December 20, 2010 2:22 pm

Ebay buys into online private shopping club

Ebay, the e-commerce marketplace, has agreed to pay $200m in cash to buy Germany’s Brands4friends in the latest in a string of deals in Europe’s burgeoning online private shopping club market.

The acquisition highlights how attractive online private member clubs have become to investors. Brands4friends was set up in September 2007 and is now Germany’s largest private online shopping club with 3.5m customers across Europe and Japan.

The e-commerce clubs, which pull together members looking to benefit from group discounts on fashion and lifestyle products, have grown rapidly in the past few years. They are particularly popular in France – home to Europe’s biggest shopping club Vente Privee – Spain and Italy, where consumers have previously had less access to discounted designer brands than in places such as the UK.

Brands use the sites to dispose of excess stock in flash sales over one or two days, or obtain market research on what products sell.

Ebay estimates that online shopping clubs now account for 20 per cent of online fashion sales in Europe. But with so many businesses operating in the same sector, industry analysts say that the sector is ripe for consolidation.

Venture capitalist and private equity players were early backers of shopping clubs but more established e-commerce players such as Ebay and Amazon are now also spotting potential in the sector.

In September, Accel Partners, an early backer of Facebook and Groupon, invested €37m in Showroomprive.com.

In October Privalia Venta Directa, Spain’s largest private online sales club, secured €70m ($95m) in funding from venture capitalists including General Atlantic, Index Ventures and Highland Capital. The group said at the time that it expected to use the funding to expand further in to Latin America and make acquisitions in Europe.

A few days later Amazon agreed to acquire BuyVIP.com for an undisclosed sum. The Madrid-based fashion site was set up in 2006 and has 6m members in Spain, Germany and Italy.

Ebay said that as part of Monday’s deal it would take over the Brands4friends’ shares in SecretSales.com, a British e-commerce site, and the group’s Japanese unit. Early investors in Brands4friends include Mangrove Capital Partners, Partech International and Holtzbrinck Ventures.

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