Recession has lead to several new business models and growth opportunities. That is the beauty of economic changes – there is innovation and new business models come about.
I subscribe to several invitation-based sites. They are supposed to be invitation-only, but popular blogs have their own invites for readers. Gilt, Ideeli, Rue La La, Haute Look, Beyond the Rack, Billion Dollar Babes, The Top Secret, and Modnique. All these sites sell designer brands at discount prices. The benefit to designer brands is that they can get rid of previous season’s excess inventory without having to dilute their brand by making discounted prices available only through select sites. The sites do an excellent job of bringing less known brands to customers. I have come across several new brands and discovered gorgeous fashion. The sites purchase products and re-sell them, so it requires capital investment and strong partnerships with good brands that encourage customers to sign up. But capital investment is relatively lower because it is primarily online, and just has one store to manage without hefty real estate charges.
Gilt is my favorite – I love its photography, and the look and feel of the site and products. However, I have never made a purchase through Gilt – for one, products sell out quickly; two, it is higher end than other brands. Its extremely innovative though and has branched out into men, home, kids, travel, and now city-related. I am curious to see what more is in store (pun intended!).
I have purchased from Ideeli, Rue La La, and Billion Dollar Babes. I don’t like paying for shipping, but all these sites charge a hefty shipping rate. Being in retail, I know that all shipping charges have a profit margin included. Its not fair to the customer. In addition, shipping rates do not vary by the size of the package. Rue La La charges almost $10 for shipping – wonder how much margin that has!
Ideeli is running a campaign with MasterCard – the site links to a MasterCard marketplace and if you make a purchase using MasterCard you can get upgraded to the 1st Row for 1 month at no extra charge. Quite innovative! I think usually upgrading to the 1st row comes at a price. Sales are first made available to 1st row members, and 2nd row members have low priority.
Rue La La has been experimenting with gorgeous photography. I particularly love the items with tropical blue background – they used that for summer items, and I felt the ocean and beach calling me just by looking at the gorgeous photography.
Beyond the Rack is my least favorite site. It is too “rock & roll”, and I am sure appeals to a certain set of customers.
Gilt launched Gilt Fuse last year and I saw paid search ads for that as well. It catered to a younger audience. However, you could find the same sales on Gilt Women and more, and Fuse was just a subset of Gilt Women. I am not sure what the business idea was especially since Fuse was just a subset, but it was closed down this year since apparently other customers felt like I did, that having Fuse separately did not make sense. I have been reading that Gilt sells through its mobile app as well, and customers actually make a purchase on their phones. One of my favorite blogs, nymag.com, did a write-up about how Gilt included selected customers in a “special program” if customers spent a certain amount on their site. (I don’t recall details). Customers wrote comments that Gilt was misleading its customers; they did not spend that much and yet were included in that special program. Ha… welcome to the age of the Internet!
In terms of marketing, the sites cannot use the traditional forms of direct marketing. You cannot run paid search and affiliate programs for sites that are invitation-based. You can run behavioral targeting and retargeting ads, as well as online advertising campaigns. The big focus, however, is on PR – blogs, social networks, partnerships, innovation, diversification, and working closely with brands to find the right product mix.
Are these sites in it for the long run? Yes, I think so. But I also see these sites as becoming “commoditized”. I see sales run on two different sites for the same brand, IN THE SAME WEEK! So Sweet Pea’s cute floral mesh tops were available on Ideeli early this week and I actually bought one top; today the same brand is running its sale on Rue La La. The products are different though – for now. You can’t blame the brands though – clearly they are trying to find the right partner, and want to diversify. But what does this imply for these sites? I enjoy following these sites, and am curious to see how many more will jump in to make money while the industry is still lucrative, and how long it will take for the industry to mature.
New York Fashion and My Rants 