Discounters Alexis Maybank and Alexandra Wilkis Wilson are in tune with the hoity-toity brands they sell: Act exclusive.
The sample sale is a cherished ritual of the urban fashionista. Luxury brands hold these events, usually by invitation only, to unload inventory at discounts of 50% to 70%. In Paris they call it the vente privée. In New York the semiannual Barneys Warehouse Sale has them lined up around the block. Sales are always final, so shoppers strip down to their skivvies between the racks to make sure a $3,000 dress is a good fit at $600.
The Web has given luxury closeouts a new life. The granddaddy of the bargain-luxe Web is France's vente-privee.com, which in six years has amassed 5 million members. It grossed $500 million last year and inspired dozens of copycats, including Spain's BuyVip, which started up in 2006 with $2.5 million in venture funding.
Now Alexis Maybank and Alexandra Wilkis Wilson, founders of the Gilt Groupe, are bringing the idea to the U.S., where "bargain luxury" is not an oxymoron (witness the success of
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Last summer, when brainstorming ideas for a new business, Maybank seized on the idea of selling to "aspirational" luxury buyers, that is, people who want luxury goods but can't quite afford them. Many brands, worried about having their cachet sullied, don't sell directly via the Web, and a few, such as Balenciaga, forbid other companies to sell their goods online. But the right site could offer brand owners a quick, painless exit for their slow-selling items.
"Existing online channels weren't protective of the fashion and luxury brands, resulting in a bit of a heartburn for those companies," says Maybank.
So she raised some seed money from Kevin Ryan, the cofounder of DoubleClick, and Gilt.com went live in November 2007. Matrix Partners put $5 million of equity funding into Gilt a few weeks later. For the company name the founders borrowed a debonair "e" from French (or was it from "shoppe"?).
Gilt's site is invitation-only, which lends it the air of exclusivity that labels are looking for (and it keeps shopping search services like Shopzilla from trawling Gilt's site for sale information). But scoring a free membership is easy; you can either be invited by one of the 75,000 existing members or by requesting an invitation through customer service.
Gilt acquires its merchandise directly from the fashion houses instead of buying from wholesalers as most discounters do. It runs at least three sales per week and hires its own models and photographers to present the clothing straight for the camera (no Vogue-like high-concept shoots that make the clothes hard to see). So far the site has hosted sales for 31 women's wear and jewelry designers, including Zac Posen, Judith Ripka and Rachel Roy. A $3,175 ostrich feather jacket from Alessandro Dell'Acqua recently went for $618. A silk chiffon ruffle gown from Notte by Marchesa that retails for $990 went for $320.
Maybank plans to add more sales as she adds staff, branching into menswear and home goods later this year. The sales are announced a day to a week in advance by e-mail and last for 24 hours, or until everything is sold. Goods are shipped out in black boxes from a nondescript warehouse at the Brooklyn Navy Yard. Buyers can return unworn clothes and shoes within 14 days; accessories can't be returned. Maybank says the sales have been grossing close to $70,000 each, with 92% of goods sold. Profits are secret, but Gilt says it's profitable.
Maybank brags that her site is selling goods that are still going for full price at Bergdorf Goodman and Eluxury.com, but it's far from clear yet that Gilt's growth will cut into profits at established retailers. "Ten years ago they said the Internet would replace traditional brick-and-mortar. It didn't quite turn out that way, and both have learned to coexist," says Marshal Cohen, a retail analyst with the NPD Group.
Wilkis Wilson's job is to sweet-talk luxury designers into selling their unsold inventory to Gilt. "I have so many brands banging down our door that I have to say no," she says.
Eventually the far larger vente-privee.com will set up in the U.S., giving Gilt competition it hasn't had in its early life. But A&A will have staked out some nice territory before then.