The flash sales website that grew by word of mouth
- 15 July 2014
- From the section Business
Social media may have been embraced with enthusiasm by much of the business world, but one French company has made it big by relying on a far older means of communication - word of mouth.
Vente-privee.com is a pioneer of internet "flash sales", in which branded goods are offered at heavily reduced prices for a short time, usually just a few days. Access to the sales is limited to members who are emailed details shortly before they begin.
The company's founder, Jacques-Antoine Granjon, says it is "not a start-up" - at least not in the Silicon Valley sense of the phrase, where some tech firms have become successes almost overnight. In fact the company's history stretches back to the 1980s, when Mr Granjon founded it with a college friend.
After studying at the European Business School in London, he went on to do some internships at various companies, something he did not enjoy. He disliked being bossed around and given "stupid things" to do. Instead he wanted to work for himself.
"My mother said I was always like that," he remembers.
Back in Paris, with a loan from his father, Mr Granjon set up a business buying surplus stock from fashion companies and selling the goods on to discount stores.
He says there are many reasons why there are often surpluses of fashion and other goods. For example, particular colours or designs can prove unpopular (sometimes because of bad weather), stock sometimes arrives late from factories, or some sizes unexpectedly sell better than others.
Mr Granjon says he soon grasped the secret to success in the field. "If you buy well you sell well in this business," he says.
"If you buy a Fred Perry shirt that [normally sells]… for £100, you buy it at £6, you sell it at £15 or £12 and the [discount] shops sell it at £29 - you've done your job."
He adds that, as the number of brands proliferated in the 1990s, they became ever more protective of their images. He came to understand that he was providing a service not only to the outlet stores he was supplying, but also to the brands with surpluses they wanted to dispose of.
The key to making his business grow would be to provide the brands with an excellent service - good distribution, expert understanding of how the discount market worked, and above all - discretion.
For a while Mr Granjon's approach worked well. The company grew and in the mid-1990s it moved into the former printing works of Le Monde newspaper, close to the Stade de France just north of Paris.
But around the year 2000, a couple of things happened that inspired a re-think.
One was the fact that some discount stores began to bypass the company, and instead deal with brands directly.
The other was the advent of the internet and e-commerce.
Mr Granjon says he thought deeply about the new possibilities the web might offer.
He realised that he could now sell directly to consumers. He also knew that his business had certain advantages - such as lots of warehouse space and an established distribution network - that some newer e-commerce firms did not share.
He acknowledges that the internet was an unfamiliar medium but believes his lack of technical expertise may have been an advantage.
Although he and his partners noticed that other e-commerce companies paid for adverts on search engines such as Google, they decided not to follow suit, at least at first. Not because of some great insight, he says, but because "we had no money for advertising".
Instead, they relied on word of mouth: "I have to tell friends and they will tell friends, and they will tell friends."
Mr Granjon believes this approach has strong advantages over advertising. In an age when trust in big companies and institutions has become something of an issue, people may be more inclined to respond to personal recommendations than advertising campaigns.
Certainly, the business seems to have prospered. From just 20 members in 2001 when it launched its website, Vente-privee now claims a membership of about 22 million in Europe.
The firm does now do a small amount of internet advertising, principally to help customers from outside France to find its website.
However, to raise the company's profile, Mr Granjon says it spends much more on what he calls "resonance advertising". An example is the recent acquisition of the Theatre de Paris, where it has mounted events such as a celebration of the birthday of French singer and actor Johnny Hallyday.
Vente-privee has also increased its range far beyond fashion to include everything from cars to jewellery to sex toys (it says it sold 50,000 of the latter in one sale).
The business has expanded beyond France to other countries, such as the UK and the USA (the latter in partnership with American Express). But Mr Granjon says that 80% of its turnover remains within his home nation. He adds that he could not imagine living anywhere else.
Although in recent years Vente-privee has brought in minority shareholders, Jacques-Antoine Granjon stills retains control. He advises new entrepreneurs just starting out to be wary.
If you bring in outside investors at an early stage, he warns that they may not have the same goal as you, "because you are creating a company to develop projects and they are investing in you to get money".