Amazon has announced the closure of its BuyVip line, the web page that allows its members access to discounts of up to 70% off the recommended sale price on leading brands of fashion, accessories, electronics, household goods and beauty products. The company acknowledged that “the business is still not profitable” in spite of its efforts.
BuyVip was founded in April 2006 by Gustavo García Brusilovsky and José Luis Vallejo. It was the first Spanish online purchasing community that made products from leading brands exclusively available to its members at reductions of 30% to 70%. For companies, it represented a way of moving accumulated stock, gaining customers and improving their promotion. The company grew rapidly: it started out with four workers and a turnover of 500,000 euros a year, and by 2009 –one year before it was acquired by Amazon– it had 300 workers and a turnover of 70 million euros. Between 2006 and 2007, the company also launched in the German and Italian markets, and was ultimately present in Portugal, Holland, Poland and Austria.
The acquisition process lasted around 18 months, and concluded with a price of 72 million euros. The purchase took place just one year before Amazon arrived in Spain. In this period it has expanded its network to numerous markets, and currently ships to 28 countries in the European Union. In spite of this expansion and the increases in innovation and convenience during this time, the expected profitability has failed to materialize. According to Amazon Spain: “Since we acquired BuyVIP in 2010 we have worked to create a shopping experience that our customers would enjoy, offering them an ever wider catalog of products, innovative features and attractive discounts (…), but the business remains unprofitable”.
One of the problems may have been the delay in delivering the products. Gustavo García admitted this problem in a 2010 interview, when the company was integrating with Amazon: “The worst thing is that the shopper has to wait a long time”. Counting the time the offer remained active (around 4-5 days), the time the brands took to send the products to BuyVip, and the time BuyVip took to distribute it to the consumers meant the whole process could take between three and four weeks. This working method was maintained with Amazon. Additionally, Amazon was itself competing with BuyVip with the introduction of its flash offers on its own website, and many brands that are on BuyVip also sell through the Amazon platform, which may have also had some bearing on the results.
This is not the first store Amazon has opted to close. In May 2016 it divested itself of MyHabit, a website with flash fashion offers that operated in the United States with a similar business model to BuyVip. It recently also announced the closure of Quidsi, the parent company of websites such as Diapers.com and BeautyBar.com, due to high shipping costs and low web traffic.
The employees at Amazon Buyvip –around 100– will be relocated in other departments in the company, as announced in Spain: “BuyVIP has an excellent team of professionals and we have offered them all new jobs that will allow them to continue pursuing their career at Amazon”. The store will remain active in Spain, Italy and Germany until 31 May.