How Gilt established its business in the luxury fashion world: A case study

According to McKinsey’s fashion forecast analysis, the global industry will show revenue growth of 2 to 4 percent in 2024, with the luxury segment continuing to generate the majority of economic gains. LVMH led with a 9 percent increase in sales, reaching over 86 billion euros, and a net profit surpassing 15 billion euros. Hermès notably outperformed, with net profits rising by 28 percent and sales by 16 percent. There’s no doubt: the luxury sector is a tempting market to enter. But how can one do so successfully? FashionUnited takes a closer look at this question with the case study of Gilt.

Gilt's journey from a startup to a significant player in the e-commerce sector is marked by strategic business moves and an innovative business model. The company was sold to Hudson's Bay Company for approximately 250 million US dollars on January 7, 2016, signalling its value and potential in the retail market. However, in a twist of events, Gilt was acquired by Rue La La from Hudson's Bay on June 4, 2018, merging under the Rue Gilt Groupe umbrella to enhance their market position.

Gilt’s model of business

Gilt has carved out a significant niche in the online retail space since its inception in 2007. As a subsidiary of Rue Gilt Groupe, a premier off-price e-commerce portfolio company, Gilt leverages the dynamism of flash sales to deliver inspired finds for women, men, kids, home, as well as luxury travel and unique experiences. With headquarters in Boston and additional offices across the United States, Rue Gilt Groupe is dedicated to offering a best-in-class shopping experience that matches the demands of today's online consumers and redefines the way consumers shop for luxury.

Originating from New York City, with warehouses strategically placed across the United States, Gilt's founders modelled the company after Vente-Privee, the French online fashion retailer known for its flash sales model. Similarly, Gilt captivated the US market with its exclusive, members-only flash sales, offering luxury items at steep discounts of up to 70 percent off retail price, for limited periods of time lasting between 36 to 48 hours. This model not only creates a sense of urgency among consumers, introducing a thrilling, fast-paced shopping experience but also offers exclusivity by providing insider-level access to coveted designer names at incredible value.

Gilt facing challenges and how they turned it around

Despite its innovative approach and significant growth, Gilt faced challenges. As Business Insider noted, during its ‘hyper-growth years,’ Gilt's ambitious expansion into full-price retail, travel, and food segments strained its resources, diverting attention from its core – discounted women's fashion. This expansion, coupled with the industry-wide slowdown in flash sales and email marketing challenges, led to a reevaluation of Gilt's strategy.

The pivotal moment came in 2016 when Gilt announced its acquisition by Hudson's Bay Company for approximately 250 million US dollars, a move that was followed by its sale to Rue La La in 2018. These transitions underscored the fluctuating fortunes of flash sales businesses and the necessity for adaptability in the fast-evolving fashion retail landscape. The shift in strategy and subsequent acquisition by Rue Gilt Groupe has allowed Gilt to refocus on providing exceptional value and service to its customers.

What sets Gilt apart is not just its business model but its dedication to authenticity, customer engagement, and creating a compelling narrative around its products. By working with independent vendors and ensuring the authenticity of every product, Gilt has maintained its reputation as a trusted fashion authority. Additionally, its pricing strategy, indicating the slash-through prices as a reference guide, adds a layer of transparency and value perception for its customers. The collaboration with Simon Property Group for the website ShopPremiumOutlets.com further underscores Gilt's ambition to redefine value shopping in the digital age.

Today, as part of Rue Gilt Groupe, Gilt continues to enchant the next-generation shopper with its daily boutique ‘pop-ups,’ delivering top brands at compelling values. Its evolution from a high-profile flash sales website to a cornerstone of the off-price e-commerce portfolio exemplifies the brand's resilience, strategic foresight, and unwavering commitment to bringing luxury within reach. As the fashion industry continues to evolve, Gilt's journey offers invaluable lessons in innovation, adaptability, and the importance of staying true to one's core while exploring new horizons.