vente-privee

The $1.5 billion scramble for Vente Privee by Gilt, eBay and Amazon

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[France] On stage at last year’s Le Web an argument broke out between co-founder Loic Le Meur and TechCrunch’s Michael Arrington over whether Europe was capable of producing a ‘big win’ Web company or whether Skype was, perhaps, just a one-hit wonder. Like heavyweight fighters, both of them traded some heavy blows in subsequent blog posts. But during the live on-stage Gilmour Gang, one company was mentioned by Le Meur which left the rest of the assembled staring blankly: Vente-Privee.

Probably the reason it prompted such sideways looks however is that this is not a classic web app startup, but an ecommerce hub. Vente-Privee began in France in 2001, but has only recently become a powerhouse of a new wave in Europe: online private sales clubs involving designer fashion brands, otherwise known in the fashion retail industry as the “overstock market”. Its success has lead to a bunch of clone sites, while Vente-Privee itself is on target to €650m in turnover globally this year. In other words Europe is not out to lunch – as Arrington put it – it is out to shop.

Private buyers clubs are business models tailor-made for the recession, offering big discounts on designer goods among virtually guaranteed buyers. They also hit revenue almost from the word go.

That success has now lead to a number of US companies becoming very interested in either entering this world or expanding their operations. TechCrunch Europe thus understands, from some very good sources, that Gilt, Amazon and eBay are all actively looking at acquisitions in the European private shopping club space. The price for Vente-Privee alone is being talked about in terms of a $1.5 billion sale. Some sources even put the figure at between $2 billion and $4 billion.

One VC I spoke to said Vente Privee was “very attractive” to the big ecommerce beasts like Amazon and eBay, and a roll-up of these types of clubs is potentially in the offing across Europe. Another said “It would be a good move – depending on price – from either Amazon or eBay.”

It’s not that surprising. Aside from its existing operations, Vente Privee is even now pushing into high end fashion, and, I’m told, just did a sale for the Chloe brand that was not advertised anywhere else, which shows how far the site has come inside the famously closed fashion industry. The company now has over 1,000 employees and 18 photography studios at its French HQ, housed in the vast, former printing factory for the Le Monde newspaper. It has now started an assault on the fashion UK market, which is worth £50 billion annually.

Back in the UK, eBay has been dabbling in the private sales market. It recently introduced eBay OUTLET on its UK site.

This new addition to the eBay platform sells merchandise at up to 70% off retail prices from various brands that have their own shop-in-shop presence on the site. For eBay buying Vente-Privee could work extremely well. It has a large audience, but it’s known for auctions, not for private overstock sales.

Private shopping clubs have exploded over the European continent.

Last year Newspaper group News International invested in BrandAlley UK, a joint venture with French online boutique BrandAlley France, itself backed by France’s Banexi Ventures.

In Russia, online shopping club KupiVIP.ru, operated by Privat Trade, counts Mangrove Capital Partners as a backer.

In April this year BuyVIP, the Spain-based private online buying club, raised about $20 million in its third round of funding, led by Kennet Partners. Mangrove (along with Bertelsmann, 3i and Molins Capital) is in that as well.

And two year old brands4friends – with two million members in Germany – is on course to do sales of €85 million ($124.3 million) this year – more than three times as much as last year. Unsurprisingly founder Christian Heitmeyer is being courted by VCs, but so far has backing from Partech International, Holtzbrinck Ventures, and… Mangrove Capital Partners again.

In the US, Gilt Groupe, Ideeli, Rue La La and others are creating a similar wave of hype – and cash.

But Europe’s private buyers clubs had better hurry with their courting of the US leviathans. Retailers are planning their inventories better in this down market so overstock sales may begin to dry up. It would be a shame miss that window for a $1.5bn exit.

  • remmy

    This is a joke, eh? Gilt doesn’t have the slightest chance of buying anyone for $2B. Nice try.

  • http://conversionr.com Merrill

    How come this kind of news is not also written about on Techcrunch France ?

  • Tim

    Sounds like a strong market to break into.

  • http://twitter.com/ben_thomas_ech Benjamin Thomas

    hmmm a bad business move ? then my guess is eBay will do it !

    twitter.com/ben_thomas_ech

  • http://rodolfo.weblogger.com Rodolfo

    “become a powerhouse of the new wave in Europe”

    and by Europe you mean France?

  • IntellectGetOne

    Let this French company eat cake.

    $2-$4billion? This has to be some of the worst over-blown hype/trype I’ve read.

    The company does about $1b in total sales with 1,000 employees? It has to sell its items at 70% discounts?

    Let’s do the math — an in-market Hermes Scarf for $300 has to sell after-market at $90 to sell on this market. The company’s employee costs alone are 10% of the business. What is the product cost considering the manufacturer has to make a mark-up? Maybe product cost of $50? So they are taking in $40 in gross margin. Deduct $10 in employee cost and you have $30 left — 33% margin to cover EVERY cost.

    Remember, this is not schlocky items we are talking about here. The buyer of these items is going to expect and EXCELLENT shopping experience and immediate service levels.

    Perhaps, even in the best case, the operating margin is 10%. 10% on $1b is $100million. At best. To reach a $2b-$4b valuation you are talking about 20-40 times earnings.

    Where is the value-add? It is in selling an other-wise $300 item for $90. That takes a real genius to do.

    C’mon. Get real. If this is the best Europe can offer — we’ll take the stinky cheese instead. This one smells worse.

    • Kal

      if at least you tried to gather some background info on the company you are trashing before posting you’d avoid looking so ridiculous.

      In terms of operating profit margin you can at least double the result of your flawed analysis. And Hermes selling online at a discount? Seriously next time just don’t post..

