“The difficulty lies in structuring the business without losing creativity and agility”
19 March 2017 · 6 min read
Building a marketplace that connects buyers and sellers has become one of the hottest entrepreneurial ambitions. However, only a few companies have succeeded in constructing a sustainable business model that translates into robust profitability.
Today we talk with Vestiaire Collective’s CFO Franck Boniface about how his firm attained such a balanced business model and how the finance function helps in that endeavour. Vestiaire Collective is a leading global marketplace and community for pre-owned luxury and designer fashion.
What are the main pillars of Vestiaire Collective’s business model?
The magic of our model is, firstly, that we are specialised in luxury goods. We have probably the biggest online inventory of this kind of products – including bags, shoes, jewellery, etc. – with an average basket of €400.
The second characteristic is that every product in our platform is checked physically by experts, so unlike other marketplaces, we prevent users from selling and buying fake copies. We perform quality control on between roughly 1,000 and 2,000 pieces every day in Paris and New York.
And beyond this, we are very social and produce a lot of content around our platform. So apart from suggesting products, we tell you about the latest trends. As a result, now people are coming to us not only to buy things, but also to get inspired.
In terms of monetisation, we take a 25% commission, on average, which is aligned with our exclusive quality control service.
Which companies do you see as your main competitors?
In Europe, one of our main rivals would be eBay, who are not specialised in luxury goods but are a major player in that segment. There are also companies in France and Germany doing similar things – VidedressingRebelle – but our two biggest competitors for worldwide leadership are two American firms: The RealReal and Tradesy. They have different models, but are still competitors for us.
Having been at Vestiaire Collective for more than four years, how has the company changed?
The change has been huge. Let me give you some figures. When I started, there were less than 30 employees, and now there are more than 250 of us. We were also 100% French, and now France only accounts for 35% of our business. We have multiplied our business volume more than tenfold. We funded the company with only 10 million when I arrived and now we have raised more than 100 million. Moreover, we were very small on the world stage, and now we are in the top three and are very well positioned to become the leader worldwide.
In three years, I’ve been through many steps and layers that would take 10 years at a normal company. So yes, a lot has changed.
What would you say have been the key drivers for your success?
I think that when things are moving very quickly, as has happened in our case, one key skill is to anticipate things, prioritise and stay agile. That’s something very common, but it’s especially exacerbated in our environment. If you are not able to pick the right subjects every morning or quickly adapt your positions to contextual change, you are just missing the point.
Secondly, it is critical to attract key talent that will help to progressively professionalise key areas along the way, leaving you more room to focus on the company’s next strategic steps. Structuring the business is important, obviously, but you need to keep the creative energy that allows you to innovate and improve.
On top of being surrounded by talent internally, the third key would be to be surrounded by talented external stakeholders as well. You have to pick best-in-class investors that understand your business, mentor you and actively contribute towards supporting you and the company in key strategy decisions. The same goes for your service providers.
Lastly, I would also mention how important it is to be connected. I’ve spent so much time speaking to other CFOs and service providers and the right people help you to gain a lot of savvy and add value to your own business. And that is key for a startup.
What have been your main challenges?
One of the key challenges for me is to ensure that you have a good match between your talents, expectations, skills and the company needs in a very fast-changing environment.
Fundraising has also always been a complex process. I’ve done three rounds in the last three years and it has always been a very enriching and deeply strategic exercise, but also a very demanding one. You need to build a clear and strong vision aligned with your existing investors, supported by the appropriate key performance indicators while you prepare the road show with the right target investors and manage the day to day.
What are the priorities for your business and how is the finance function helping to achieve them?
The priorities are pretty straightforward: sustaining growth through expansion – which is very specific to our business since we are growing at a 60% rate; and maximising the business’s profitability while finding the right positioning.
I work a lot on strategy definition, performing modelling exercises, making sure that the positioning we’ve got – or the one that we are anticipating and intending to take – is the right one. And also, assessing and getting the right data to make sure we are entering the right markets for international expansion.
On the profitability side, after having driven the business towards profitability in mature markets, our next challenge is to ensure that new countries follow the same track. As part of this objective, I have recently been doing some extensive work on understanding the mechanism behind the behaviour of our existing and new clients to optimise our marketing performance. Understanding the behaviour of your clients is also key for you to make effective use of forecasts.
What are the main cultural-related challenges you are facing derived from your hyper growth?
The difficulty lies in striking a balance between agility and the structuring of the business. We cannot just put people in a box, since we face the risk of losing creativity and agility. It can happen that sometimes you feel you are being too structured, while sometimes it’s the exact opposite – everything is a little bit messy. The idea is to work towards that balance, although that path is not always linear. I definitely don’t want us to become a normal company, but sometimes it is hard not to, which has many implications, especially for acquiring entrepreneurial talent.
That aside, at the beginning we only had French people who were exclusively communicating with a French market whereas now most of them – since many are still with us – have to speak to the world. And there’s a huge gap. I’m very focused on an ongoing discussion regarding what should be local and what should be central.
What are the tools you use in your workflows?
We have a proprietary platform here, so most of the data comes from that source and is then rerouted to business intelligence, reporting and accounting tools. Excel has historically played a huge role in the KPI workflow construction. We are now gradually moving towards more next-generation tools on every front and more specialised business intelligence. For instance, we have implemented Periscope, which makes it possible to easily and instantly visualise data performance. As for our business modelling, we are planning to move from Excel to Anaplan in the coming months.
And what other processes have you automated to improve operational performance?
What is really critical to me is not so much the financial back-end – e.g. invoice recording, but making sure I get the right data myself and am able to share it with the right people. So, the extraction of key performance indicators from the platform was definitely something I worked on.
On the accounting side, we have implemented a lot of automation around invoicing, bank transactions, FX, etc. One of the things I really like about my job is being able to work with startups, especially Fintech firms. So, solutions like Kantox make me more adept than ever and allow me not only to achieve differentiation, but also to focus on other stuff. Another example would be about transaction approval and the risk of fraud. We have plugged into a company called Riskified – since we were struggling to decrease our fraud rate – and they have really helped us in that respect. But again, the key point is that many of these new solutions make me more efficient, make my life easier, and let me focus on more strategic tasks.
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