead to delays of fall winter product deliveries into our seller base. With regard to the brand platform, to-date we have not seen a material impact on our ability to deliver fall winter collections despite some factory closures. However, the risk of cancellations in the near-term is increased given the focus of retailers on clearing their current stock positions before taking in new season stock. That said I'm very pleased with how we have performed throughout the crisis so far including pivoting our marketing focus and revamping our consumer messaging to meet the changing landscape.

We believe that as the global platform for the luxury fashion industry, Farfetch will be a structural winner over the longer term. Our broad offering, strong supply of spring summer '20 products and the exceptional customer service our teams are delivering continues to serve us well. There is a lot to manage but we will continue to focus on sustainable growth and while we are not providing quantitative guidance for the second quarter we are on track for Q2 2020 Digital Platform GMV to be ahead of Q2 last year. Additionally we remain focused on achieving adjusted EBITDA profitability in 2021. In light of the uncertain environment and lower GMV and revenue expectation than we had previously planned pre-COVID-19 we have revisited our cost base deferring and delaying any incremental spins not deemed essential to nearer term priorities. We plan to continue implementing these cost saving initiatives throughout the rest of 2020 and I will update you on the results of these efforts over the next few quarters.

On that positive note, I shall return you to Jose.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Thank you, Elliot. When I founded Farfetch 12 years ago with a vision of building a global platform for the luxury fashion industry I never imagined we would be helping this industry navigate such unprecedented times. Over the past few months as we have seen firsthand, the positive impacts of our efforts to connect the creators, curators and consumers of this industry we still love and the resilience of our business model throughout, we are even more galvanized behind our mission. While there are various headwinds and tailwinds which makes the near-term unpredictable, I believe Farfetch will emerge structurally stronger as a platform over the medium and long-term. As we navigate this crisis, I am extremely proud of our teams for rising to this unthinkable situation to ensure the continuity of our business and continue to drive our growth within the ever-evolving constraints of the current environment. I can't think of a better example of when our people have embodied our values and I want to thank every Farfetcher for their resilience and dedication throughout this challenging period. Thank you.

I'll now turn the call back to the operator for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from Eric Sheridan with UBS. Your line is open.

Eric Sheridan -- UBS -- Analyst

Thanks so much for taking the question and echoing your statements, hope all is well and safe with everyone in the team there at Farfetch. Maybe a two-parter, when you think about the current environment how do you think about aligning some of the variable marketing costs in such a volatile and demand environment versus maybe some of your longer term goals and looking at customer acquisition and customer retention while people cannot leave their homes and shop in more traditional ways offline and trying to capitalize on some of the pent-up demand on the consumer side? So, sort of marrying the shorter term variable piece with sort of your longer term goals on customer acquisition and moving people as you said Jose to maybe accelerate some of the penetration curve we see with luxury shopping online. Thanks so much.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Hey, Eric. Thanks for your question. We have developed and invested on leading marketing tech. A lot of our demand generation investment is fully automated and also global. What that means is that we were able to pick up algorithmically some of the trends that you've just mentioned. As I mentioned and Elliot mentioned on the call, we've seen incredible traffic and interest around this type of culture that is fashion even during a lockdown. Visits are up 45%. New customers are up 27%. And importantly, that is at constant demand generation investment as a percentage of GMV. So in other words, the cost of customer acquisition has come down. And also the cost per visit has gone down and that is a result of leaving marketing tech and also, as a result of staying operational with a very high level of service and incredible offering throughout this crisis.

So we are -- where there is opportunity and where consumer sentiment allows us to do so we are capturing that extra demand and we're also working very hard on retention, retention efforts, our toolkit is now even more powerful. ACCESS our loyalty program is firing from all cylinders. We now have almost 1.5 million active members of ACCESS. We've seen more than 20% uplift on GTV and GMV versus the control group driven by spend per customer frequency and AOV and also we are very focused on making sure that this new cohort of customers is retained and goes from order number one, order number two or order number three. So obviously, it's -- a time where we have to be mindful of consumer sentiments and we have to be mindful of messaging, but in the markets where we see an opportunity we are capturing market share and share of voice in a very, very, very encouraging way.

Operator

Your next question comes from Louise Singlehurst with Goldman Sachs. Your line is open.

