Amazon rumored to be making another acquisition in the flash sale space…

October 6, 2010

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

WSJ is reporting that Amazon is set to announce the acquisition of BuyVIP – a Spain-based, pan-European flash sale site (e.g. Gilt, Ruelala) that services Spain, Italy, Germany, Portugal, Netherlands and more with different geographically targeted flash-sale sites. BuyVIP focuses on higher end luxury goods such as D+G,

BuyVIP had €60 million GMV in 2009 the company now expects sales of over €130 million in 2010. They say they are the largest flash sale site in Europe, but I think that title clearly belongs to Vente Privee rumored to be over  €1B in sales.

Amazon is reportedly paying ~$100m for buyvip.com which seems like a pretty good deal given GSI’s acquisition of Ruelala for $350m with similar revenue/growth characteristics (but obviously Rue was in the US).  This is also quite a savings from what it would take to acquire Ventee Privee which has been rumored for a long time – so they are opting to buy the number 2 for great deal instead of pay top dollar for the number one player it would seem.

Why and what does it mean?

BuyVIP fits in nicely with three of Amazon’s growth strategies:

  • Apparel – BuyVIP is squarely in the apparel category which Amazon wants to dominate.
  • International expansion – Amazon has made it pretty clear that it sees very strong growth opportunities internationally. Amazon recently announced they plan to build 13 DCs, most analysts believe all but 3 of those will be non-domestic
  • Flash sales – Buyers increasingly are turning to flash sales as an interesting way to buy.  Now Amazon has both Woot and BuyVIP to address that consumer desire.

Amazon’s M+A strategy is very interesting because lately they have had a ‘keep them independent’ strategy with Zappos and Woot, but with BuyVIP I would be shocked if they did not take the platform and expand it aggressively into France, UK and USA.  I would be concerned about this acquisition if I were at Rue/Gilt because Amazon could bring to bear some significant assets:

  • Distribution – Nobody has Amazon’s distribution capabilities.  Having purchased from many of the flash sites, their fulfilment can leave a lot to be desired.
  • Reach – With > 100m consumers, Amazon has a great platform to offer flash sales to a much larger audience than any of the current sites reach. Don’t forget Zappos either –  an audience ripe for flash sales IMHO.
  • Manufacturer relationships – Flash sales frequently deal with channel conflict.   Retailers do not want manufacturers liquidating through flash sales.  Amazon doesn’t have that issue and in fact as the largest internet retailer has more distressed inventory buying opportunities than any company in the space.  Amazon could also use that position to lock out competing flash sale sites.

So I think this is one time we’ll see Amazon do a deeper push with the newly acquired asset.  What do you think?  Sound off in comments.

SeekingAlpha Disclosure – I am long Amazon and Google. eBay is an investor in ChannelAdvisor