Gilt Groupe: The art of the private sale (Part I)

Invitations to private sales have long been the exclusive domain of only the most well-connected of fashion insiders. Traditionally, they have been given out by fashion companies as a way of saying 'thank you' to friends and supporters of a brand.  This wasn't just to be snobby, there was also an important business rationale behind it. It ensured that the goods ended up in the hands of trusted customers rather than being sold out of the back of a truck somewhere, which can damage brand equity and reputation.

Thus, for the average consumer, getting access to one-of-a-kind runway samples and excess stock was near impossible...until now. For the first time, companies on both sides of the Atlantic are partnering with fashion brands and retailer to take this exclusive privilege online and thereby, opening it up to people who don't run in tight fashion circles. For their part, fashion brands have started to learn that they can trust these new companies to professionally handle the private sales, while also protecting their brands -- and perhaps even introducing them to new customers.

Gilt Groupe was launched by A&A, shorthand for dynamic duo  Alexis Maybank, CEO, and Alexandra Wilkis Wilson, CMO. They come with great Internet and Luxury pedigree from Ebay, Louis Vuitton and Bulgari, not to mention double-Harvard degrees. In its first month of existence, Gilt has conducted online private sales for Zac Posen, Alvin Valley and Marchesa -- the sales last only 24 hours, but even then the stock seems to sell out almost immediately. This A&A team is onto something.

Meanwhile in London, Miriam Lahage is the CEO driving the business of koodos.com, with some hard-earned funding from top-tier VC Atlas Ventures and years of experience at TJX, the parent company of TJ Maxx, the world's leading off-price retailer. Koodos' main business is to sell off-price merchandise like TJ Maxx (only Koodos is online), but they are also doing some one-off private sales with apparel and accessories from brands like Marc Jacobs, Chloé and Fendi .

In the first of two posts about emerging online private sales models, we sit down with Rachel Wolkowitz, Gilt Groupe's Director of Marketing and Communications to get the scoop on Gilt, and tomorrow Miriam will give us her views on how koodos.com's private sales create a win for everyone involved.

BoF: How did Gilt Groupe come about and what specific market opportunity are you trying to address?

RW: Alexis Maybank, formerly of Ebay (founding team) and Ebay Canada, and Alexandra Wilkis, formerly of Bulgari and Louis Vuitton, joined forces to launch Gilt Groupe. Long time close friends, they wanted to combine their complementary backgrounds to launch a members-only community that gives access to hand-selected fashion and luxury good online. We are trying to address the following:

 

For the consumer...Access to the inaccessible, allowing members access to hand selected fashion and luxury goods at desirable pricing ( 50-70% off) and a streamlined efficient way to shop (allows you to still get the "thrill of the chase " while not having to seek out sample sale locations, which the vast majority of Americans do not have access to) .

 

For the collector...Access to one of a kind, runway samples and previously unreleased items from coveted brands.

 

For brands...A private online channel that allows brands to distribute their goods to our membership in a way that is not visible to non-members.

BoF: You have already worked with an impressive list of fashion brands positioned at the very top of the industry. How did you convince these brands to work with you on a new concept like Gilt Groupe?

 

RW: The brands we have secured have chosen to work with Gilt Groupe given our desirable membership base, the lack of discrete online alternative channels, and the speed with which we can react to their needs and sell their inventory.

BoF: For each designer sale, you develop a reel of video to share a bit about the designer's creative process and ideas with potential customers. How do you develop the video content?

 

RW: We collaborate with the brands' internal marketing teams, and our production team produces a reel showcasing the brand or designer’s inspiration behind the items Gilt Groupe showcases in that designers shopping event.

 

BoF: The Gilt Groupe management team is an experienced group with diverse experience and education. How did your paths cross?

 

RW: Alexis and Alexandra went to university together at Harvard and were classmates at Harvard Business School. While having complementary professional backgrounds and personal interests, “A&A” (as they are known) have been long time close friends, who had always wanted to start a business together and were inspired by a business model that was introduced to them in Europe. (www.vente-privee.com)

 

As for me, I too proved myself in the world of Madison Avenue (HL Group ~ Harry Winston, Asprey, Krug and David Yurman) and Ghiso in Geneva. I met Alexandra in NYC through our shared worlds.

 

BoF: What do you look for in the brands you decide to work with on your site? How should brands go about contacting Gilt about this?

