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Private Sales Burgeon on the Web

The hype and froth over firms such as Vente-Privee, Gilt Groupe, Rue La La and Ideeli are reminiscent of the dot-com bubble.

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Billion Dollar Babes website.

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Last year, the company produced $95 million in sales, with a loss of $11 million.

Bluefly has said it has no plans to adopt the new format because the no-returns policy would not be in keeping with its customer service, but the company has staged private sales with Circa, a wholesale estate jewelry company.

Yoox has bucked the trend and is doing well, perhaps because it offers Italian brands and new non-discounted merchandise. It plans to go public this year. The company had 101 million euros, or $148.6 million, in revenues last year, and more than doubled its earnings to 9.2 million euros, or $13.5 million. The company also runs e-commerce sites for brands such as Diesel, Pucci, Marni, Emporio Armani and Moschino. It also offers vintage and new merchandise through exclusive designer collaborations.

But while the private sale sector might be booming now, with so many companies entering the segment, there’s sure to be a shakeout ahead, predicted One Stop’s Tomich. “Clearly you can’t have 15 people doing this,” he said. “Our strategy is not to worry about it. As long as our list is growing, sales are growing, our off-line events are growing, we will continue to focus on that,” he said.

The biggest challenge seems to be finding enough merchandise. “There’s a real fight right now for product,” said Tomich. “For interesting, compelling goods and services for people to buy. Everyone wants Marc Jacobs and Seven jeans, you’ve got all these guys fighting for the same product.”

“That’s what keeps me up the most at night,” said Alexandra Wilkis Wilson, Gilt’s co-founder and chief merchandising officer. “A lot of designers have cut back on production.”

Gilt Groupe’s stylish presentation also limits what they can sell. “Our photo costs are high, we use models and have hair and makeup,” said Wilkis Wilson. “We can’t sell brands that don’t have deep quantity and inventory, so that limits who we can feature.”

The strategy at most companies is to expand into new categories. Most private sale firms have quickly gone beyond women’s clothing to men’s and infants, then into beauty and home. Rue La La is like a Macy’s, with toasters and blankets, whereas Gilt Groupe takes more of a Barneys New York approach, with sheets from Frette, vases from Jonathan Adler and Odegard rugs.

Certain sales move more quickly than others. For example, Hervé Léger, Christian Louboutin and Laura Mercier were some of the fastest-disappearing sales in recent memory, said Wilkis Wilson. Gilt also does a large business in fine jewelry, which cannot be returned, but the inventory moves more slowly. “People take their time with fine jewelry. The sell-throughs are very high, it does incredibly well, but the speed is not the same. Maybe they’re doing research,” she said.

The highest price point Gilt has sold is $12,000. The company offered a bracelet for $23,000, but it did not sell. “We’ll try again,” said Wilkis Wilson. “It’s all about testing.”

Gilt now is expanding both on the geographical and product fronts. In March, the company launched a Japanese site and is looking into other locations. On Wednesday, Gilt will open its contemporary shop Fuse, similar to Barneys Co-op, with labels such as Generra and C&C California. Some of Gilt’s 1.2 million members log on each day to look but don’t buy because the prices and styles are too high for them. Fuse will target customers outside of New York, particularly college students.

“We want to get the word out with a younger audience that loves fashion and doesn’t have access to sample sales,” said Wilkis Wilson.

And Gilt isn’t stopping there. In the fall, the company plans to introduce a travel site with luxury and niche hotels and getaways, ski chalets and summer rentals. Wine is on the to-do list.

Rue La La is also no stranger to the creative buy, offering Father’s Day gift packages such as a gift certificate to Palm Springs, Calif., a Palm cookbook and a delivery of Palm steaks.

But with all the new entrants and expansion into new markets, the question remains whether these sites can sustain decent margins and generate a sizable profit rather than just breaking even, said Forrester’s Mulpuru. In other words, are they a boo.com or an Amazon? The key will be volume, she said.

As far as Rue La La’s Fischman is concerned, the sky is the limit.

“We believe the opportunity in the United States is enormous,” he said.

 

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