Cettire’s business model ranks mystery supplier network, raises quality control questions

The luxury fashion business model draws on tiers of opaque suppliers, is vulnerable to errors in inventory and blacklists staff from taking annual leave, sources claim.

Cettire, led by Dean Mintz, did not answer direct questions about how many executives, managers or board members have access to the names of its suppliers.

The model of luxury online goods retailer Cettire draws on different tiers of opaque suppliers, is vulnerable to errors in inventory levels, and blacklists staff from taking annual leave for large chunks of the year, sources say.

The Australian understands ASX-listed Cettire’s staff are told to list and restock products on the website from higher-tier suppliers, but not from the lowest tier.

Employees are only given supplier codes as identification and are told to avoid the lowest tier of suppliers, if possible, which is likened to an emergency supply of goods if other tiers are out of stock.

“If we have the option of tier one, tier two, just don’t touch tier three, it was mainly this kind of system,” one former employee said on the basis of anonymity. She said staff were not made aware of the reasons for suppliers to be placed into these buckets, but noted the higher-tier suppliers would typically provide product photos and more detailed descriptions and information.

A lot of the quality control rested with the “trust relationship” Cettire had with suppliers, the former employee noted.

Other sources familiar with the company suggested a clear hierarchy of large and smaller suppliers for identical products, many of whom provided photos of goods remotely to Cettire, which often needed to be retouched.

The comments raise questions about how Cettire manages its supply chain and where any accountability lies for product or distribution issues.

Cettire doesn’t disclose how many suppliers it has and not a lot is known about its distribution, which matches wholesale suppliers of luxury brands with customers. It relies on a drop-shipping model, which means it doesn’t store inventory or stock. Products ordered are shipped directly to customers by third-party wholesalers it has relationships with. Cettire typically deals with these unnamed wholesalers rather than the designer brands.

A Cettire spokeswoman said the company did not have a supplier tiering system, but did categorise suppliers when publishing new products on its site if employee intervention was required.

“Orders are routed algorithmically via the company’s proprietary software, having regard to margin, fulfilment timing and location, amongst other inputs and is completely supplier agnostic,” she said.

“Tiering does not relate to suppliers, it relates to the process of publishing products on to Cettire’s platform when new products are made available by the supply chain.

“The publishing process is largely automated, however, if manual intervention is required, there is a prioritisation process for publishing new inventory, which places emphasis on inventory which is most likely to perform strongly.”

Cettire did not answer direct questions about how many executives, managers or board members have access to the names of its suppliers.

“There are strict mutual confidentiality clauses in agreements with suppliers so supplier information is limited to those who need to know in order to fulfil their roles,” the spokeswoman said.

The company had a “large and diverse” supply chain and its base case model meant the supplier provided the product imagery, she said.

(High-end fashion brands have struggled. Among them Burberry has issued a profit warning and axed this year’s dividend. Picture: AFP

Audit firm Grant Thornton has declined to answer any questions about its relationship with Cettire, and any potential vulnerabilities in the company’s supply chain.

Cettire – which listed on the ASX in 2020 – experienced a period of rapid growth based on a low-cost model which employs about 70 staff, a large share of which are engineers. Reclusive founder and chief Dean Mintz rocketed into the The List – Australia’s Richest 250 this year, and is one of the wealthiest 30-somethings in Australia.

But Cettire’s customer service levels have come under fire in recent months and continue to be a sore point. Of the past 10 Cettire reviews on Productreview.com.au, eight rated it just one star and two gave five stars, reflecting polarising views on the company and its service levels.

Mr Mintz in May told an investor conference Cettire’s returns process was “best in class”, reflecting its automation.

But David, who did not wish to disclose his surname, ordered from Cettire a month ago and found the refund process cumbersome and frustrating. He ordered and paid for a Prada bag only to be later told it was out of stock.

“I emailed them back that I’m happy if they keep my order active and see if there is a change in (stock) circumstances, but I didn’t receive a response,” he said. “Their overall customer service is very lacking, especially for what you would expect in a luxury goods market.”