Louise Singlehurst -- Goldman Sachs -- Analyst

Hi, good evening everyone. Thank you for taking my questions. Two areas for me. Firstly, Jose if you could talk a little bit about I suppose the new opportunities which are also rising in the current environment. We've obviously got much stronger balance sheet capacity and I just wonder whether there's a plan for further investment in areas such as black and white as well as the core marketplace to drive market share? Presumably there are a lot of private brands in the industry, which are desperately trying to move online in the current environment as well as the ongoing discussions with the existing partners?

And then secondly, a question for Elliott if I may, again just touching on the prior question, really thinking about the balancing of customer acquisition with the market share equation again but really what that means for platform contribution margin in the current environment, if you can give us any color? And of course with the learnings of last year and the discussion around take rate, if there is any particular negotiations that you might be having with some of the boutiques to give them a bit of a take rate holiday in the current environment. Thank you.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Thank you Louise, thank you. So the investments in Farfetch Platform Solutions and also Store of the Future, I should add are largely completed. And we have invested behind our platform as you could see over the years and we're now leveraging that investment. Of course, this doesn't mean that we are not going to continue to invest but we are expecting strong leverage from our technology investments. And that is a line that we separated on the P&L so you will be able to monitor that as we go along. So the good news is that the very large investments that we've made in technology are paying off. We now have a multi-tenant enterprise-level global e-commerce solution that we can offer brands and we can offer retailers. And you're absolutely right.

We are having very exciting conversations and an acceleration of old conversations, brands that have seen -- department stores that have seen the success with Harrods and how we were able to maintain a global -- a very, very high level of global service including China, Middle East and the other key geographies for Harrods over this crisis. And also the other 20 luxury brands that use FPS, so this has not gone unnoticed and we do expect advances, and I'm confident that we will have news probably next time we speak. The other area Sore of the Future, I think this will see an acceleration because as you know sales per square foot are very important KPI for luxury brands and retailers, and brands are worried and the type of stores that even post lockdown, and what we've seen even in some countries that have now gone beyond lockdown.

The sales per square foot are not going back for them -- in majority of cases to pre-COVID numbers because people want to avoid crowds, because people want contactless payments and sometimes they're not available and they want a level of personalization, agility, that makes shopping in a post-COVID world still enjoyable. And this is what we've delivered to CHANEL and actually the first thing we did with the Store of the Future team was gather everyone and say, OK, how does our product suite work in a COVID world and post-COVID world? And this was incredible because we found that many of the functionalities that we had developed pre-COVID are extremely powerful, and are in fact being used by CHANEL even as their flagship store [Indecipherable] to stay in a very personalized elevated way servicing and keeping their dialogue between fashion advisors and customers.

So we believe that these digitization of brick and mortar was nice to have in the -- not in our view, but in the view of many brands and many retailers and will be promoted to a must have. And I think we have the only specialist solution specifically for luxury, for the highest levels of service, personalization and luxury ceremonies if you want, which is specifically designed for this industry. So I think we are in a very, very strong position both with FPS and we've started the future to leverage the investments we've made over the years and have more brands and retailers join in the platform with those products. I'll let Elliot take over to answer the second part of your question. Thanks, Louise.

Elliot Jordan -- Chief Financial Officer

Hi, Louise. Good evening. Hope things are well with you. So, I think it's a great question to think about in terms of the customer acquisition cost versus market share. And clearly, the new customer mix over the first quarter shows there are customers to capture in this environment and our customer acquisition cost on a per customer basis -- you have to go back to 2018 to be at the low levels we paid for new customers across the last quarter. And in a cost per visit, our paid cost per visit, you even have to go back further than that to be at these sort of levels. So, we're seeing an opportunity to drive broader awareness for capturing new customers and I think that is the right thing to do so long as Jose was saying earlier on we're confident that we can get new customers that we've acquired into second and third and then fourth order stages with Farfetch and that's what the team is very focused on.

This is a huge opportunity for us to be able to drive growth from these new customers. And that does of course bring into question about what does that mean for margins into the future? We are very focused on balancing that investment worth delivery margins. As you know our main KPIs for this business are around our GMV position, our order contribution margin, of course, ultimately, our EBITDA position. And so, we are very focused on order contribution as a key part of that. And I think in the near-term, there's a lot of push and pull on that number. Obviously, the AOVs for the next quarter are likely to remain lower and depressed as we see intensified competition bringing down prices in terms of markdown. We have seen the shift to lower price categories as well due to quarantine and lockdown.

