Gilt Groupe's Advantage

In an article Fortune published today, Shelley Dubois reveals and discusses how luxury online retailer Gilt Groupe ensures that consumers buy their high-end products.  Gilt Groupe was launched in 2007 by Doubleclick co-founder Kevin P. Ryan, eBay executive Alexis Maybank, and Louis Vuitton and Bulgari merchandising executive Alexandra Wilkis Wilson.  The online retailer is based in New York City and offers its members luxury merchandise, clothing, home decor, and even food, travel, and other activities through the flash sale method.

Gilt's CVP is to provide discounted luxury goods and activities.  Their target customer consists of the wealthiest consumers who continue to place importance in the value of brand name items but are still looking to find bargains.  There are several features of Gilt and other similar luxury online retailers that cause them to be successful:

• Flash sales only offer a certain amount of inventory for specific brands during a set daily time, causing products to run out extremely fast.  The method takes advantage of those customers who may be more likely to make impulse purchases.
• The "members only" aspect of the website increases the feeling of exclusivity for these target customers, causing them to feel as if they are snagging a deal the majority of people are not aware of.  However, members can also earn credit for inviting friends to the Gilt Groupe.  Also, this "members only" feature gives sites like Gilt a competitive advantage in accessing the needs of wealthy high-spenders unlike department stores Saks and Macy's.
• Since luxury retailers were facing less consumer spending because of the recession, Gilt was the perfect platform to take care of all their excess inventory.
• The most valuable asset of the Gilt Groupe has become the data it has of knowing the details behind its elite members.  Gilt owns highly valuable and detailed information for how 3 million of the wealthiest consumers are spending and what they are purchasing within the site.  This asset  is incredibly beneficial to the luxury name brands using the Gilt platform and is the tool that benefits Gilt the most.

However, since luxury retailers are streamlining their inventory to reduce the items they have to push to sites like Gilt, the Gilt Groupe and other similar luxury online retailers such as invite-only site RueLaLa and Ideeli have all begun cutting workers and restructuring to possibly attract a broader range of customers.

Therefore, last week, Gilt announced a partnership with Du Jour, a brand new luxury magazine which strives to connect digital and print media to target local content for the wealthy.  The magazine was founded by Jason Binn, the creator of luxury magazine publisher Niche Media.  According to The New York Times article, "New Magazine Aims for 'Luxury Customers'", Du Jour's target customers are bargain shoppers who have a net worth of $5 million, a house more than $1.5 million and an average income of at least $250,000.

Although the magazine business is beginning to dwindle, Gilt and Du Jour will benefit from each other.  For example, Gilt Groupe provides Du Jour with an already targeted audience of wealthy individuals willing to spend money on luxury brands.  Since Gilt and Du Jour have overlapping target customers, Gilt is helping the luxury magazine reach its target audience of people with an average net worth of $5 million.  At the same time, Du Jour will be making around $32,000 a page for its print advertisements.  While the online edition of the magazine will be available to Gilt members, the print edition will only be sent to customers who fit five of seven criteria while donating at least $10,000 to philanthropies or spending at least $100,000 on offline luxury  purchases throughout the year.

Gilt and Du Jour could create a new concept where a magazine publication can be successful by being built off of the advertising and consumer statistics of an online retail site.  I believe Gilt has what it takes to remain successful.  Additional advantages Gilt Groupe has to the points I listed above include:

• In addition to having the benefits of being an online company, Gilt does not need to account for designing and manufacturing its own products since it obtains everything from luxury retail stores.  Unlike department stores, Gilt only needs to worry about the procurement and distribution of its products since it is an online retailer.
• Gilt brings easier access to luxury brands for customers since the majority of luxury brands do not sell their products from their website and instead use the sites of departments stores and other venues.

The consumer data Gilt Groupe has is a huge asset to the company and can be used to ensure its success.  The collaboration between Gilt and Du Jour take a more effective and efficient turn on niche marketing and I am interested to see where this could lead.