Daily Daze

Flash Dance! Luxury Flash Sales Sites Regroup After Layoffs

After bingeing on salaries and schemes, luxe deal sites start dieting. Can Gilt Groupe cross the IPO finish line without scuffing the lacquer on its Louboutins?

Not all the Gilt Groupe’s reaches were met with as much skepticism. Jetsetter, the luxury travel site, gets rave reviews from customers and does 40 percent of its revenue in full-priced offerings. But Gilt City, which bills itself as selling “experiences” and therefore overlaps with both the Jetsetters and Groupons of the world, failed to get much traction beyond a few core cities. Along with closing six markets as part of the layoffs, the company announced Gilt City president Nate Richardson would also be leaving.

Some of January’s fat-trimming was more literal. A tipster to New York spotted a new sign in Gilt’s normally generously stocked pantry: “Gilt has made a New Year’s Resolution to cut the following items from our purchasing diet across all locations: all fruits, all yogurt, all cheeses, Thomas’ English muffins, granola and health bars, Rice Krispie treats, Poptarts, and Pellegrino.”

When asked, Mr. Ryan cheerfully dismissed speculation that Park & Bond would fold into Gilt Man and rumors of Gilt City’s demise and promised all the remaining verticals are here to stay. “Park & Bond is doing very well, although not as well as we had in the budget,” he said. Mr. Ryan said the problem was merely one of single-digit inventory write-downs: “We bought more than we could sell.”

One former employee implied that missed projections were more than a miscalculation. “I think the feeling among the staff was that the revenue projections were pretty wildly irrational,” the source said. “I was not convinced that Park & Bond was being set up for success. I thought, if we make these revenue projections, it will be a miracle.”

According to the source, either the “premise was framed incorrectly” or the strategy was simply, “Let’s do this so that we can say we did it—on the backs of a lot of selfless, really talented people,” the source said, citing long hours and staffers’ commitment to the project.

Gilt Groupe President Andy Page responded to that idea by email, citing the changes inherent in a dynamic company. “Our performance is based on actual results, not what we forecast—especially for a new business. We reforecast every month, for each of our businesses, and our investors have visibility into that process. The way we demonstrate our ability to start a full price business is to create a successful brand, sell a tremendous amount of product and delight our customers. We did all these things. Park & Bond is the fastest growing business in the first 6 months compared to any of our other properties, but it was still over resourced.”

The same former employer disputed claims Gilt Groupe has been making to the press for years that the company is immune to industry-wide concerns about sourcing inventory. “It’s all spin and its all calculated to have a successful initial public offering, the people who have made it be damned,” the source insisted.

“I currently have visibility into our sales through June and anticipate having more access to product than we require,” Mr. Page replied by email. “That is for several reasons including our relative competitive positioning (more brands using us exclusively) and the volatile holiday season which left brands will a strong excess on hand.” He added that Gilt’s position in flash, “is currently the strongest it has been since I joined the company almost two years ago.”

For now, Mr. Ryan seems content to watch the industry shakeout from his Park Avenue perch, a familiar scene from his DoubleClick days. “I’ve watched this movie since 1996 where an area gets hot. In 1997, we had 37 competitors in ad-serving. Five years later, we were down to about five.”

The story had an portentous ring, especially when Mr. Ryan added, “We bought a bunch of them and a bunch of them went out of business.”

ntiku@observer.com, ajeffries@observer.com

A version of this piece appeared on page A1 of the February 1st, 2011 issue of the New York Observer.

CORRECTION: An earlier version of this story said the Lot18 office has a fireplace; that is incorrect.

Comments

  1. Notyourenemy says:

    “Nonessential”? So professional of you to say.

    Customer service, eghh…nonessential!
    Logistics, nonessential!
    “Certain” developers, non-essential!
    Recruiters….we definitely do not need those! They are non-essential!

    Why hire these people at all, some only 2-5 month ago? Think again…enough of belitteling people who worked for you as some type of nonessential and useless nobodies.

  2. YouKnowIt says:

    At the core these businesses are off-price retailers that live and die by inventory availability, margin and cheap fulfillment channels . There is nothing revolutionary about the core business model. Who is the most successful off-price retailer?  TJX Co.  Compare the Gilt offices and attitude with your average Marshalls store.   More layoffs and sub-leased suburban office parks are in the future for these companies if they ever want to be profitable.