The Secret to Private Sales What you can learn from the top 5 players.

Table of Contents
What is Private Sales, and why is it so hot right now?……………….…pg. 3-9 Who are the leaders?…………………………………………………………………..pg. 10-14 Key elements of top Private Sales sites ….…………………….……….….pg. 1521 A peek at what’s next.…………………………………….…………………..………pg. 22-27 Is Private Sales a fit for your business?.…………………………….……..pg. 28-30 Contributor biographies……………………………………….…………….……….pg. 31-33 Thank you…………………………………………………………………………….….……….pg. 34

What is Private Sales, and why is it so hot right now?
Private Sales is an emerging retail concept through which luxury retailers and brands sell merchandise on an exclusive, online platform to an exclusive customer base. Though there are several variations to the model, Private Sales sites are generally defined by the following: • Invite-Only — access requires an invitation from the brand, or a member friend. • Name-Brand Merchandise — sale items are quality, not cheap or out-of-date. • Discounts — items are compellingly priced to drive impulse purchases and loyalty. • Selling Event — sales are timed events, during which the merchandise is offered either until it sells out or a set deadline is reached.

And the conversion — a registered user — is also much higher than a standard email blast can achieve. Private Sales sites use mostly viral email marketing.What is Private Sales. where friends invite each other to join the site. Image credit: purpletwinkie © 2009 Optaros. and why is it so hot right now? Invite-Only A key element of successful retailers is successful marketing. 4 . Inc. All rights reserved. These messages have a much higher open rate than standard email campaigns because they come from someone the recipient knows.

5 . All rights reserved. and why is it so hot right now? Name-Brand Merchandise For brands and retailers that have the product assortment to support the model (products with a sense of exclusivity. Private Sales sites offer a unique venue for distributing excess product when demand has been miscalculated. © 2009 Optaros.What is Private Sales. that are premium and/or expensive). Inc.

. protects the image of the brand.and offline. Inc.What is Private Sales. All rights reserved. BusinessWeek Vente-privee. “The way we are dealing with overstock is a revolution for branded products. thanks to everything from fashion misses to production planning mistakes to unexpected weather. and why is it so hot right now? Overstock is unavoidable in manufactured goods.. "It is extremely efficient.” Jennifer Schenker." [Xavier] Court [vente-privee cofounder] says.com Refashions Closeouts © 2009 Optaros. and brings in new customers on. 6 .

Often. Shoppers are buying items not because they specifically intended to purchase them.What is Private Sales. and why is it so hot right now? Discounts and Timed Sales The holy grail of online retailing has been the impulse purchase. but because they are offered deals that feel too good to pass up. for this experience. a shopper will come to an online store for one item and leave with that one item — or even nothing. Inc. Impulse purchases are what drive profitability for brick-and-mortar stores. Online retailers needed to find a way to drive impulse purchases. © 2009 Optaros. a shopper may come in for one item. and on a massive scale. For example. 7 . All rights reserved. The ecommerce world has had difficulty translating this experience online. given an industry average cart abandonment rate of 60%. they keep coming back. And. and Private Sales is the first online retail concept that has proven its ability to do so. and the time is running out. and walk out with three.

All rights reserved. • Extremely attractive financials. • Incumbents adding private sales to their sites. including Neiman Marcus. Inc. Saks and Comcast. Gilt Groupe went from 0-$500 million in 3 years. largely due to the following: • Rapid revenue growth — Vente-privee went from 0-$1 billion in revenue in 6 years. • VCs funding new entrants. • Larger players buying in — GSI Commerce acquired Rue La La for $350 million in October 2009. and there are perpetual rumors of Amazon planning to buying Vente-privee for up to $3 billion. © 2009 Optaros. 8 .What is Private Sales. such as low customer acquisition cost due to viral invitations. and why is it so hot right now? Private sales is a very attractive online retail concept. Secret Sales and Private Outlet. such as BuyVIP.

while attracting scores of wannabe fashionistas willing to wait for haute couture at a low price. Many of these companies help fuel pent-up demand by limiting membership… Luxury brands can use these members-only sites to hide markdown prices from retail shoppers willing to pay the full amount. and why is it so hot right now? Saddled with overstock from the retail recession. 9 . and other high-end goods are selling their wares at reduced prices through… private shopping sites. All rights reserved. Douglas MacMillan. BusinessWeek Psst! Private-Sale Shopping Sites Are Hot © 2009 Optaros. makers of luxury apparel. home furnishings.What is Private Sales. Inc.

they represent the most likely sources of tested best practices. . the following companies have emerged as early leaders in the Private Sales space.Who are the leaders? Though the market is dynamic. therefore.

