How will established retailers respond to the opportunity/threat of Private Sales?

Private Sales started in the fashion stores of Paris as they cleared out excessive inventory in invitation-only ventes privees.  Vente-privee.com then took the concept online and in 8 years has become a$ 1 billion retailer.  Numerous imitators have followed online such as Rue La La, and Gilt Groupe with similar rapid revenue growth.

Large, established retailers like Saks and Neiman Marcus have launched some online Private Sales and many other retailers are currently debating what to do.  The rapid revenue growth, low customer acquisition costs and high inventory turns are hard to ignore.  But how does this fit with the core business?

Two options exist for established retailers:

Private Sales as Marketing Campaign.  Treat it as another marketing campaign.  Create a microsite, develop a theme, select product and drive traffic through an email blast.  Use the Private Sales approach as a hip new way to sell discounted inventory.

Private Sales as Multi-Channel Business Plan.  Established retailers could leverage their supplier relationships, store footprint and large customer databases to merge the original version of Private Sales that occurred in store with the new online version.

The Marketing Campaign version is fairly straightforward and the approach that both Saks and Neiman Marcus have followed to date.  Let’s explore Multi-Channel Private Sales a bit further.  How do the unique assets of an established retailer provide competitive advantage in Private Sales?

Store footprint.  Returns could be brought to stores for store credit.  If inventory is present in stores, the items could be viewed/tried on ahead of the online sales event.  In-store, invitation only events could be held to drive store traffic and allow inspection before purchase.

Supplier relationships.  As a top customer for many brands, an established retailer could negotiate for access to top excess inventory as part of the relationship.

Large customer databases.  The viral nature of Private Sales needs seeding with email campaigns to the right customer segments.

Loyalty programs.  Purchases in Private Sales would be credited in the overall loyalty program to encourage greater loyalty to the retailer’s Private Sales site.

What other advantages would a Multi-Channel Private Sales retailer possess?  Who do you think will be the first retailer to go Multi-Channel Private Sales?