The Next Billion Dollar Retailer
By now we’ve all heard of Amazon’s near-billion dollar acquisition of Zappos which provided a tremendous return to Zappos’ original investors – Sequoia Capital and Venture Frogs. In fact, they only invested $60 million in the company over seven rounds. And, now, they’re sitting on a billion dollar return. How’s that for IRR?
Obviously, this is the magic of venture capital and outside of investing in a publicly traded venture BDC like Harris and Harris (Ticker: TINY), there’s not much we at home investors can do to get in on the ground floor. But, with up and coming retailers, we can still win! Heck, everyone remembers when Zappos was a low-price retailer instead of just a “customer service focused” retailer. Those were good days weren’t they?
Well, it seems a new trend is hitting the web. “Private” members-only luxury sample sale sites. These retailers focus on getting limited quantities of luxury brand items and selling them for firesale prices. Obviously, sales last a limited time and items typically run out fast. As luxury retailers struggle in the current market environment, private sample sale websites have become a favorite way to liquidate past seasons’ inventory without risking the brand image (i.e. falling into the discount vortex). Sale prices are fleeting and consumers never get a chance to get accustomed to being able to get a luxury brand’s wares for less. In fact, the sales may only help reinforce the “aspirational” quality of these brands. By now, I’m sure you’re dying to know what sites I’m talking about. Never fear. The Curious Investor is here with the skinny and I’ve got invites for all my readers as well.
Gilt Groupe seems to be the mother of the main private, sample sale retailers in the U.S. With 1.4 million members, it’s growing like a weed and predicts that it will grow sales from $140 million this year to $400 million next year. They’re also hiring like a crazy so those of you looking for a job, head on over and take a look at their careers page. Gilt is women’s focused but men’s brands have been coming fast and furious. The main site – Gilt Groupe – focuses on established brands like Ralph Lauren, Guess, Barker Black, Dior, etc. and features apparel, accessories (handbags, shoes, watches, etc.), beauty products and home interior products. After using the site for a while, my guess is that the Company takes inventory for some sales and these sales are the fastest to sell out and typically only last 24 hours. Some other sales seem to be drop shipped and you can tell by the 2-3 week wait time for delivery on some products. Overall, this site definitely has the best and most regularly updated selection, but the drop shipping makes for a rather irksome customer experience. Gilt is also launching a travel website – JetSetter – and has already launched a women’s only site – Gilt Fuse – so keep your eyes peeled for even more great bargains on other types of products. You can access all sites with one account and your invite is right here.
Rue La La is yet another competitor and supposedly is on track for $130 million in sales this year. The site sets itself up as “mini boutiques” and sells all sorts of aspirational products. I’ve seen a Cuisinart sale and there’s an upcoming sale on Patz and Hall wines. There’s cutlery, jewelry, and just about anything you’ve probably ogled but not had the money to buy. Prices range, but it seems the initial sales tend to be more expensive than on Gilt (but still 40-60% off of retail price). In contrast to Gilt, which seems to have inventories so limited that everything sells in the first go, Rue La La is currently running “final sales” for many of the apparel brands for which prices have been lowered even more! The benefit at Rue La La is also that sales typically last more than one day and most products ship in 3 to 4 days which makes it a bit easier to spend some time thinking about what you want to buy rather than the impulse feel of Gilt. Again, your invite is right here.
Finally, Haute Look. Haute look has womens, mens, and kids gear as well as home goods. The site isn’t quite as pretty as Rue La La, but the concept is similar. Individual “boutiques” for each brand and staggered sales opening at different points each day. The collection is a bit more eclectic and not quite as “couture” as the previous two sites. For example, there’s currently a sale for sports memorabilia. I haven’t spent enough time digging through Haute Look, but you can now get there before me! Here’s your invite.
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