CNBC Business | PRIVATE AMBITION

PRIVATE AMBITION

Vente-Privee may be the diva of Europe’s online fashion world, but could this French star really be a global sensation? Jo Bowman reports

Jacques-Antoine Granjon sits at the helm of an e-commerce empire that’s being whispered about as the next multibillion-dollar online takeover target. The members-only sales site, where big-name fashion brands sell at discounts of up to 70%, is reportedly attracting interest from the likes of Amazon and eBay.

With a ready and growing market of almost nine million signed-up consumers, and partnerships with more than 850 leading brands that have excess stock to shift, Vente-Privee has been a start-up sensation. Launched in Paris eight years ago, it utterly dominates online clothing sales in France, and is expanding into Germany, Spain, Italy and the UK. This year, it’s expected to shift close to €1bn worth of stock. The total online apparel industry for all of Western Europe is valued at between €12bn and €13bn, much of it sold through sites that emulate Vente-Privee.

Granjon, the company’s co-founder and CEO, is not a fashion man, nor marketer nor techie. He is a perfectionist, though, and he says this goes a long way to explaining the success of Vente-Privee in the increasingly crowded online private-sale market. He points to the quality of the photography on the site: Vente-Privee has 18 photo studios, five video studios, a team of 300-plus artists, and its own make-up artists and hair stylists.

“Every photo in Vente-Privee is treated like it’s the cover of Vogue,” says Granjon. “We have 80 people work on each photo because that makes the difference. You have to give the best service … on the internet, people only have to move their finger one millimetre to go to the competition.” Amazon, he says, pays the same attention to detail and customer service: “They were burning billions of dollars [in the early days] but now nobody can reach them. They have the warehouses, the IT, the name, the brand. It’s over.”

Vente-Privee sells mainly fashion and accessories, but also homewares, sports products and some electronics. Sales are open to members only and last from two to four days. Membership of the site is free. Rivals include Gilt Groupe, Rue La La and Ideeli – also doing brisk business despite the economic malaise.

“We sell brands, and everybody wants brands,” says Granjon. “When there’s a crisis, people want brands because it makes them feel secure. When there’s not a crisis, they want brands to pursue their dreams. People want low prices and service. We’re exactly where people want to go.”

Retail analyst Sucharita Mulpuru, of Forrester Research, says private-sale sites are flourishing because of the recession, not in spite of it, as manufacturers, caught out by retailers’ suddenly slimmed-down orders, have a mountain of stock to move. “That fits right into the business of Vente-Privee and their competitors; they thrive on manufacturer overstock, and this year, retailers have been so conservative,” she says. Next year may be a different story, however, if manufacturers churn out less stock in anticipation of fewer orders; if sales then pick up in stores, then far more of the output will be sold at full price, leaving little for online discounters.

Has the recession served Vente-Privee well? Yes, says Granjon. But he insists he’d have done better without it. “Crisis is not good at all … but it’s not bad.” He expects growth this year of 35%–40%. “But if there was no recession, we would have been much bigger.”

Granjon, 47, hasn’t always had such confidence in his model: “For the first three years, we didn’t know if it was going to work. There was no quick internet; e-commerce was very new. When we started, there were no digital photos; we had to run down to Canon on the Champs Elysees to digitise the pictures.”

Before Vente-Privee, Granjon had been a clothing wholesaler, buying excess inventory and selling to the few real-world discount stores that existed in France at that time, something he kept doing until 2004, when high-speed internet connections suddenly made Vente-Privee a hit and he switched to the online side full-time.

“It helped that we didn’t start from scratch; we had warehouses, bankers and buyers. But we didn’t know it was going to grow so quickly. The growth has been incredible.”

Vente-Privee launched in the UK in 2008 and it wants to be as strong there, and in Germany, Spain and Italy, as in France. Last year, 350 new employees swelled the total to 1,000. “I can grow to €1bn–€2bn in sales,” he says.

Vente-Privee has never advertised, though it does do PR campaigns to attract press coverage and make itself a topic of conversation: “To have people talk about us is much more powerful than us talking about us,” says Granjon. The company has launched a CD of music from the site, and is preparing a record with Alain Chamfort, the man behind the stage musical about Yves Saint Laurent. Vente-Privee has about 100 rivals in France alone. Still, it dominates. “The others come from marketing or IT, but they don’t come from discounting,” says Granjon. A five-year head start on most of them means VentePrivee has a stronger relationship with many brands; that attracts more consumers, who then attract the brands. “We can invest more money, hire more people and innovate every day,” says Granjon.

Growth has not come without pain, however. In late 2003, a mix-up meant listings of available items on the site didn’t match the stock. “We sold items that we didn’t have and it was terrible,” he recalls. A flood of complaints followed, overwhelming the customer service staff who at that time numbered just five. When emails went unanswered, customers kept on mailing, resulting in 100,000 messages to the company from unhappy buyers. Everyone got their money back and a big apology: “It’s a big ocean, and we feel it’s a long-term relationship with our members. We’re open with them, and if there’s a problem, we solve it, and people trust us more.”

As the company expands, Granjon says it’s working to understand the nuances of different markets. In the UK, Vente-Privee has hired a senior executive from off-line discounter TK Maxx to help it get a handle on the preferences of local consumers. “To ask people to wake up at 7am to buy something that will be delivered two weeks later, you need the right offering,” says Granjon. “That’s different in different markets.”

Analyst Mulpuru says these differences mean that the Vente-Privee model wouldn’t necessarily work if applied to the world’s biggest nation of shoppers, the US. “There’s just so much more competition,” she says. Bricks-and-mortar discount chains Ross and TJ Maxx are multibillion-dollar businesses; most major department stores have outlet sales and sell off discounted stock online; and the brands themselves have discount stores for overstock. “Vente-Privee for the most part buys everything on consignment; they take orders and it takes two or three weeks for delivery. In the US, they want instant gratification,” adds Mulpuru Desktop browsing is a lot more comfortable than rifling through boxes of designer gear in a warehouse, but you don’t walk away with your trophy.

Granjon says he has no plans to expand beyond Europe, although he knows global web businesses might have. “If I was the guy at Amazon or eBay, I’d say ‘why not’? In a way I’m very surprised [at the interest], because 90% of our sales are in France, but they say ‘if we can duplicate this model around the world we could make a huge business’. I’ve had no contact with them at all … but I’m always ready to talk. You never know.”

BAG AND CLICK

Several private-sales internet companies have made strides in 2009 including Gilt Groupe, Rue La La and Billion Dollar Babes. With more than 1.5 million members, new York-based Gilt Groupe is the largest, holding for 36 hours on designer clothing and homeware with discounts of up to 70%. Members are given incentives to invite their friends with a $25 cash gift issued after an invited friend makes a first purchase. Each sales begins at noon US eastern time, enabling office workers to shop at their desks as they break for lunch. Before each sale begins members can see an online runway video modelling the merchandise.

A recent entrant to this arena is Tokyo-based Glamour-sales.com, whose 48-hour sales each showcase a single luxury brand, enlivened by online video footage. About 60 brands have reportedly signed up to the concept, which will be exported elsewhere in Asia, including China and Korea, in 2010. Another new member-based concept is Chicago-headquartered Groupon, which offers just one deal every day, having worked out an arrangement with a retailer to off er a product or service to its members in around 40 American cities at a large discount, provided that a specified number of people opt in. The minimum threshold number of takers is called the tipping point. If the tipping point is not reached by the time the sale period ends, it’s no deal; if it is, then the members who have opted in receive a “Groupon coupon” via email the next day.