The flash sales wine site has had numerous strategic stumbles under founder Philip James. In December 2011, the site expanded into European markets, but pulled out of the U.K. in July, after just seven months. There was also the acquisition of the French competitor Vinobest and attempts to get into experiences. But last January, 15 percent of employees were handed a pink slip, followed by 11 layoffs in June and six more in July.

A spokesperson for the company confirmed to Betabeat that the layoffs were related to a strategic pivot toward direct response under CEO Jay Sung, who replaced former CEO Kevin Fortuna this past December. The spokesperson said Mr. James is still with Lot18; he will be charge of what a source close to the company called Lot18's "hail mary" pass: selling wines through a subscription model.

Mr. Sung (Photo: LinkedIn)

"The point being from the beginning they were trying to build an interesting high-end brand and now it’s like, 'We just need to get users, we don't care who the fuck they are,'" said the source, who added, "Jay Sung, a direct marketing guy, is now running the company, which tells you exactly what you need to know. Any pretense of higher-end lifestyle stuff is going by the wayside."

The spokesperson also confirmed that the layoffs were related to the existing flash sales business, which will continue on. "Everyone built [flash sales] up to the place where it can run with lower burn," he said, noting that Mr. Sung chose the remaining staffers "because he believes in their ability to fit in with the new subscription model and support flash sales." Mr. Sung also told ATD that Lot18 needs "to resource according to our new business model and operate the existing business more efficiently with considerably less burn."

Lot18 is going after the market currently dominated by industry veterans like Global Wine Company and Direct Wines, which run The New York Times Wine Club and a wine club for The Wall Street Journal, respectively. "If you look at the $30 billion to $40 billion wine market, the vast majority are not at that high end," said the Lot18 spokesperson. The company needs to look for customers "who can't afford $50 for a Cabernet, but can afford a $15 Cabernet."

Our source said it wasn't yet "game over," for the startup. "If Lot18 can put better wines in front of people on a club basis, they can justify an exit or acquisition, that would end up making their investors happy." Bottoms up?

(Photo: Twitter)

Last time we heard from Jenna Haze, the infamous porn star was performing unspeakable acts on blissed-out, ripped male costars. Now officially an ex-porn actress, Ms. Haze has harnessed the same enthusiasm it takes to give a good BJ and transitioned it to the business world, partnering with startup Daily Desire, a "lifestyle flash-sale site created for the adventurous consumer with a penchant for high-end sexy luxury products and brands."

Daily Desire isn't the first site to merge sex and tech. A few weeks ago, we reported on Boink Box, which is essentially Birchbox for sex toys. Then the ever-salacious Queen Cougar Cindy Gallop launched her own reality-based porn site. So if we already have a sex toy subscription service and a video porn startup, a sexy flash site was really the only logical next step.

According to a press release, "DailyDesire.com will feature a collection of carefully selected products, from sexy swimwear, lingerie and alluring bedroom accessories, to provocative art, home furnishings and travel packages, available exclusively to its members." Oh, we really hope "home furnishings" includes a lamp in the shape of a dildo.

"We all know sex sells, but it never has in a safe and classy environment like this," Ms. Haze said in a press release (we assume she's never heard of Babeland?). "Shoppers will immediately notice the high-aesthetic and quality in all of the products we offer, as well as the new and exciting way we'll deliver them."

In order to inaugurate the partnership, Ms. Haze has filmed a typically NSFW ad spot for the new startup, costarring her butt. Watch it in the comfort of your own home here.

Ms. Pische (Google+)

Daily deals were on the rise last year, and for a few heady months everyone got really excited about them. Groupon's copy was still cute and quirky and hadn't yet begun to tip over into cloying; 2-for-1 skydiving lessons were still a happy novelty; this reporter even interviewed for a Google Offers copywriting gig (and no, she didn't get it).

But then came that faint gloom cloud, and suddenly the daily deal business model was being called into question. And frankly, it got really, really tiring to delete emails from Groupon, Living Social and Google Offers on a regular basis for coupons we would occasionally buy and then never use.

That's why we're thankful for Unsubscribe Deals, a new web application from a "recovering lawyer" named Edwin Hermawan and a West Village waitress named Lea Pische. In one easy step, the app connects to your Gmail account and automatically unsubscribes you from the deals emails you signed up for, including Groupon, Amazon Local and Daily Candy.

From an email Ms. Pische sent us:

We started at a hackathon. At Pivotal Labs if you must know. We were trying to hijack a Pivotal Labs engineer and find our mythical tech cofounder. All we got were awkward interactions and a random conversation about postgreSQL.

While stumbling home, we started checking our text messages and emails... and we kept getting these emails from daily deal sites. My ESPN digest and fantasy league update totally got lost.

So we woke up, called our our favourite Polish front end coder and a favor from my Muay Thai sparring partner (he happens to be a really good designer that I could never ever afford) and made UnsubscribeDeals.com.

We help the 99% that get flooded by daily deal emails. What side are you on?

We think Ms. Pische and Mr. Hermawan might have careers in creative writing or PR should this whole Unsubscribe Deals thing not work out.

Ms. Yeoh (linkedin.com)

When the daily deals trend collapses, the third-party client apps that streamline daily deals will be the first to go. We're getting a whiff of that today with the announcement that CityPockets, a New York-based e-coupon organizer that aggregates all of your deals, is shutting down.

In an email sent out to users today, CEO Cheryl Yeoh wrote:

I deeply regret to announce that CityPockets will completely shut down on June 30, 2012, since we are no longer able to maintain the product for a variety of reasons....We'd like to direct you to our friends at DealsGoRound and Yipit, both offering deal management services and we hope that they will fulfill your needs.

