Start-up hopes to mimic European success with invitation-only online shopping network

Two online retail entrepreneurs are hoping to cash in on the extraordinary success of private online shopping networks in Europe by launching one of Australia’s first invitation-only online shopping sites.

BrandsExclusive, which is focussed on selling heavily discounted clothing and apparel, is the brainchild of former eBay executive Daniel Jarosch and former PricewaterhouseCoopers employee Rolf Weber.

The site is based around the model of a private shopping network, where members can only join if they are invited by another member.

This model has been extremely popular overseas, particularly in Europe, where market leader, French company Vente-Privee operates a network with six million members and over $1 billion in annual revenue. German site BuyVip and US site Gilt have also grown rapidly.

“These companies that have proved that this is a viable way for brands to sell excess stock online direct to consumers,” Jarosch says.

While he admits there are a number of Australian sites already using elements of the BrandsExclusive model, such as a limited-time sales and sales and shopping clubs, this is the first time a true invitation-only model has been tried in Australia.

While the model would appear to go against the basic philosophy of online retailing – that is, online shopping works because it accessible to a huge, global audience – Jarosch argues that the model has huge benefits for brands and customers.

For customers, the attraction is obvious – big discounts, usually 50-70% off recommended retail price.

For the brands themselves, the attraction is control. He says one of the reasons many designer brands and large brands have been hesitant to get into online shopping in a big way is price erosion – Jarosch argues that a designer label which holds a 50%-off sale online knows that customers searching on Google a year after the sale will see the sale price and will be less inclined to pay full price.

Selling through a private shopping network allows the designer label to limit the number of people who have access to the sale prices, and control the time period that the sale runs for.

BrandsExclusive model works like this. BE approaches (or is approached) by a brand looking to sell products. The two parties agree on the products and the pricing (including a margin for BE) and BE then sends an email to its database. This email sends interested members to a branded, exclusive online shop dedicated to that brand and members have the ability to order for a set period (typically three days). BE takes the order, goes back to the brand with one aggregated order and then takes responsibility for order fulfillment.

Jarosch says the model allows brands to tailor their sales campaigns.

“We spend quite a lot of time with the brand up front to find out about what they are trying to do with their sales and marketing campaigns,” he says. “It could be a marketing campaign for a new product or it could be a campaign to aggressively clear excess stock.”

“What we are delivering is relevant users. This is something that I can’t stress enough. It’s not about the total number of users, it’s about the relevant types of users.”

The business had a soft launch on May 1, with employees from a few large corporations invited to join the site for beta testing. The site is now open to the wider public and while Jarosch will not reveal membership numbers, he says he is pleased with the progress so far.

“The unknown factor is that no-one has worked together with the brands like we do. There’s a lot of education to be done, both on the brands side and the consumer side.”

Investors in the company include European venture capital firm Freelog and Sina Afra, former director of eBay Germany.

“We spoke to a number of investors here and in Europe. The response was really good but there was a lot more speed from Europe because they knew the business model. We had to have speed to market,” Jarosch says.

He argues valuations are typically a tick lower in Australia because the online retailing community is not as well developed as it is overseas.