Vente-privee.com Refashions Closeouts

Private sales of designer overstock have been a part of the Paris high-fashion scene for years. This Internet middleman takes the concept online

by Jennifer L. Schenker

During frenzied invitation-only clothing sales called ventes privées, chic Parisians strip down to their underwear to try on deeply-discounted designer clothes in bare rooms with cement floors and florescent lighting. After fighting over last season's stilettos and then stuffing as many glamorous gowns as they can grab into extra-strength trash bags, they put back on their street clothes and haul their take to makeshift checkout counters.

Distasteful as such cut-rate shopping orgies might sound, top designers such as Givenchy—the fashion house that gained fame with clients like Audrey Hepburn and Grace Kelly, and is now owned by LVMH Moët Hennessy Louis Vuitton (LVMH.PA)—find them a reliable and time-tested way to get rid of overstock.

But now luxury marques and even consumer products companies increasingly are turning to an online alternative that is shaking inventory-clearance to its foundations. Called Vente-privee.com, the six-year old French company holds invitation-only closeout sales over the Internet—and attracts a million unique visitors a day who buy, on average, 40,000 items daily.

All in the Presentation

Items for sale include luxury apparel and accessories, wine and Champagne, household linens, baby clothes, and small household appliances. All are sold, while they last, at fixed prices 50% to 70% below retail. With revenues last year of roughly a half-billion dollars, up 40% from 2006, privately held Vente-privee.com is becoming a force in distribution and is starting to be copied around the world.

Part of what sets the startup apart is its unique approach to merchandising. Instead of showing grainy pictures of unsold blouses or handbags, Vente-privee.com puts together slick promotional shots and videos featuring fashion models and original music that add lustre to the merchandise. The campaigns—approved by the brands—help boost sales while making the online shopping experience more pleasant than a real-world sample sale. Deeply discounted prices are mentioned, of course, but there's nothing about the Web site reminiscent of a bargain basement.

The formula already has attracted more than 600 brands to Vente-privee.com, including Givenchy, Dolce & Gabbana, Cacharel, and Armani Casa. Now they're being joined by mass-market sellers such as Adidas (ADSG.DE), Swatch (UHR.F), Mattel (MAT), and Electrolux (ELUXB.ST). The lure? More control over brand image, thanks to Vente-privee.com's exclusive merchandising programs, and twice the margins earned via more traditional closeout sales.

First-Mover Advantage

"Vente-privee.com has created an entirely new channel for brands," says Christian Strain, a principle with venture capital and private equity firm Summit Partners, based in Boston, Palo Alto, Calif., and London. Summit invested an undisclosed amount in Vente-privee.com last year for a 20% stake in the company—its first-ever deal in France. The funding is helping Vente-privee.com expand: It recently opened operations in Spain and Germany and plans to add Italy and Britain in the next six months.

The company's rapid rise already has inspired dozens of copycats. In France alone, Vente-privee.com has as many as 70 competitors offering discount and closeout merchandise online.