A new concept is spreading in the luxury industry creating a demand and supply for discount designer goods. A new luxury online experience that offers a different culture. The chic E-commerce sites offering luxury brands at discount savings are all the buzz and smart luxury portals are getting much attention. Likely, why investors also want to cash in.

Will more luxury consumers start to tell if they save on luxury goods?  Do you really want people to know if you got your Gucci online at a discount  from a luxury portal? True some of these popular luxury portals can’t keep certain items in stock because of the demand. However, we have yet to see a huge branding effort to give credibility back to the luxury portal.

BANGALORE — TPS Shopping Outlet Pvt. Ltd., an e-commerce start-up that offers discounts of up to 80% on global designer brands, raised $5 million last week from a set of five companies.

The 11-month-old firm based in Bangalore — which sells brands such as Moschino, Hugo Boss and Gucci — on its members-only Web site theprivatesales.com, plans to use the money to add categories and launch a similar Web site that offers discounts on luxury fashion. TPS declined to name the investors.

Private-sales portals that have a regular customer base of registered users are an attractive model for investors, analysts said. Such online retailers take luxury labels to customers in small towns and cities, widening the reach of global brands. The discounts make the labels affordable to a larger audience of aspiring fashionistas, even if the discounted styles on sale are a season old. These online retailers offer lower prices, a wide variety of categories to choose from, and the convenience of ordering original top-end brands from anywhere.

“Brand retail is big and belongs to a big consumption story,” said Mukul Singhal, a senior associate at SAIF Partners, a private equity firm. The primary attraction of online retail is its ability to reach those beyond the big metros.

“[The] supply chain is broken and people don’t get such brands in tier-two and tier-three cities,” he said.

SAIF Partners is set to invest $4 million to $5 million in a Bangalore-based online apparel and accessories start-up that it is incubating, which means the private equity investor is nurturing a fledgling operation through the process of growing its business.

Last month, the fund also invested $4 million in Pune-based BrainBees Solutions Pvt. Ltd, which offers global brands such as Mattel, Pigeon and Mee Meet hrough its online baby products shop Firstcry.com.

Another private-sales portal called 99labels.com raised $3.5 million last week from Info Edge (India) Ltd., which runs recruitment site Naukri.com. FashionandYou.com, another seller of luxury labels, raised $8 million from Sequoia Capital last December.

“E-commerce is an emerging area [that shows] promise for investors,” said Debashish Mukherjee, partner and vice-president at consulting firm A.T. Kearney India, adding investments are small, but upside is high.

Within this category, the bet is on the high volumes these online sellers of luxury brands are expected to generate in the long term, said Kanwaljit Singh, managing director, Helion Venture Partners.

“In the short run, they do have lower margins but that is the time when they concentrate more on customer acquisition, sorting out deliveries and back end,” he said. “Once all this is in place and the business has stabilized, their margins are better than physical outlets.”

A big benefit is that private-sale portals save on real-estate costs, which, typically, is a huge cost burden for high-end stores. These firms lean heavily on word-of-mouth publicity, referrals of existing members, and Internet advertising to reach customers. Some try new approaches: TPS Shopping, for instances, plans to host fashion shows starting next week.

The online seller also plans to use the money raised to expand its brand inventory to 300 to 400 new brands from its current list of 140, said Sunder Gianchandani, president of TPS.

The firm is growing at 50% to 70% every month, and has 400,000 registered members, of whom 47% have made purchases,he said. It aims to have five million members over the next two years.

So, how exactly does he manage to get a real Gucci bag, not a fake, for 20% of original price: “We have agreements with these (luxury) brands and they give us their surplus,” Mr. Gianchandani said. “We sell them at discounts of maximum retail prices here.”

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