Pressure is mounting on Internet retailers, brands and bricks-and-mortar boutiques to forge alliances after Yoox (>> YOOX SpA) agreed to buy Richemont's (>> Compagnie Financiere Richemont SA) Net-a-Porter in an all-share deal to create an industry leader with combined sales of 1.3 billion euros ($1.4 billion).

The online fashion sector is attracting growing interest from investors eager to gain exposure to a fast-expanding business that is likely to be critical to future sales, particularly among Millennials, web-savvy customers born between 1980 and 2000.

Founded in 2008, Farfetch helps independent designer stores link up with customers around the world and takes a cut from each sale. Partner stores include the trendy L'Eclaireur in Paris, H. Lorenzo in Los Angeles and Fivestory in New York.

José Neves, Farfetch Chief Executive and founder, said luxury brands' reluctance to embrace the Internet was partly behind the boom in so-called parallel trading, when consumers buy in shops and resell products online to other consumers.

"These consumer to consumer online sites are changing the way people shop for luxury goods, and partnerships with official distributors that offer good service is a way to fight this," Neves said.

Broker JP Morgan Cazenove last month said some luxury goods executives and consultants believed 20 to 40 percent of luxury sales in mainland China were now done in parallel trading.

Farfetch, which raised $86 million in March, is backed by Vogue publisher Conde Nast International and Yuri Milner, the Russian entrepreneur who invested in the Russian Internet service provider Mail.ru (>> Mail Ru Group Ltd), Facebook (>> Facebook Inc), Twitter and Spotify.

Farfetch sales are expected to rise to more than $500 million this year, up from $320 million in 2014.

Browns, an early adopter of e-commerce, now makes more than a quarter of its sales online.

Last month, luxury online retailer Lyst raised $40 million from investors including luxury king Bernard Arnault, head of industry leader LVMH (>> LVMH Moët Hennessy L.V.), Facebook (>> Facebook Inc) investors Accel Partners as well as Balderton Capital which put money in Yoox and Net-a-Porter.

Founded in 2011, London-based Lyst partners directly with shops and fashion labels and updates customers on new collections. Its sales jumped to $150 million from $40 million a year ago, the company said at the end of last month.

The Neiman Marcus department store chain last year acquired German online fashion retailer My Theresa and its Munich store to better serve customers outside the United States.

(Editing by Hugh Lawson)

By Astrid Wendlandt