And what that means for us is a higher shipping cost as a percentage of GMV because obviously the shipping cost plays the same although the AOV drops down. It could so mean further pressure on the first-party gross margin as we look into the next quarter because of pricing initiatives and highly likely that as we try and engage these customers we've acquired with the second and third order, we're likely to offer more free shipping to engage with that side of things as well, those new customers. There will be promotions of course by our sellers. I expect that doesn't necessarily mean we will fund them. As you know we've very much focused on passing [Indecipherable] onto our sellers and that is the long-term strategy for Farfetch. And so we are not expecting significant reductions in [Indecipherable] contribution in relation to that. But as I said, there are a lot of other factors within that. Going back to what you see at around take rate, I think as you may have heard, we have been offering a number of various sort of financial and service-related assistance to our boutiques during this time.

We have for a little period of time offered a slight reduction on take rate, but that is not material in the grand scheme of things. Take rate for us is all about the value that we offer to our partners. And clearly right now for both boutiques, brands, department stores, we're offering immense value in order to be able to reach the global customer. And therefore quite rightly, we will be maintaining our position on take rates. Historically take rates have gone up in this business. 10 years ago they were around 15%, they're now around 30%. That's because every time we renegotiate with our sellers on the platform the take rates either stay the same or head north, head up. We were driving more take rate because of the value-added services that are being delivered to the customer. So I think for us it's a balance. We're very focused on the GMV delivery, the order contribution being in a good place for the environment and then, ultimately the path to profitability as we continue to grow and leverage the fixed cost base.

Operator

Your next question comes from Doug Anmuth with J.P. Morgan. Your line is open.

Douglas Anmuth -- J.P. Morgan -- Analyst

Great. Thanks for taking the question. I have two. One for Elliott and then one for Jose. Elliott, first, just any more color that you can provide on the degree of slowdown in March and then perhaps also what you've seen in April and May thus far? And just given your comments on 2Q, can we assume that quarter-to-date you're seeing growth on a year-over-year basis? And then second for Jose, you talked a lot about how you've helped your critical boutique partners with the support boutique initiative, and then also of course just the -- probably the only way that many of them can actually sell products right now, but can you just talk about their health, the health of the boutiques, and also what's happening to the boutique and brand mix on the platform during this time? And do you see any changes here on the other side of the crisis? Thanks.

Elliot Jordan -- Chief Financial Officer

Hey, Doug. Thanks very much for your question. So we don't seem to break out the quarter and some month-by-month stats but what I will say is that we did see growth year-on-year across January, February and March so all three months of Q1 were in positive territory for the Digital Platform. I mean, that's an exceptional result in this environment as most other companies in the luxury space are not growing. And I think that really does prove the strength of the business model and has been achieved as a result of all the investments we've made to-date; the investment into China in our tech platform, our logistics team, our marketing engine, our data engine and of course our people, as well as a decade of building relationships across the industry. I think that's served us extremely well to be able to continue to grow and build on the boutique and brand numbers in this quarter as well.

In terms of Q2 again, I'm not going to break out the quarters but April was ahead of April 2019 overall and on a like-for-like basis within the marketplace. But what I would say is that week-by-week it's very volatile, and the overall position is subject to the trading stance of our sellers and of course the competitive environment. And there's a lot of uncertainty between now and the end of the quarter. As I said earlier on, the consumer sentiment, from quarantine, it's going to be competitive -- there could well be restrictions of supply of new products into our seller basic toward the back end of the quarter and as I was saying to Louise, the category mix is moving toward more leisure with less fine fashion right now. So May and June still remains uncertain in terms of the exact result that we are seeing but, yes, to your point, I'm confident as we stand today given the trajectory of the business that Q2 overall will be in growth because we've got ample supply and amazing chain delivering and impeccable service and the model is proving very resilient during this time.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Hi, Doug, picking up on your question, so around boutique health and boutique and brand mix. So we -- I think it's important to maybe take a step back and look at our supply and the dynamics of supply. So at any point in time if we take a snapshot of the supply available to sell on the platform, we have roughly give or take $5 billion of supply. Obviously, that has been growing consistently and sequentially. And usually those $5 billion and this is a snapshot obviously, all these products coming out and products coming in, etc. Usually this $5 billion have two channels. One is the online channel, which is primarily Farfetch, the vast majority of online sales by our sellers is on Farfetch and the other is physical store sales, right?

