Brainstorm Tech 2010

Where the Fortune 500 and the innovators meet to shape the future of business. (July 22-24, 2010)

Gilt Groupe's haute sample sales expand

June 25, 2010: 8:43 AM ET

This is one in a series of articles leading up to Fortune Brainstorm Tech, which takes place July 22-24 in Aspen, Colo. The articles will look back at the progress of companies that presented at Brainstorm in 2009 as well as look forward to those that will present this year.

By Mary Jo A Pham, contributor

Gilt Groupe CEO Susan Lyne. (Photo: TechCrunch, Flickr.com)

Shoppers who thrive on elbowing competitors out of the bargain bin to get a Gucci markdown can now have that experience virtually.

The catch? Steeply discounted deals include limited items such as vintage Chanel jewelry, but each buying window is a flash sale that only lasts for 36 hours.

In 2007, founders Alexis Maybank and Alexandra Wilkis Wilson created Gilt Groupe, which pushes luxury goods on its website, www.gilt.com.

The company sells itself, says Maybank. In 2009 alone, the privately held company generated $170 million in revenue, up from its initial cache of $30 million in 2008. It expects that figure to balloon to $400 million this year.

Gilt Groupe introduced flash sales to e-commerce by taking typical sample sales out of New York City and into the broadband marketplace. The exclusive access to designer goods at sample sale prices draws over one million unique visitors on a monthly basis, according to the founders. The company successfully handles inventory for approximately 70 unique sales a week.

Most of Gilt Groupe's customers became members of the site through word of mouth. "This viral impact has been most significant" on motivating sales and bolstering revenue, Maybanks says. Once a shopper becomes a member, they learn of the flash sales through blast emails.

In an interview with Fortune, Maybank discussed the company's online success, the challenge of hosting traffic from millions of shoppers, and what people at the fashionista-techie junction can anticipate from the site in the coming year. We'll hear more later from Susan Lyne, the company's CEO, at Fortune's 2010 Brainstorm Tech Conference.

Fortune: Membership to Gilt Groupe is free, but it's invitation only. How many people currently have a Gilt Groupe membership?

Maybank: We have three million members now. Current members have attracted about 75% of our audience to date with our membership referral process.

Fortune: What are some of Gilt Groupe's top accomplishments to date?

Maybank: We have a loyal fashion following that sees the selection that we put [online] and go to the site daily for [fashion] advice. The experience we created, the trust, and the closeness with customers are accomplishments we are most proud of.

We launched Jet Setter last fall. Jet Setter is an online specialty e-commerce website that provides travel services for a consumer looking for greater lifestyle services and experience purchases.

Fortune: What have been some of the greatest challenges Gilt Groupe has faced in terms of generating sales and growing the company?

Maybank: The most exciting challenge we've faced is how 50% of all revenue from Gilt sales come in less than an hour [after the sales start online]. What that means is that we have to build a stronger underlying system that can manage enormous traffic from 12 p.m. to 2 p.m. Our website has to balloon to be the size of a sale site like Amazon, for about two hours everyday.

It's technologically challenging to scale, but we're attracting some of the best technology talent. We've made tremendous headway and it's a big area of focus for us as traffic increases from 100,000 shoppers to one million online at once.

We have 17 new sales starting each day, and as many as 70 different sales weekly. Therefore, we're turning over inventory 70 times a week. This can't be done anywhere else except through e-commerce.

Fortune: Gilt Groupe continued to expand during the worst recession in 50 years — what enabled your company to successfully do that?

Maybank: I think it's fair to say that more customers were looking for even more value in 2008. They were not shopping more, but there was more inventory that became available to our customers. We were really happy to be a strong partner with our brands, giving them business when times were uncertain -- and helping them ride out the recession.

Fortune: What are some new services that Gilt Groupe is planning to launch?

Maybank: So far we've been really surprised by the amount of business generated on the iPhone and iPad. During weekdays, they constitute 5% of daily sales and on the weekends, 8%. We're excited about our new Android application coming out in the fall. We're also doing deeper Facebook integration so that members can better communicate with their friends about the things that they like from Gilt Groupe.

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About This Author
Shelley DuBois
Shelley DuBois
Writer - Reporter, Fortune

Shelley DuBois writes on management issues for Fortune.com. Before joining Fortune, she was a producer for National Public Radio's Science Friday and worked for Wired. Shelley has a graduate degree in science, health and environmental reporting from New York University. She lives in Brooklyn.

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