Gilt Groupe is repositioning itself as a high-end lifestyle brand, with about half its offerings set to be sold at full retail within the next few years. Gilt is widely accepted as a leader in the flash sale industry, so if they’re making a definitive move into retail, what might that indicate about the discount luxury world in general? The reasons for the adjustment to their business model are numerous — and could affect the entire flash sale industry. Here’s a rundown on why:
- First off, there’s just too much competition in the flash-sale arena. Besides Gilt, shoppers have a choice of HauteLook, ideeli, Rue La La, Amazon’s Myhabit, plus limited-time discount options from established stores like T.J. Maxx and Nordstrom and more.
- Brands have been producing less since the recession. For sites like Gilt, which are predicated on selling manufacturer’s overstock, less inventory means fewer options to offer their customers.
- E-commerce analysts at Forrester Research have pointed out that the flash sale model simply isn’t that lucrative. A number of big flash sites aren’t actually profitable.
- Hey, luxury sales are booming, and full retail offers a bigger profit margin than does flash discounting. If (a certain sector of) consumers are consistently willing to pay full price, why not provide it for them?
We think Gilt’s move makes sense — after all, they already have a luxury-hungry customer base (the site had 946,000 visitors in June) and they offer the editorial trappings of high-end ecommerce. With flash sales’ limitations coming to light, owning a broader luxury lifestyle image seems like a logical next step for the company.