founded in 2006. 11 . Italy and Spain. offering daily sales events to members that feature international designer brand merchandise. ideeli ideeli was the first members-only shopping community in the U. Gilt is a major player. Venteprivee operates in France. with over $1 billion in revenue in 2010 and projections to grow 22% each year. Gilt Groupe Founded in 2007. featuring top brands in fashion. Inc. Germany.S.3 million members. The company has seen rapid growth. with $500 million in revenue in 2010. home and beauty. All rights reserved. The company recently received $20 million VC funding. UK.. vente-privee is the originator of the Private Sales concept.Who are the leaders? vente-privee Founded in 2001. © 2009 Optaros. Gilt Groupe provides invitation-only access to fashion and luxury-brand sales events lasting 36 hours. Ideeli offers limited-time sales events to more than 1.

operates a marketplace through which premium fashion and lifestyle brands host 24-48 hour private sales events. The company achieved $90 million in revenue last year. All rights reserved. 12 . Hautelook HauteLook. a portfolio of ecommerce companies that use a common technology platform. © 2009 Optaros. Inc. founded in 2007.Who are the leaders? Rue La La Founded in 2008.. Rue La La was acquired by GSI Commerce for $350 million in October 2009. customer database and management team to create a luxury Private Sales experience. Inc. Rue La La is a division of Retail Convergence.

Who are the leaders? The chart below shows the dramatic gains in unique visitor traffic for these companies* over the last year — roughly a 300% increase total. Inc. 13 . © 2009 Optaros. All rights reserved. *Vente-privee not included due to insufficient data availability. with each seeing at least +100% yearly change.

as well as some unique elements to watch as trends going forward. there is a great opportunity to learn from the leaders. Specifically. Therefore. we wanted to find: • What are the best practices that can be learned from the leaders? • What are predictions for future capabilities that the leaders will offer? © 2009 Optaros. we reviewed these sites for key business model design elements that drive their success. Inc. 14 .Who are the leaders? For those looking to develop Private Sales businesses. All rights reserved.

Several key design elements have become best practices to achieve these objectives: .Key elements of top Private Sales sites A successful Private Sales model requires the creation of an exclusive club. a highly loyal repeat customer base and a powerful demand for impulse purchases. a viral invitation-only machine.

16 . This dramatically reduces the traditional customer acquisition costs of advertising. direct mail marketing. Each site makes it easy to invite friends to. Image credit: Olive Oil Lady © 2009 Optaros.Key elements of top Private Sales sites Viral Invitations New customer acquisition is driven primarily through people inviting their friends. SEO. paid search and affiliates. Inc. All rights reserved. often either through Facebook Connect or adding contacts through Plaxo. The average incentive is $10 to the friend of each invitee that makes a purchase.

All rights reserved. Inc. A notable difference between key players is whether or not the reservation time is shown — a consideration between notifying the customer that they may continue shopping to drive up average order volume. versus the risk that they will horde merchandise in their cart. The most common approach to address this issue is to provide a reservation time buffer once an item is placed in the cart. thus allowing enough time to checkout. Some of the sites extend this time when another item is placed in the cart. © 2009 Optaros.Key elements of top Private Sales sites Cart Reservation One of the biggest complaints from Private Sales shoppers is that an item will sell out in the time it takes them to move an item placed in a cart to checkout. 17 .

(Shoppers are not coming to the site with an intent to purchase a specific item. thus creating an impulse to buy. most Private Sales sights do not. where a shopper spends time looking at each event. 18 . such as size and color.Key elements of top Private Sales sites Absence of Site-Search Functionality Most ecommerce sites offer search or guided-search functionality to help visitors find products of interest. Conversely.) However. most of the sites do offer a variant filter for items of interest. © 2009 Optaros. The goal with this tactic is to create a window-shopping experience. All rights reserved. Inc.

Inc. The emphasis is on encouraging browsing to create the urge for an impulse purchase. and product page. sub-category. broken down by category. All rights reserved.Key elements of top Private Sales sites One-Page Event List A traditional ecommerce retailer may have thousands of SKUs in a hierarchical product catalog. 19 . Large Private Sales sites may have dozens or even a hundred simultaneous events. but they are listed on a single page. © 2009 Optaros.

Inc. the business benefits of having customers that know what time to come to the site every day greatly outweighs the additional IT costs and performance challenges. this tactic can also create a huge challenge for IT in supporting extreme spikes in traffic. Note: Cloud-based auto-scaling platforms are ideally suited to address this spiky demand.Key elements of top Private Sales sites Sales Events Always Start at the Same Time It is important to encourage customers to come to your site at the same time. the rate of product sellout and conversion rates for return visitors. All rights reserved. Though your IT team would much prefer to spread the start time of sales events throughout the day to ease the operations. 20 . by having a standard start time for each sales event. However. © 2009 Optaros. This maximizes impulse purchases.

21 . a Private Sales shopper is motivated to checkout before the inventory depletes or her reservation runs out on her cart. Advertising that free shipping is available for additional items purchased within a given number of hours builds goodwill. © 2009 Optaros. and most importantly does not create disgruntled shoppers. All rights reserved.Key elements of top Private Sales sites Order Stays Open for a Few Hours Compared to traditional shopping. Inc. For this reason. inevitably leading to call-center complaints about multiple shipping charges for sameday purchases. increases order volume. This creates a situation where a shopper is forced to checkout soon after adding an item to the cart. buying many items may require several checkouts.

