Those who went through the late nineties and early 2000's remember how quickly internet companies attracted investment and then promptly went belly-up. The valuations seemed to stretch common sense and yet investors (individual and institutional) would throw money after these firms looking to hit on the promise that they would remake the world as we knew it. The retailing segment had plenty, with online grocery firm Webvan perhaps the most prominent of those that didn't make it.
Today, it seems, we may be back in a similar place even if not quite so frenzied as it was 10 - 15 years ago. Companies such as Gilt, Groupon and LivingSocial are attracting large investments, leading some to question the businesses' actual worth.
A report by Reuters last month projected that Groupon could raise up to $1 billion in its initial public offering. The company could attain a valuation of up to $20 billion.
Recent reports that Gilt had received $138 million in investment capital, bringing its valuation to $1 billion, led The Wall Street Journal to question whether the flash sales retailer was worth it.
"I'm a bit of a doubter," Andrew Jassin, co-founder of Jassin Consulting Group, with clients that supply Gilt Group, told the Journal.
Mr. Jassin's doubts stem from questions of supply for Gilt. As a flash sales site, how does it guarantee that it has consistent inventory to keep up with demand?