So you can see the significant tailwind that we have in terms of supply as we capture a bigger chunk of the mix, right, so if you're a boutique or department store on Farfetch is previously Farfetch works 30%, for example, of your mix because of unfortunate closures or even after the closures because of less traffic general in stores, we will be a bigger part of the mix. So it's not only the amount of inventory that is uploaded to the platform, it's how much we capture of that inventory and that is a big tailwind. So we're not worried in terms of the position on supply both for spring-summer '20 and moving forward. I also would like to highlight something unique about Farfetch, which is the e-concession model, right? So we have 500 brands that have direct e-concessions and in this scenario I'm now more thinking about autumn-winter '20, spring-summer '21 in a scenario where brands are slower in terms of production or are producing less because of factory closures or either scenario of rationalization of channels, brands will prioritize their direct-to-consumer sales.

So the first inventory to come will be for their channels and for example we are connected to Gucci.com, so the same warehouse that services Gucci.com services Farfetch, same warehouse that services Prada.com services Farfetch, etc, etc, I'm just giving for example that we have 500 e-concessions and we tap directly into the brands' inventory. This is completely unique because our competitors will not have access to these priority deliveries. And again, I think it's a tailwind for us. Difficult to say how many boutiques are not going to survive, but I have to say our conversations with boutiques are encouraging. Our boutiques are the best in the industry. Some have been around for 100 years in fact, others for decades. They are very, very solid businesses and we haven't seen boutique bankruptcies so far, not that I'm aware of and certainly nothing material.

But of course, we remain vigilant. And it's not going to be an easy time for them. So, we remain focused on helping them out. Finally, in terms of mix between boutiques and brands, brands have become an increasing part of our business. As I said, in previous calls 50% of our available supply is now coming from direct brand relationships. We expect that to continue during COVID-19 and post-COVID. I don't think that will affect the contribution percentage per se or take rate. And the reason is our medium and small brands actually paid more than the boutiques and this is something that is maybe a misperception sometimes of our model. Brands have a bigger margin, in fact, and brands love using ancillary services and need the solutions and other services on the platform, which means the take rate with the majority of the brands actually, not the majority in dollar value, but the majority in number is actually materially higher than the boutiques.

So as these different paths move take rate may oscillate a little bit. I think the biggest oscillation comes from FPS because obviously on FPS the take rate is much lower. So is the expense, the direct costs of selling these products because with Harrods as you could imagine we don't pay for demand generation, we don't pay per customer service, we don't pay for free shipping, etc, etc. So albeit at a lower take rate, actually the other contribution percentage is much higher in FPS and that is the metric that we're trying to optimize, as Elliot mentioned to Louise, we remain very focused on profitability and we will achieve sustainable growth in Q2 but not at all costs and we will protect the margins.

Operator

Your next question comes from Geoffroy de Mendez with Bank of America. Your line is open.

Geoffroy de Mendez -- Bank of America Merrill Lynch -- Analyst

Yes, good evening everyone. Thanks for taking my question. I got two actually. So can you talk a little bit about the relationship that you have with Tencent? You recently disclosed that they have something like 5% of the capital. So what's the plan there? So that's question number one. And the second one is regarding fulfillment by Farfetch. It was said in the news that you've been helping boutiques with the solution to lift their inventories in their warehouses. How is it going with this service and are you going to try to build up this more and keep the boutiques in this service?

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Thank you, Geoffroy. The relationship with Tencent is fantastic. It is actually a long-term relationship. We have been investing behind WeChat for a number of years. We are by far the leading luxury platform on WeChat, not just our Farfetch mini programs and Farfetch accounts, but we also power 80, 8-0 luxury brands on WeChat and many of them are the largest brands in this industry. So it's a field where we see tons of innovation coming through and we have, for example, we've started to launch mini programs that allow KOLs, China's influencers to create their own curated shops with Farfetch products, which has been extremely successful. So it's a bit like QVC in the digital age on steroids. And we've seen consumers engaging with this type of mini program and this type of innovation.

