Fashion Web Start-Up Raises $36 Million

DealBook Jun 08, 2012 Back to press

Everyone loves a bargain, but some shoppers just want access.

At least that’s the thesis behind Moda Operandi, a New York-based start-up that has raised $36 million from venture capital firm RRE Ventures, and several strategic investors, including IMG and LVMH Moët Hennessy Louis Vuitton.

Like Vente Prive, Gilt Groupe and a bevy of me-too flash sales sites, Moda Operandi offers limited timed sales. But instead of baiting consumers with deep discounts, Moda gives its users early access to designers’ upcoming merchandise and charges full prices. Previous investors New Enterprise Associates, New Atlantic Ventures and Conde Nast also participated in the financing round.

Moda Operandi’s investment comes as many high-end retailers, once reluctant to sell their premium goods online, begin to embrace the Web.

There are still some notable holdouts in the industry, like Chanel, which doesn’t sell its trademark quilted bags or boucle jackets online. But many are becoming emboldened, as more consumers shift to the Web to make their purchasing decisions. Online sales in the United States are expected to grow more than 50 percent to $304 billion in the next three years, according to data from Forrester. And earlier this year, LVMH, started the Chinese-language version of nowness.com, its fashion editorial site, in a bid to expand its influence among China’s elite.

Moda Operandi is part of a new crop of start-ups courting high-end designers willing to grant exclusivity but not discounts. The company — founded in 2010 by Áslaug Magnúsdóttir, a former Gilt Group executive, and Lauren Santo Domingo, a Vogue contributing editor — showcases limited sales, or trunk shows, for prestigious designers like Marc Jacobs and Proenza Schouler. Shoppers pay half of the full price upon purchase, and the rest when the item is received. The goods, which are usually showcased before they hit department store shelves, typically arrive 6 to 10 weeks later.

Moda Operandi was created in part to help brands connect with consumers after fashion shows. Now that the Web has made shows so accessible, Ms. Magnúsdóttir says there is a major opportunity for labels to immediately capitalize on these marketing events by selling direct to consumers online.

“Because customers are now able to see full collections online in real time, there is a great deal of excitement generated by fashion shows that Moda Operandi strives to harness immediately,” Ms. Magnúsdóttir said. “The Web has created a much savvier consumer.”

The financing will be used to help build the business internationally and increase its “in-season” business. Unlike its preorder business, which makes up the bulk of its revenue, Moda Operandi also offers curated collections of ready-to-ship goods.

In many ways, the rise of companies like Moda Operandi is a reaction to the glut of discount flash sales sites. While sites like Gilt have been able to attract premium brands, many have also struggled to build their inventories. Now that the financial crisis has passed, retailers are more disciplined about managing their stock and finding more buyers in stores.

“Those are lower margin businesses, and there’s a lot of competition now,” said Adam Ludwin, a principal at RRE Ventures. “We had no interest in investing in a me-too company.”

This post has been revised to reflect the following correction:

Correction: June 8, 2012

An earlier version of this post included an incorrect amount for the expected online sales in the United States in the next three years. It is $304 billion, not $304 million.

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