Annabel Palmer talks fashion, funding and family business with Nish and Sach Kukadia, co-founders of the flash sales website and private members club Secretsales.com
DEAL of the day, or flash sales sites, were brought into the post-dotcom bubble world with the launch of Woot.com in 2004. It gave customers a 24 hour window each day to take a particular deal or ignore it.
But while flash sales sites rescued many bricks-and-mortar retailers after the 2008 financial crisis, their own survival has been called into question in recent months. The evidence is mixed. Groupon floated in 2011, valued at $12.7bn (£7.64bn). A year later, it had lost around 80 per cent of its value. Nonetheless, some forecasts are positive – a BIA/Kelsey study recently predicted global industry revenues would grow to $3.9bn by 2015.
Britain was introduced to the fashion flash sales concept by private shopping club Secret Sales, founded in 2008 by brothers Nish and Sach Kukadia. As you would expect, the duo are optimistic about the future of flash sales; their business now has a £27.4m turnover. It sells brands like Tag Heuer and Jimmy Choo, with up to 70 per cent discounts on high street prices. In 2013, sales grew by 65 per cent compared with the year before, and the site has saved its customers over £125m to date.
PASSION FOR FASHION
The Kukadias grew up with an understanding of how the fashion industry works – their father was a significant shareholder in Pepe Jeans. A passion for fashion took hold of Sach early on – he entered the clothing industry long before Nish, where he “acquired the skills needed to start Secret Sales, in terms of buying product, pricing structures and merchandising”. Older brother Nish, meanwhile, went into digital advertising after graduating, working at a WPP agency and handling accounts including Direct Line and Xerox. Today, Nish is Secret Sales’ chief executive; Sach is its buying director. “We have very different personalities – which has allowed us to each contribute to the business in our own way,” says Sach.
The brothers had their lightbulb moment in 2006, when they were introduced, as consumers, to French flash sales site Vente-Privee. They saw an opportunity to take that business model, and make it suitable for a British audience. “Painstaking” industry research ensued, which led the brothers to narrow their focus to fashion accessories and footwear. Today, Secret Sales has expanded to homeware, wine and beauty products. “But back then, we wanted a mix of products that would work alongside clothing our members could buy on the high street. Like the female customer who wants to buy the dress from Topshop, but wear it with a designer handbag,” says Nish.
A NEW MODEL
The starting year was an education – both for the brothers (we spent months identifying fashion labels we wanted to stock and knocking on doors”) and for the brands themselves. “We were the first fashion company in the UK to adopt the consignment model – where brands ringfence stock on our behalf, we run a campaign for around four days, and we place an order only once we’ve taken orders from our customers. Traditionally, clearance houses would work with brands under a fixed purchase,” says Sach.
It took time for the new concept to garner interest. Indeed, in the early days, the brothers were advised not to take any “further risk or liability” with operating this model, which “wasn’t as successful then as it is now”. It wasn’t until they had case studies – deals they only secured by committing to the product first – that the business started to gain traction. Within the first two years, Secret Sales had opened 300 different brand accounts.
All this was achieved on what the brothers call a “shoestring” budget: a £100,000 bank loan penned against their family property. It left little for marketing, so to drive traffic to the site the duo relied on networking, and writing on forum or community sites. The economic downturn marked a turning point – brands had excess inventory, consumers were on the hunt for bargains, and at the time there was “no other retailer positioning itself as an accessories-focused discount website”.
After 18 months, venture capitalists started calling. And in 2009, they were approached by German flash sales company Brands4Friends, which “wanted to invest, as well as provide infrastructure and the blueprint to scale. It was the most exciting proposition we’d received, and we went forward at the start of 2010.” Soon after, the brothers acquired another high profile investor, eBay, following its acquisition of Brands4Friends that same year. But the retail giant didn’t share their “vision”. “Amicable” conversations ensued, and the brothers decided to find investors who were “more UK-centric.” Secret Sales now has a board of three institutional funds.
So if not fundraising, what has been the biggest challenge? “The advancement of technology, and ensuring you are constantly communicating with customers and building a loyal user group,” says Sach. As such, their immediate plans involve personalising the consumer experience. “We want to create a more curated shopping experience, with more emphasis on content and editorial.”
And while the brothers are aware of the obstacle the wider industry faces, they are optimistic about the future of Britain’s ailing high streets. “Retail is a highly competitive market – we have a very mature high street with fantastic products,” says Nish. “And if retailers can find a way to get in front of customers when they want to shop – and Click and Collect is an interesting development in this space – they can be successful.”
The hardest part, they tell me, was taking the first step. “But it does get easier. Working for yourself, you know that every drop of sweat you put into the business will be to your reward,” Nish says. Let’s hope their hard work continues to pay off.
CV NISH KUKADIA
Company name: Secret Sales
Job title: Founder
Studied: Management and Marketing at UMIST
Favourite Business Book: The Everything Store, by Brad Stone
Talents: Photography, painting
Motto: Hire great people, it’s half the battle
CV SACH KUKADIA
Number of staff: 85
Job title: Founder
Studied: Management and Marketing at UMIST
Drinking: Vodka, slim tonic and lime
Reading: Gone Girl, by Gillian Flynn
Favourite Business Book: The Rise and Fall of Alan Bond, by Paul Barry
First ambition: Launch a fashion brand
Heroes: My father
Motto: Say what you do and do what you say