One of the few things working in luxury retailing appears to be invitation-only private sales websites such as Gilt.com, RueLaLa.com and Billiondollarbabes.com. Last week, Saks Fifth Avenue launched its own 36-hour sale.
Also known as "flash" web discounters, online "private sales" have built a following with virally-marketed, daily "members only" sales while also enabling designer brands to quickly liquidate merchandise outside undesirable channels, according to The Wall Street Journal.
For instance, RueLaLa.com, launched in April 2008, has more than 1.2 million members and expects to do over $100 million in revenue this year. Its parent, Retail Convergence, was acquired last week by GSI Commerce.
On GSI's second quarter conference call last week, Ben Fishman, Retail Convergence's CEO, explained the benefits of the private sales space.
For members, the overriding benefit is "getting access to great product at a great price." But there's also a "fun" element for members as a sense of urgency is created by the limited time events. All of RueLaLa.com's events start at 11 A.M. on day one, last for two days, and then end at 10:59 on the second day.
"This creates a very unique behavior in which our membership virtually lines up starting early at ten forty-five AM and is hitting refresh on their keyboard until they gain access at eleven o'clock to that boutique," said Mr. Fishman.
For brands, a "flash" sales event can liquidate merchandise in a "very, very short period of time." In the first hours after an event goes live, sell-throughs reach upwards of 40 percent to 50 percent.
"Because it happens so quickly, we're able to protect the brand, we're able to ensure that visibility is at a brief period of time, and we're able to make sure that their inventory is sold without creating any significant channel conflict or, for that matter, any channel conflict whatsoever," said Mr. Fishman.
The exclusive nature of events also protects brands. Only members can buy the merchandise and they have to be invited through a friend. None of the product is ever advertised, either online or offline.
Finally, brands benefit because the events introduces new customers.
"Events are truly the catalyst for referral," said Mr. Fishman. "The more events we run, the more referrals we create. The more referrals create the more membership we create, and so on and so on. This is what has allowed us the tremendous growth that we've seen over the past year and a half, and we think is what's going to allow for the scale over the next two, three, and four years."
Discussion Questions: What do you think of RueLaLa.com and the opportunity around online private sales or websites? Should retailers such as Saks conduct their own private sales to liquidate merchandise?