 

RW: We look for brands that are most relevant and compelling to our membership. We consider the brands that would fall under the fashion and luxury umbrella (not necessarily as measured by price point.) We like to offer high and low price points... the perfect t-shirt to accompany a tailored suit and a pair of French ballet flats. Brands should contact Gilt Groupe at vendors@gilt.com, where one of Gilt Groupe’s Buyers will respond immediately.

 

BoF: What are your plans for the future, especially with regards to growth?

 

RW: In the near future we will increase our shopping events from one sale to three sales weekly. Also we will consider shifting into adjacent categories later in 2008, such as into men’s, children’s and home goods categories.

 

BoF: Okay, and one last thing. Why 'Gilt Groupe'? And, what's with the extra 'e' on the end of Groupe?

RW: For women, shopping is one of, if not the guilty pleasure. I.e., Gilt Groupe takes the gilt out of retail therapy. The addition of  the 'e' signals our embracing of the French joie de vivre, Gilt Groupe's goal is to offer an enjoyable, entertaining and ultimately fulfilling experience.
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As Rachel mentioned, Gilt Groupe is an invitation only community -- next  up are Judith Ripka and Rachel Roy. But, the Business of Fashion has exclusive invitations for five members of the BoF community who give us the most insightful thoughts on the Gilt Groupe business model using the comments function below (please make sure to fill in the field for email address so we know how to find you.) We're looking forward to hearing from you.

Photos courtesy of Gilt Groupe.

Comments

[Jas B]

To charge designers a specific fee to sell off their merchandise to a select group of trusted customers is an ideal situation for any fashion designer. As, having to go to extremes of "burning garments" rather than see it trickle down the lines to unmentionable selling points or the wrong hands may definitely dismay their brand and reputation.

A&A have tackled a sound "need" of designers and connected it to a burning "want" of consumers to buy luxury for less. The fact that is "members only" makes it that more lucrative to buyers and sellers.

[La Genèvoise]

I don't know if my thoughts are insightful but what I do know is that I like the idea of Gilt Groupe. It falls in line with new forms of communicating and selling online. The Gilt Groupe has managed to use a public tool such as the net to create a skillfully intimate niche, something I thought was almost impossible on such a forum. Thank you for proving me wrong.

[JR]

Koodos has taken every trick from the web 2.0 book from a blog, contests and umm widgets, other than the blog it seems like alot of unnecessary "cheese" thats she uses to reach the masses. Gilt works off of exclusivity, which benefits them with a mysterious reputation. These websites are definitely pushing to different audiences and definitely have different strategies of conducting business. Koodos success is all determined on how much they build up their site instead for Gilt the website seems more as tool for them to present themselves. Gilt has taken a tested model for business an translated for people to access via the web.

[G Sar]

It's certainly an intriguing business model. One challenge will be finding the right balance between growing the membership base to achieve economies of scale while, essentially, flying under the mainstream radar so as to not harm brand-equity or tangentially sully any of the brands with the 'sale label' or price point.

[Barbara Alexander]

You are on the money, JR.

[Miss Gretchen]

I had been attempting to work up a succinct group of thoughts on how the idea of the sample sale and "fashion insider-ness" has possibly hurt the department stores and driven the Forever 21/H&M model. . .bemoaning the way in which a person used to have a relationship with a salesperson at a boutique or department store and how that is becoming a thing of the past. . .but this idea of the Gilt Groupe (love the name) seems to be having the best of both worlds in a way which is accessible to fashionable women who may not live in a major fashion city, and that appeals to me. Interesting!

[T]

It would be interesting to know how they maintain the exclusivity and quality of the memberships. I would assume that some members might re-sell their discounted goods and this would undervalue their business model.

[JeanClaude]

An interesting concept that is susccessful in Europe (the mentioned Vente Privee).
However, isn't there already Bluefly.com in the US offering previous season designer brand products for discounted prices?
There I can choose from a large variety vs. the limited choice for a limited time (we know creating the sense of scarcity works) at Gilt.

[hypnos_420]

Well I assume that these ladies have a good feeling for the people who they can trust and only a fool would take advantage of advantage. They also strategically price their items and market them that it would be unwise not to wear and try to resale. The prices that they choose are also the amount anybody could try to get for the same item if they were successful at advertising and the actual sale. The only time really anybody would pay a max for an article of clothing is if it is extremely rare, intricate, or popular however some people may have eccentric tastes that they accomodate with ridiculous prices.