    • http://www.shpalle.com shpallje

      go tweet that to your $1b twitter

    • http://www.michaelslevy.com Michael S. Levy

      The article mentions Gilt, Amazon and eBay are shopping around Europe for private shopping clubs, not looking at Vente Privée only: they are “actively looking at acquisitions in the European private shopping club space.”

      Indeed, there are a good dozen websites to look at in Europe, built on this model… In France, Spain, Germany and the UK.

      And your margin calculation is incorrect, margins are double that in the overstock business…

      • IntellectGetOne

        Double that in the overstock business? Are you kidding me?

        You do know that Overstock itself is in the overstock business?

        Have you looked at their margins?

        Clearly none of you guys actually SELLS this stuff online.

      • http://www.michaelslevy.com Michael S. Levy

        IntellectGetOne, I am actually a founder and shareholder of such a company, so I do know the model inside and out, and I DO sell “that stuff” online.
        As for the sale price, it’s pretty obvious: what do you think is the BUY price so you can SELL at 70% off retail????

  • anon

    Amazon just bought Zappos for $850 million. Why would they acquire this company?

    If Vente-Privee is as big as you say it is, it would be better off going public.

  • remmy

    not to mention that Gilt is a private company probably worth about $600M and they are going to buy a much larger company in France? Simply could never happen under any circumstances. Only thing that is possible would be a merger, but even that is a real stretch.

    • harry

      Gilt is worth $600M? That cracks me up. They are on a burn rate and at this point have yet to actually release any numbers other than estimating that they will do $500M in sales next year. For all anyone knows, they haven’t broken $100M in sales yet so they are most definitely not a $600M company.

  • Jim

    Gilt is riding a wave of hype and success. They hired 50 people last month (up to 250 now), closed a $43M round (valued at $400M) and is poised to earn $150M this year. Will see what happens, they’re an interesting company to watch with some very high expectations to meet. To put them in the same category as Amazon & Zappos is a bit premature.

    • harry

      Gilt’s riding a wave of hype for sure – it’s like 1999 all over again. Hire a celebrity CEO (look at her record at Martha Stewart OmniLiving), get funding at a ridiculous and unproven valuation because you have ties to the VC market (one of Gilts founders is the same guy that owns Silicon Alley Insider so he already runs in those circles), then hype yourself as having $500M in sales in 2010 when you haven’t proven you can even hit $100M in 2009. Nice concept, but Rue la la and Vente Privee were at it long before Gilt was. Oh, one other thing – hyping that they might hit $150M in revenue this year is not the same as having $150M in earnings……

  • Pete

    For the bunch of readers commenting on Gilt buying Vente-Privee, read again. The opposite is being discussed.

    As for IntellectGetOne’s brilliant comment, your nickname is a perfect match – it’s time to get one indeed – you clearly have no clue about VP’s business, nor fashion (Hermes sold at a discount on an e-commerce site ? How about Ferrari or Porsche while you’re at it ?).

  • http://www.ebaybusinesses.net/ Pete

    For the bunch of readers commenting on Gilt buying Vente-Privee, read again. The opposite is being discussed.

    As for IntellectGetOne’s brilliant comment, your nickname is a perfect match – it’s time to get one indeed – you clearly have no clue about VP’s business, nor fashion (Hermes sold at a discount on an e-commerce site ? How about Ferrari or Porsche while you’re at it ?).
    BTW I love your blog!

    • IntellectGetOne

      Pete,

      We’ll forgive the double-post as a mark of your knowledge.

      You can deny the numbers all you want — but I have been in this business for years. There are no margins for the seller. Sure, it is a business which will make you a living. But there is no way, on any continent, that this business is throwing off anything more than 10% ebidta margins — NO chance. And anyone dumb enough to pay 20-40 times ebidta is an absolute fool or a Nobel Peach Prize judge.

      Please — if your wisdom is so grand — enlighten us. How does a company sell fashion brand items a season late at 70% of retail and make a stunningly high profit?

      The world awaits the genius who can show us that model (and includes the 1,000 employees to boot).

  • http://www.goebel.net/technews/ Markus Goebel

    Last week Brands4friends announced its break even after 2 years in business.

  • http://www.simplyzesty.com Niall Harbison

    I guess not every company needs to get tons of media coverage to make good revenues. I always admire companies that just plug away in the back ground making money without needing the oxygen of publicity.

  • http://www.referrerventeprivee.tk RebecA

    Ifyou want to register feel free to use my email rarcega13@hotmail.com or visit http://www.referrerventeprivee.tk to learn more about vente privee.

  • http://www.quintura.com Yakov

    The global online shopping club champion Vente Privee should eventually purchase the national champions KupiVIP.ru, etc in order to reach Amazon..

  • http://www.spirofrog.de Tom

    Internet outlets are in!

  • francesc

    I’ve talked with some shareholders and council members of the europen vip sales companies that this text comment….

    IT’S NOT TRUE, THIS COMPANIES WILL NOT BE SOLD…AND THEY DON’T WANT TO SELL …

    please check the source of this info. The US companies never will buy the european, if this companies are not in M&A market….

    Thanks. F

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  • Nicolas

    The €650 MM turnover means “revenues” of Vente-Priveé or GMS (gross merchandise sales)?. If it is the latter (most likely) then the gross revenues of VP should be somewhere around €40/60 MM. A 2+Billion valuation for a company generating a few tens of millions makes no sense to me.

    • http://www.michaelslevy.com Michael S. Levy

      €650 MM turnover is Sales/Revenues (“Chiffre d’Affaires” in France), not GMS.

      • Nicolas

        Thank you Michael. Really impressive then!. That type of valuation makes a lot of sense in principle then!. Regards

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    arbdev

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