Amazon buys members-only site BuyVIP, lifts prospects of local players

Online retail giant Amazon has purchased European members-only fashion site BuyVIP, in a move one local operator says delivers value for the emerging private sales model.

The sale, which was finalised for $US96.5 million according to the Wall Street Journal, follows a flurry of activity in the local sector with OzSale taking $14.5 million in funding from Twitter investors Insight Venture Partners last month.

In July, former eBay executive Daniel Jarosch and former PricewaterhouseCoopers employee Rolf Weber started BrandsExclusive, the first invitation-only shopping site in Australia. They hope to emulate the success achieved by European operators, where the model has experienced aggressive growth.

Sites such as market leader Vente-Privee have quickly taken over the market, with the French company counting over six million members and around $1 billion in revenue.

BuyVIP also claims over six million members, and offers deals to customers in seven countries including Spain, Italy and Austria. The site received over $US20 million in funding last year, according to TechCrunch.

The sites operate on a membership basis. They are predominantly fashion focused and offer top brands for discounted prices – a model Amazon says is extremely attractive.

“BuyVIP.com is an excellent complement to Amazon’s European business and will provide another unique way for Amazon customers to find and discover unique and compelling products,” Greg Greeley, vice president European Retail at Amazon said in a statement.

But the deal delivers great value for Australian operators, where the model is relatively new, OzSale chief operating officer Carl Jackson says.

“We are eagerly watching what’s happening over there, and there are some pretty dominant players there. Inevitably one of the bigger trades was going to happen there, and the sheer number of members and strength there is giving them some attraction.”

“I also think the focus of fashion gives them real strength. Amazon is strong in some categories, but not necessarily in apparel, it is a difficult category, and I think this gives them some immediate scale in that area.”

Jackson says while the model has taken some time to catch on in Australia, business is beginning to heat up. He says OzSale will reach over one million members soon, revenue is “significantly more” than an estimate of $20 million that was provided to SmartCompany earlier this year and the company will triple its business by June 2011.

But the growth of the model is also being noted in the competition. BrandsExclusive is beginning to build scale and its investors include venture capital firm Freelog and former eBay Germany director Sina Afra. The company also says it is the first invitation-only model in Australia.

The founders believe designers are attracted to the control these sites offer, allowing them to reach a wider market without having to erode their brand’s price proposition through various sales and discounts on their main site.

But Jackson says OzSale is “a few steps ahead”.

“I think we’re a couple of steps ahead of anyone else in the market. We will triple our business by June next year. We are experiencing solid growth and I think although there is scale building in the business, some consolidation will occur.”

Jackson also hinted the company would be open to an acquisition, stating that it has a traditional private equity deal and that “there is an exit on the radar”.

“We’re only just new into this partnership with Insight Venture Partners. But I think the big question is around expansion, and how can grow this model. We would like to see some of our growth coming out of Asia and that area eventually.”