Image credit: alicia rae .A peek at what’s next Private Sales is still a young retail concept. and rapid innovation in the user experience is to be expected. Following are some of the advances we expect to see on leading sites over the next year.

Rue La La has partnered with Bravo to sponsor the show. 23 . and drive greater return traffic. We predict tighter content integration into Private Sales sites as they already drive tremendous daily traffic from loyal customers.A peek at what’s next Fashion content Private Sales sites have the opportunity to influence shoppers through richer content around the available products. Many of the sites provide little-to-no content around the items. For example. Inc. All rights reserved. Image credit: John Carleton © 2009 Optaros. Providing “exclusive” daily content such as fashion articles is a logical next step. Launch My Line. Why are they compelling? Why is the price such a deal? Which items could be combined with others for an outfit? This type of content could increase the number of shoppers interested in a specific sales event.

increased incentives to extend invitations or competitive leader boards to see who is the biggest influencer. Private Sales sites could market to these consumers directly with special offers. All rights reserved. Inc. 24 . but the ones that have invited groups of people that buy the most. © 2009 Optaros. they could take a lot of people with them). These networked influencers should be addressed separately to keep them loyal to the brand.A peek at what’s next Club for Top Invitee Networks The most valuable shoppers are not the ones that buy the most. (If they switched to a competitor.

but none that we’ve seen are fully leveraging the potential value of this community. 25 . This also allows for effective use of social networks to extend reach. Image credit: BWorthey © 2009 Optaros. Inc. Poll questions or blogs with comments would be a good start to tap into the open innovation potential of the clientele.A peek at what’s next Customer Idea Community Which brands are the shoppers most interested in seeing? What site improvements are most desired? Private Sales sites have many loyal customers that are deeply engaged. All rights reserved.

could help to build a community feel and drive impulse purchases due to the visual “competition” for products. which generates impulse purchases. Currently. especially if turned on during the high-traffic first hour of an event. This feature. All rights reserved. none of the top sites provide a visual representation of this crowd to shoppers.A peek at what’s next Crowd Visualization Part of the power of Private Sales sites is the rush of the crowd at the start of an event. Image credit: edwebproject.org © 2009 Optaros. Inc. 26 .

27 . but as Private Event sites learn how to mine and analyze social graph information. With this data. Inc. All rights reserved. a new level of personalization can be explored where “customers like you” can truly be identified.A peek at what’s next Social Analytics This is a nascent area. but also on influencers. © 2009 Optaros. marketing efforts can not only be focused on conversion.

Is Private Sales a fit for your business? Private Sales has become one of the fastest growing new retail concepts. Many companies are looking to offer Private Sales to tap into this trend. but how do you know if it makes sense for your business? .

and generally require a specialized platform.g. but only the top 10% of the customer base should be invited to start (based on purchases over the last 12 months). To achieve this usually requires a separate brand or at least a brand extension (e. The functional and technical requirements for a Private Sales site are very different from a traditional ecommerce store. Saks Private Sales). 29 . All rights reserved. © 2009 Optaros. An existing customer’s database can be leveraged to jumpstart a Private Sales site. Inc.Is Private Sales a fit for your business? For an existing retailer to make a Private Sales model work there are a few key elements to consider: Consumers must feel a sense of exclusive access to convince them that the pricing is really compelling and worth inviting their friends.

It is another way to shop and to bring excitement to your customer…eCommerce is moving into a new phase (and it makes money). Bob Schwartz. Inc. Schwartz Group Analysis of the Private Sale Market — Note Very “Private” Sale © 2009 Optaros. All rights reserved.Is Private Sales a fit for your business? Overall my point of view is the “private sale experience” is fantastic and should be part of most eCommerce or multichannel companies. 30 .

.Contributor biographies This e-book was developed using the intelligence and insight of Marc Osofsky and Adam Michelson.

All rights reserved. Inc.Contributor biographies Marc Osofsky Marc Osofsky is the vice president of marketing for Optaros and leads the company’s go-to-market efforts and solution development. 32 . © 2009 Optaros. Marc has more than 15 years of experience in helping businesses leverage new technologies to achieve their business objectives.

new online retail concepts and multi-channel efforts. All rights reserved. 33 .Contributor biographies Adam Michelson Adam Michelson serves as the director of ecommerce at Optaros. Inc. © 2009 Optaros. He works with clients to leverage next generation internet technologies for ecommerce re-platforming.

LinkedIn or our Ecommerce Blog to let us know your thoughts. to discuss launching a Private Sales site for your business.Thank you for your time! We hope you enjoyed The Secret to Private Sales. Or. Please connect with us on Twitter.com . contact Optaros today: Phone: (617) 227-1855 Email: Info@Optaros. Facebook.

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