Gilt’s slide from sizzling hot to lukewarm is an emblem of how fast-changing our shopping habits are in the online era. Gilt built an early following for its deeply-discounted designer clothing and accessories, and quickly branched out from women’s apparel to offering deals on men’s and children’s clothing, home goods and more. The deal with Hudson’s Bay adds to evidence that the flash-sales model seems to be losing its luster.
“There’s a little bit of consumer fatigue around these concepts,” said Liz Dunn, chief executive of retail consultancy Talmage Advisors. “It’s hard to continue to make it feel special.”
Just last year, the parent company of home-shopping giant QVC paid $2.4 billion for Zulily, a mom-oriented deals site that briefly soared after its initial public offering but soon found itself struggling to build repeat customers. One King’s Lane, the website that is something like a sample sale for home furnishings, slashed 15 percent of its staff last year. LivingSocial and Groupon — two other businesses that made their names on daily deals that had to be snapped up quickly — have been reducing their workforces and trying to pivot to different business models.
For Gilt, in particular, it hasn’t helped that brick-and-mortar off-price players such as T.J. Maxx have moved to be a more forceful presence online and that a bumper crop of resale shops such as the RealReal and ThredUp have flooded the Web with gently-used designer goods at low prices.
Hudson’s Bay hopes that in joining forces with Gilt, it will be able to take advantage of the deals site’s tech know-how.
“We see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities,” said Jerry Storch, the chief executive of Hudson’s Bay, in a statement.
In that way, the acquisition would have some parallels the tie-up of QVC and Zulily. QVC chief executive Mike George has said he believes his brand will benefit greatly from Zulily’s proprietary personalization algorithms, praised by industry experts as some of the best in the business.
In announcing the acquisition plans, Hudson’s Bay said it plans to closely link Gilt with its off-price chain, Saks Off Fifth. The company believes that this set-up can create some cost savings and other efficiencies, because the brands can share inventory and together can lever more buying power. But they also announced some customer-facing ways of entwining the brands.
For one, Hudson’s Bay said it plans to create Gilt “concept shops” within its existing Saks Off Fifth locations. In doing so Gilt, follows other e-commerce sites that have moved into actual stores. Bonobos, Rent the Runway, BaubleBar and Fabletics are just some of the online brands that have opened physical outlets after realizing it was a crucial way to connect with customers at a time when some 93 percent of total retail sales still take place offline.
Hudson’s Bay also said it would allow Gilt customers to return to their online purchases to Saks Off Fifth stores. That may sound like a small detail, but it could be meaningful to Gilt’s business. Shoppers are sometimes wary of making a purchase online that they can’t return to a store. For example, in a survey about holiday shopping conducted by consultancy Deloitte last year, some 41 percent of shoppers said being able to return an online purchase at a physical store was among the things they valued most in a return policy. (This ranked even higher than free returns or being able to return without a receipt.) So if this model is taking away that concern, it could encourage more shoppers to give Gilt a try.
Hudson’s Bay said the deal is expected to close around Feb. 1 and is to contribute about $500 million to its sales this year.