David alerted Cettire that it was still advertising the bag despite being unable to stock it, and he eventually decided to cancel his order.

“I never received acknowledgment that I was happy to wait longer, I never received a response or advice that it might be a technical matter that they could refer perhaps to another department to take the item down,” he said. “I’d never use them again … for the sake of trying to save a couple of hundred dollars.”

Asked why Cettire would continue to advertise out-of-stock products, even after being alerted by a customer, the spokeswoman said Cettire always had “a basis to believe a product is in stock and available” if it were being advertised.

“However, inventory availability is dynamic and constantly changing based on information reported by our suppliers’ inventory systems, so it is possible for there to be a mismatch between digitally reported inventory levels and the physical inventory,” she said.

The Australian in May revealed that the Australian competition regulator was assessing complaints about Cettire, while the US Federal Trade Commission had received 173 complaints over four years.

In comparison, the FTC information showed global online retailer and rival Farfetch was the subject of 81 complaints over the same period.

Several Cettire complaints with the FTC claimed the customer received damaged goods, a couple raised allegations of counterfeit luxury products being supplied, while others claimed they received empty boxes or had issues obtaining refunds.

Cettire has denied allegations it supplied any customers counterfeit goods.

Cettire has been navigating a tough operating climate and is due to report annual earnings toward the end of August, which aligns with the lifting of a restriction binding Mr Mintz to not selling further shares in the company.

A buyer claims a PRADA bag he ordered was out of stock but had difficulty communicating with the online company.

Cettire last month warned its earnings were being hit by challenging conditions as its fiscal year was ending. The update to investors resulted in about 50 per cent of the company’s market value being wiped out on the day. The shares have since rallied about 17 per cent to $1.33.

Inflationary and economic pressures are buffeting an array of global luxury brands, amid tempering consumer demand in markets including China, where Cettire launched last month. LVMH – which includes designer brands such as Louis Vuitton and Tiffany & Co – is among those reporting declining sales in Asia, excluding Japan.

Hugo Boss in July cut its annual sales forecasts, citing softer demand, while Burberry issued a profit warning and axed this year’s dividend.

Cettire’s low-cost model has also raised criticism from former frontline employees who said they were offered few avenues for promotion and subjected to three-to-four months of the year being black-listed for annual leave. Sources said very few exceptions were allowed to qualify for annual leave during the blackout periods, with one being getting married.

The Cettire spokeswoman said like other retail businesses the company had peak trading periods where it was “more difficult” for employees to take leave. “Peak sales periods at Cettire are mid-year and pre-to-post Christmas,” she said.

Little is known about Mr Mintz, who established Cettire in 2017, bar his interest in technology, mixed martial arts and table tennis.

Mr Mintz has, however, sold about $335m worth of Cettire stock since early 2022, including $127m from a sale in March.

The Australian has found a digital footprint that links Mr Mintz’s Hotmail email address to an account on digital marketing community forum BlackHatWorld. The account named Tomoenage – a jujitsu and judo move – was active in 2009-10 asking other users about software and IT systems including an adwords management system, blogslammer, back linking to boost website traffic and sourcing an article writing company.

In 2010, the account asked BlackHatWorld users how to monetise an adult website that received about 1500 unique visits a day.

Cettire and Mr Mintz were asked about the online activity and the connection between the Hotmail address and the Tomoenage account.

The spokeswoman said: “Dean categorically states that he has never heard of nor did he have any involvement in the mentioned website.”

In May, The Australian was privy to digital evidence including the same IP addresses linking two entities associated with Mr Mintz to an online eBook called “Learn how to get Real Strippers into Bed from Strippermaster.com”.

The eBook was sold for $US29 and offered tips on how to “learn the secrets to attracting some of the most desired women on earth – Strippers”.

“How to pick up Strippers – it’s not a book for every man,” the eBook advertising stated. At the time, Mr Mintz said he had never heard of, nor had any involvement with Strippermaster.com.