This morning we announced an investment in BuyVIP, one of several fast-growing online shopping clubs in Europe. This is one of those unusual, uniquely European business models -- basically the online equivalent of a fashion outlet mall.
The private sales model was pioneered by Vente-Privee in France and quickly copied in pretty much every country in Europe. BuyVIP is probably the biggest player after Vente-Privee, with 3.5m members in Spain, Italy and Germany.
It's fair to say that the companies in this sector have had revenue growth unlike anything we have ever seen in Europe. In this volatile economic cycle, discount eCommerce is thriving as consumers flock online to find bargains.
BuyVIP and its competitors basically operate similar models: they run frequent, short-duration online sales (70% off!) of surplus fashion goods. The sales are only open to members of the club, a feature designed to protect the brands' image and keep the sales from being crawlable by price comparison engines.
What we like about this market in particular (apart from the explosive growth) is that private online outlets are becoming a key distribution channel for brands. At €1bn+ in 2008 and growing, it's a channel that the fashion industry is starting to build into regular supply chain plans. We're already seeing this concept evolve from a way to dispose of excess inventory into an incremental outlet for current-season goods.
Picking the best business to back in this market seems difficult on the surface. There are 3 or 4 European players that have shown great traction in their home territory, including Brand Alley (GB), Brands4Friends (DE), Privalia (ES), Private Outlet/Andrino Group (FR). Most have received hefty doses of growth financing from angels and VCs. But we had to choose, and we're excited to back BuyVIP for several reasons:
- BuyVIP has the most experienced, solid management team of the lot, led by Gustavo Garcia Brusilovksy, and including serial entrepreneurs CFO Gerry Heydenreich and COO Luis Krug.
- Apart from Vente-Privee, BuyVIP has the most international footprint, with leadership in Spain and Italy and a growing presence in Germany (with more countries to come).
- BuyVIP has a very helpful board and shareholder base, including Bertelsmann (with great contacts in Germany and elsewhere) and Michael Kleindl (co-founder of AdLink). Media relationships are going to be an important way to gain members in this market.
So how does this deal fit with our stated strategy of backing mostly bootstrapped, founder-owned businesses, you might ask? Well, for us the key question is always about capital efficiency. We're happy to invest in companies that demonstrate an ability to create significant equity value with modest amounts of capital. BuyVIP meets that test. And contrary to rumour, we do like working with existing investors, it just depends who they are ;-)
Congrats David -- I'm looking forward to seeing an evolution in your wardrobe... no excuses now!