And that has peaked Tencent interest even more and as we stayed always very close to them that led one conversation led to another and obviously led to them participating in the convertible issuance in the beginning of the year. But of course, we don't comment on other shareholding positions. On fulfillment by Farfetch, again, I think this is an extremely powerful solution for the future. We now have six fulfillment by Farfetch warehouses. They are 3PLs so we don't have any capex associated with them. They're created with our processes and our software. So they're seamlessly integrated on the platform. And that has been used not just by boutiques but by far by brands as well. That allows us for example to acquire NGG in August and having them shipping direct to customers by November. So extremely pleased because we have fulfillment by Farfetch facilities. In Italy they've been able to tap on that and we now have as Elliot mentioned a very, very healthy and fast growing 1P original business.

Other brands are using the fulfillment by farfetch facilities as well and we think this is a major driver for profit because it is much more efficient to ship from a centralized location than to ship from verious boutiques. So if you buy three items on Farfetch, you'll get two or three boxes. If they are all in the fulfillment by Farfetch facility, you'll get one box obviously with the savings that entails. The distributive nature of our model is fantastic and it makes us very resilient but it is more expensive than centralized logistics. The advantages of range still that remain that we will continue to distribute this model but if we can have the main 10%, 20% of SKUs available in centralized warehouses it has -- we've modeled it and it has a very strong impact on other contributions. So we will continue to push that service. And the good news is that we have more and more brands and retailers that are using it and I think that will also accelerate from now on.

Operator

We have time for one more question. The final question comes from Stephen Ju with Credit Suisse. Your line is open.

Stephen Ju -- Credit Suisse -- Analyst

Okay. Thank you very much. So Jose and Elliot, I think you called out in your prepared remarks some potential danger to the fall winter season. You are undoubtedly having a lot of conversations with your brand partners right now so any way to dimensionalize what percent of the industry merchandise could be in danger of missing or I guess skipping the season altogether? And secondarily, like what does this mean for the usual spring-summer and the fall-winter cadence that we're all used to? Any impact that you think this might have over the longer-term on the fashion industry and as a consequence, your business? Thank you.

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Thanks. I'll take that question. So I think, first of all there may be delays in production. I would like to note that in the case of NGG, we didn't experience any delays. I think that speaks to the incredible assets we've acquired, a very nimble brand platform with very capital efficient model. They don't own any factories. They source from 400 different factories in Italy, Portugal and other parts of the world. They were able -- because of their efficiency to have the production started before lockdown or moved around to locations and factories where the lockdown measures were not in place. So on NGG, no material risk. The rest of the industry is still very difficult to say because we are now seeing the first delivery, so it is difficult to say. I think it's fair to say there will be some delay, difficult to say that if that -- it will be material or not.

What I do know is that if anyone gets delivered, will be the brands direct-to-consumer operations, right? It will be the brands directly operating stores. It will be brand.com, it will be concessions on Farfetch, potentially concessions on other marketplaces if any, because they are higher margin, because they are more strategic and because brands are trying to divest from wholesale anyway, this is something that as you know has been the trend in the industry. And the other thing we also see is we are taking much higher percentage of sales from the existing inventory, right? So for every 100 pieces that are uploaded on the platform, we used to take a certain percentage. That percentage is now higher because the offline channel, which lets say, compete for the inventory if you want to be picture it that way is obviously tapping less on that same inventory pool.

And that's very unique with our model. So, that I think will -- is a major competitive advantage as it will allow us to capture even faster market share from our e-tailers, from the competitors that are e-tailers essentially -- our hybrid retail, e-tail businesses. They don't have that capability. They don't have the direct-to-consumer model with brands and they don't have the agility to tap supply wherever supply is. We have it coming from 50 countries and directly to demand wherever demand is. This is very unique to our model and that's why you see growth whereas in other players you will see shrinkage in Q1.

Alice Ryder -- Vice President, Investor Relations

Great. Well, thanks everyone for joining us today. We look forward to speaking to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Alice Ryder -- Vice President, Investor Relations

Jose Neves -- Founder, Co-Chairman & Chief Executive Officer

Elliot Jordan -- Chief Financial Officer

Eric Sheridan -- UBS -- Analyst

Louise Singlehurst -- Goldman Sachs -- Analyst

Douglas Anmuth -- J.P. Morgan -- Analyst

Geoffroy de Mendez -- Bank of America Merrill Lynch -- Analyst

Stephen Ju -- Credit Suisse -- Analyst

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