Private Sales Websites a Luxury Bright Spot
By Tom Ryan
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?
Just visited RueLaLa and the site looks nicely put together. I’m not on the list so I don’t know what’s going on inside but I look at this as a good marketing channel for upper-tier brands.
If you don’t want to see Rolex and Prada on Amazon, this may be the next best thing to protect the brand and its exclusivity. I like the idea but I would love to see how they execute inside. I guess in the meantime, I will sit by my inbox and wait for that coveted invitation to appear….
Why not! It’s a great way to control distribution of high-end brands and not see them end up on eBay, Amazon, or Overstock. Besides, you’re targeting the customers who are going to buy these items anyway. It also makes it sound deliciously exclusive. When brands–especially apparel, jewelry, and accessories–give up that exclusivity factor, they lose some of their luster. No one wants Burberry and Kmart on the same level.
As long as the “referral only” stays small enough to have an exclusive feel and the idea of the game stays fresh, this is a great idea. Being made to feel exclusive by being one of a small group of people who have access is great. The thrill of the hunt by having access to non-advertised special deals is exciting. That sounds like a great idea–as long as those two elements remain.
Camille is right–the devil is in the executional details. Keeping it exclusive on the one hand and well-enough known on the other is a very delicate balance.
I actually buy product from RueLaLa and it’s a heck of a marketing ploy!
The timed urgency of it, the daily reminders and the beautiful teaser photos all work to pull me in, hook, line, and sinker. Also, the referral aspect makes the venue feel personal and exclusive. No, I didn’t know that over a million people are on the site. As a user, I felt a sense of exclusivity from the referral itself. Also, the fun is fueled by a certain false sense of urgency. Not only is it a limited time offer, but the goods sell out fast.
The downsides: as a rabid online shopper, I am accustomed to generous return policies. RueLala allows returns for store credit only. This is not clear until after the purchase is made. Bummer. If you buy shoes or clothes, you are stuck with increasing store credit if they don’t fit.
Also, there are limited sizes available. If a shopper is an “off” size (high or low) the merchandise will be somewhat limited to purses, jewelry, and non-apparel accessories. RueLala has sales on spa and beach getaways, too.
Finally, the prices don’t seem to be real bargains. They are just offered urgently. This isn’t clear until after you’ve shopped there a while.
Private selling websites and even stores, I believe, will be a wave in the future. It’s fun for shoppers targeted for sellers. The liquidators in the space may become a bit sidelined as more upscale, fuller-service sites come into focus.
Sounds like a great idea. Having limited quantity or time always gives a sense of urgency to purchase in the off-price world.
However, it usually takes many years for online stores to become profitable. I wonder if the invitation-only websites are currently operating in the black. Do these websites purchase goods on consignment? What happens to the unsold merchandise–does it get returned to the vendor or do they do they take additional markdowns to liquidate the goods?