RUE ON A GILT TRIP
Flash-sale site bags rival at a discount: sources
Gilt Groupe, the pioneering flash-sale Web site where women score Dolce & Gabbana totes and Manolo Blahnik pumps for 70 percent off, was sold Monday to rival Rue La La, the companies said.
Terms of the sale were not announced.
The decision to sell the once red-hot Gilt Groupe by Hudson’s Bay Company marks the second time in two years the 11-year-old site has changed hands.
The sale by Hudson’s Bay, which also owns Saks Fifth Avenue, comes as growth in the flash-sale sector has slowed down.
HBC had hoped Gilt would accelerate its online sales. HBC will now focus on its core business of running department stores.
While terms of the deal could not be learned, Rue La La, owned by Philadelphia area e-commerce tech company Kynetic — which also owns sports licensing firm Fanatics — is scooping Gilt up for considerably less than the $250 million HBC paid for it in 2016, according to sources familiar with the deal, as first reported on nypost.com.
The deal represents the culmination of a nine-year courtship on the part of Rue La La.
“We have been trying to buy Gilt for years,” said Kynetic founder Michael Rubin. “We have an identical business model but serve different customers.”
Together Gilt and Rue La La have more than 20 million registered customers and the combined entity — to be called Rue Gilt Groupe — expects to grow to more than $1 billion in annual sales in the next couple of years, Rubin said.
Rue La La, which sells designer duds, beauty products and home decor merchan- dise, has been profitable for the past four years and has been growing in the high single digits for the past couple of years, according to Rubin.
Gilt, which was meant to buoy the Saks Off Fifth chain’s e-commerce business, has been shrinking — with HBC taking a $116 million write-down in 2017 on the purchase.
At one point during the heady days of flash-sale sites, Gilt was valued at more than $1 billion — when “whole offices would stop doing work” when a limited-time sale was announced, according to retail consultant Craig Johnson. “Those days are in the rear mirror for this sector,” he said.
Several years ago, Gilt’s sales had been pegged at about $500 million — then they slid.
The brand will be operated separately from Rue La La and the deal is expected to close next month, according to Rubin, who is also executive chairman of Rue La La.
“Where this wasn’t the right fit for Saks, it’s the perfect fit for Rue La La,” Rubin said.
Gilt is seen as more exclusive and higher end than its rival, with about 15 percent of its customers overlapping with Rue La La, according to sources familiar with the companies.
Gilt is not the only flashsale site to shrink over the years.
Fab.com was also valued at $1 billion but reportedly sold for $15 million in 2014. Zulily, after going public in 2014, was sold to QVC, and Ideeli was sold to Groupon for $43 million.