With Gilt Groupe now supposedly working alongside Goldman Sachs to launch its long-coming IPO, the flash sale model is facing renewed scrutiny. As a smaller surplus of desirable inventory plus a slew of new competitors put Gilt to the test over the past few years, fashion wonders whether there’s enough power to back up the business.
However, the conclusion seems to be that the flash sale isn’t a broken model. Rather, it’s a business, at least for Gilt, overly reliant on pricing. As of now, the only thing that sets the site apart from other retailers is its permanent reductions. If anyone else, in any capacity, replicates or beats those prices, Gilt loses its only advantage. And since the alternate venue is likely a department store or, say, Amazon, customers have time to consider the item in question, giving the retailer an edge over the flash sale.
For Gilt to stay competitive, then, it needs to expand its focus to present members with a new perspective. A narrower, higher-end group of brands, some kind of original product (Gilt does this now, but with the “brands” masquerading as mainstream mid-priced luxury labels), or better customer service (free returns would be nice when you have such a limited time to make up your mind about buying something) would all help the site continue to stand out in a crowded field that no longer feels special.
That said, Gilt is growing. Sales in 2012 were $550 million, up from $450 million a year earlier. An IPO probably makes sense for the company, but without an adjusted strategy, don’t expect Gilt to go the way of Michael Kors’ public debut.