714  High-Growth Companies
Sizing the Market  For many young, high-growth companies, it’s challeng-
ing to estimate the size of the potential market. You must be creative and 
clever about what data to collect to bound your forecasts. In the case of the 
ride-share market, for example, you can start with global taxi revenue. But 
you must also consider how many new rides will occur because of the ease of 
access, as well as how many riders are likely to replace their cars altogether.
Compared with other nascent technology companies, Farfetch’s product 
markets are easier to size. Many investment banks and consulting firms study 
the global luxury market in depth. Information is available on the number of 
products and the total value of merchandise sold in stores and online.
Exhibit 36.4 presents revenue for the global luxury market between 2010 
and 2018, with analyst forecasts extending through 2025. Bolstered by strong 
growth in Asia, the luxury market is expected to grow between 4 and 5 per-
cent annually, reaching $450 billion by 2025. Growth looks to be uneven across 
channels, however. Expectations are that over the next decade, in-store sales 
of luxury products will remain flat, while online sales will increase from 
10 percent to 25 percent of the total market.
The online migration of luxury goods is far from certain, however. No one 
really knows if these high-end products will migrate as much or as quickly 
as have media, electronics, and other items. Later in the chapter we develop 
multiple scenarios, with each scenario based on a different level of online 
penetration.
EXHIBIT 36.4  Global Luxury Market: Offline vs. Online Sales, 2010–2025E
$ billion
Online
% online
In-store
500
400
300
200
100
0
7
222
22
254
28
279
32
290
37
300
42
311
52
318
58
330
73
333
94
332
112
335
2010
2016
2017
2018
2019E
2020E
2021E
2022E
2023E
2024E
2025E
3
8
9
10
11
12
14
15
18
22
25
Source: Farfetch Investor Presentation, December 4, 2019, Bain & Company.

A Valuation Process for High-Growth Companies  715
Modeling Revenues  A robust revenue model, especially for nascent compa-
nies, will incorporate operational data mirroring the company’s economics. 
In the case of consumer companies, these include the number of custom-
ers, transactions per customer, average transaction size, and other items. 
Exhibit 36.5 presents a revenue model for Farfetch’s third-party marketplace, 
based on forecasts by the research team at Cowen and Company.4 These par-
ticular estimates underpin one of our four scenarios presented later in the 
chapter.
The revenue model in Exhibit 36.5 starts with the number of customers, 
which in 2018 was approximately 1.4 million. Since the typical customer makes 
a purchase just over twice a year, the company generated just under 3 million 
transactions that year. The size of the average order was about $600, leading to 
an estimated $1.8 billion in gross transaction value. Since some transactions will 
EXHIBIT 36.5  Farfetch: Revenue Model for Third-Party Marketplace, 2017–2028E
$ million, except where noted
2017
2018
2019E
2020E
2021E
2022E
…
2028E
Third-party revenue model
Unique customers, thousands
936 
1,353 
1,787 
2,293 
2,897 
3,603 
…
9,911 
× Orders per customer
2.01 
2.15 
2.31 
2.33 
2.35 
2.38 
…
2.52 
Number of orders, thousands
1,881 
2,913 
4,121 
5,342 
6,817 
8,563 
…
25,005 
× Average order value, $
620 
618 
605 
637 
650 
659 
…
700 
Gross transaction value1
1,166 
1,801 
2,493 
3,402 
4,428 
5,645 
…
17,500 
Net of returns
(290)
(439)
(577)
(782)
(1,018)
(1,411)
…
(4,375)
Net of fulfillment revenue
(74)
(98)
(138)
(197)
(256)
(318)
…
(984)
GMV, net of fulfillment revenue2
802 
1,265 
1,777 
2,423 
3,154 
3,917 
…
12,140 
× Portion generated by third party
95.0%
91.9%
91.5%
92.2%
92.8%
93.3%
…
93.3%
× Take rate
32.8%
32.5%
30.9%
30.9%
30.6%
30.3%
…
29.4%
Third-party revenue
250 
377 
503 
691 
896 
1,108 
…
3,331 
Other Revenue
Platform fulfillment revenue
74 
98 
138 
197 
256 
318 
…
984 
First-party revenue
40 
102 
152 
189 
228 
261 
…
815 
Black & White segment
6 
10 
16 
23 
30 
37 
135 
Browns’ in-store revenue
15 
16 
18 
20 
22 
23 
…
30 
Farfetch revenue
386 
602 
827 
1,119 
1,430 
1,746 
…
5,296 
1 Excluding Black & White’s outsourcing revenue and Browns’ in-store revenue.
2 Gross merchandise value, net of fulfillment revenue.
Source: Farfetch F-1 filing and 2018 20-F filing; Cowen and Company estimates.
4 To create one of our scenarios, we used data from John Blackledge et al., “FTCH 2Q Preview: Or-
der Growth Momentum in Focus when FTCH Reports 8/8” (unpublished manuscript, Cowen and 
­Company, August 5, 2019), available from Bloomberg. We thank the team at Cowen and Company for 
providing data used throughout the chapter.