(Reuters) - Alibaba (NYSE:BABA) Group Holding Ltd (HK:9988) and Swiss group Richemont (S:CFR) will invest $1.1 billion (£837 million) in online luxury fashion retailer Farfetch Ltd (N:FTCH) and its new Chinese marketplace, as online demand for luxury goods booms in the Asian country.
Alibaba said on Thursday it will launch Farfetch shopping channels on its e-commerce sites Tmall Luxury Pavilion and Luxury Soho, while also investing in newly formed Farfetch China along with Richemont.
Farfetch's shares jumped about 9% in after-market trading.
The Chinese luxury market, which is expected to account for half of global luxury sales by 2025, has seen a strong recovery this year as shoppers emerging from COVID-19 lockdowns splurged online or in retail stores.
Versace owner Capri Holdings Ltd (N:CPRI), Coach owner Tapestry Inc (N:TPR) and Louis Vuitton parent LVMH (PA:LVMH) are some companies that have been able to offset slumps following lockdowns in global fashion capitals as demand in China rose.
Alibaba and Richemont will invest $300 million each in Farfetch, and $250 million each for a 25% stake in the joint venture, that will include Farfetch's marketplace operations in China.
Farfetch, which counts Alibaba competitors JD.com (HK:9618) and Tencent Holdings Ltd (HK:0700) among its investors, will be able to expand its reach to Alibaba's 757 million consumers.
Separately, Artemis, the controlling shareholder of Gucci-owner Kering (PA:PRTP), also plans to increase its stake in Farfetch, according to a joint statement.