Handbag rental service Avelle cuts staff

It shouldn't come as a huge surprise that Avelle is trimming its work force.

After all, possibly the only thing worse than renting a designer handbag during these tough economic times is making an outright purchase of one. And that might be the saving grace for Avelle, the Seattle online handbag rental service formerly known as Bag Borrow or Steal.

The company -- often described as the "Netflix of Handbags" -- eliminated positions representing about 20 percent of payroll earlier this month.

Avelle Chief Executive Mike Smith, who previously led Classmates.com, Nordstrom.com and Lands' End, said that the company actually is better positioned than some high-end retailers because of its unique rental service. It charges $9.95 per month to access the handbags.

"Everyone is feeling the impact of the economic downturn in some way," Smith said in an e-mail interview. "As a player in the luxury goods category, we are at an advantage because we offer an alternative to buying luxury during a time when people are really looking for new ways to shop. Renting gives access to luxury without the large expense or commitment of ownership."

Smith declined to offer specifics about whether membership levels have declined in recent weeks at Avelle, though he did note that membership has more than quadrupled in the past year to more than one million. He also noted that the company continues to broaden its product focus. In addition to handbags, Avelle also offer jewelry and sunglasses with plans to add watches this week.

Avelle now employs 45 people. And it continues to hire, especially at its warehouse operation which was recently brought in house. It also has recently hired customer service agents and Web site analysts.

"However, we also saw an opportunity to consolidate some function and streamline some processes and felt that it was the right thing to do given the uncertain environment," Smith said.

Avelle, which raised $15 million from Madrona Venture Group, Steelpoint Capital and others last year, joins a number of other Madrona-backed companies that have cut staff recently.

Others include: Intrepid Learning Solutions, Mercent, Redfin and WildTangent.

Obviously, the memo is out to get costs in line.