Why eBay Needs to Lock Away Its "Fashion Vault" For a While
It used to be that eBay (EBAY) was the online marketplace for finding that highly-coveted item from a favorite designer. Whether truly vintage or merely last season, the auction giant could be counted on to facilitate sales and spark bidding wars between collectors lusting after hard-to-find items.
Then things started to change. eBay introduced its "Fashion Vault" last fall, directly peddling the wares of Hugo Boss, DKNY, Max Mara, and -- right now -- French Connection. These "flash sales" feature limited quantities of brand new items at ample discounts for only 48 to 72 hours. As exclusive events go, this is somewhat interesting, but it also put a damper on what eBay's long been best known for: the thrill of bidding against like-minded fashionistas. And as a new sales channel, it's a little puzzling.
It's not like eBay's been struggling during the recession. In November it sold a 70 percent interest in Skype to an investor group for $1.9 billion in cash (and a note for another $125 million). For the fourth quarter, eBay's revenue grew 19 percent without Skype, an increase the company attributes to growth in PayPal and StubHub and improvement in the core eBay business. Net revenue for the full year rose a more modest 2 percent, but still.
Perhaps eBay's been experimenting with other sales channels in the last six month because of the good cash flow. Or perhaps it's simply eager to try out concepts that have brought other retailers considerable success. Note how it became purveyor of a designer diffusion line this month a la H&M, Topshop, and Target (TGT). Narciso Rodriguez's capsule collection debuted on March 11 (and judging by the quantities available now, hasn't exactly flown off the virtual racks -- yet).
eBay's Fashion Vault concept is similar to Gilt Groupe and Rue La La, which make exclusive premium merchandise available through private online sales. These virtual designer sale sites have grown exponentially during the downturn, each boasting well over a million members. Gilt Groupe snagged an impressive $43 million financing with General Atlantic and Matrix Partners in August while Rue La La sold to GSI Commerce for $350 million. This was no doubt partly fueled by the sites' invitation-only cachet as well as the limited availability of luxury designer items that aren't easy to find at retail.
Which is another reason why eBay's move leaves me scratching my head.
Sure it's great to get new, in-season merchandise at a discount, but French Connection clothing at 50-60 percent off? Among the 62 pieces, a few are standouts -- such as the "Twist Again" dress pictured above. But for the most part we're talking beater tanks, knit cardis, and miniskirts -â€" good basics, not luxe goods. This is a far cry from Gilt Groupe's more toney threads from the likes of Roberto Cavalli and Temperley London. Somehow this sale makes even the edgy French Connection brand (which recently dipped into a provocative Chat Roulette contest to entice customers) seem watered down.
eBay may have to lock this Vault idea away until it can offer deeper discounts or can lure more haute designers into the fold rather than push what's available in most department stores.