Ouch. Directing your users to former competitors? That's gotta sting.

"We've always been friends with DealsGoRound and Yipit, and wanted our loyal fans to have an alternative to store / manage their vouchers," Ms. Yeoh told Betabeat via email. "It's only fitting for us to show some love to our fellow daily deal friends."

Fortunately for CityPockets fans, Ms. Yeoh also took the opportunity to announce a new venture: It's called Reclip.It, and it's a "social catalog" for the sharing of deals, coupons and discounted products. The social component means that you can follow "deal bloggers, friends, or brands and get notified whenever they clip a good deal into their folder." It looks pretty much exactly like a Pinterest for coupons.

Even though CityPockets will be completely shutting down on June 30th, ReClip.It's similarities--both in industry and concept--make it seem more like a pivot than anything else.

"People have been clipping coupons for decades and the industry that has been primarily driven by ad-ridden, cluttered and outdated coupon sites is ripe for disruption," said Ms. Yeoh.

"We're initially focusing on serving the mommy bloggers who curate coupons and deals on their website to the 32M moms who subscribe to them," she added.

Mr. Vacanti. (Twitter)

Concern over the industry's fate has pervaded this week's Daily Deal Summit. But if yesterday’s proceedings seemed a little glum, this morning’s keynote speaker offered a slightly sunnier outlook.

Betabeat reached Yipit cofounder Vin Vacanti’s talk just in time to hear him teasing out one possible positive scenario. He speculated that the shift from local deals to nationally distributed ecommerce might offer traditional media outlets a second chance to capitalize on the daily deals boom. He used GQ as an example: The magazine is constantly recommending products to its readers, so why not create an ecommerce list and make some money? Though granting GQ might consider the idea heresy, he explained: “With ecommerce, it’s 1, 2, 3, 10 products that can be sold anywhere in the country. The selling experience is a lot easier. It makes a lot of sense.”

Mr. Vacanti isn't one to cheerlead without cause, so afterward we caught up with him outside the event for some perspective on the state of the industry. Did he agree with David Tisch’s suggestion that the very term “daily deal” has become practically poisonous? “It’s more of a branding issue,” Mr. Vacanti said. The phrase has gotten a bad rap, he explained, but there’s nothing inherently flawed with the business model. Fab.com, for example, has managed to do quite well for itself selling discounted goods for a limited period of time. The industry “would do itself a service" by adopting the name "flash offers" instead.

Part of the problem: "[Observers] thought of Groupon as this $100 billion company, and they’re now an $8.5 or $8 billion company. So people are sort of disappointed. They think it’s been a bust. Well, on the other hand, Groupon is still worth eight times Instagram--and no one thinks Instagram is a disaster."

To be fair, that likely has something to do with differing user acquisition costs, among other things, but Mr. Vacanti’s point about overinflated expectations is well taken.

While none-too-keen on the prospects for building national businesses on local deals, he also elaborated on the virtues of a broader strategy. Pointing to the success of Fab.com, he said, “I think there’s an opportunity for companies to launch with a curated list of products that are more national distribution, therefore the sales cost isn’t as high and they’re still able to build a huge list.” Plus, local players like city newspapers could still leverage their home-field advantage into a decent (if limited) business.

That's not likely to inspire a mad dash to launch daily deal sites. Then again, that's a healthy development.

(via Twitter.com/AustinEvarts)

Slouched comfortably in his chair, holding forth on the prospects of a would-be Groupon, TechStars’ David Tisch expressed doubts about the name of the very event where he was, at that moment, speaking. “The word ‘daily deal’ is, like, staring me in the face, and I’m scared of it.”

“It’s poison, I think, to a large audience outside of probably this room.”

He addressed a diverse crowd: While the suits certainly turned out in force, Betabeat spotted more than a few untucked shirts and even one battered pair of men’s flip-flops. (The panelists themselves reached equilibrium somewhere in the vicinity of business casual.) Diversity of dress code notwithstanding, the conference had the just-between-us tone of a small industry gathering.

And that industry isn’t wholly spooked, but it does seem a little concerned about the weather. Mr. Tisch’s comment tapped into a faint anxiety running throughout the first day of the 2012 Daily Deal Summit, staged at the Times Square Crowne Plaza in partnership with online trade publication DailyDealMedia. Panel titles like “State of the Union: Industry Interrupted” and “Too Fast, Too Furious?” betrayed concern about the industry’s future that aren’t exactly unfounded.

At one point, a poll of the audience revealed a substantial number had unsubscribed from at least one daily deal email list. A tiny few even admitted to unsubscribing from their own company’s.

Nor are the industry giants simply sitting pretty, peering down at the teeming also-rans. Asked by moderator (and Yipit cofounder) Jim Moran about what a company like Groupon should be doing, Mr. Tisch suggested strengthening ties with local merchants, with an eye to becoming something like the internet equivalent of the Yellow Pages. Angel investor Benjamin Sun, on the other hand, sees Groupon leveraging their acquisition lists into sales of everything from watches to treadmills. Maintaining the status quo didn't seem to be an option.

The audience, for their part, got a little aggressive with this particular batch of panelists. First the speakers faced an interrogation regarding the high costs of customer acquisition. (GiltCity VP Florent Peyre answered first and therefore bore the brunt, until Mr. Moran gently moved things along.) Another attendee wondered about merchants refusing to honor deals, while still another challenged the Washington Post’s Tim Condon on the efficacy (or lack thereof) of tying deals to content.

The state of the industry having been assessed, the conference moved onto more nuts-and-bolts—though still somewhat downbeat—panels. There was much discussion of user testing best practices and optimal email times at “The Year of the Unsubscribe?,” while “Making the Deal Model Work” parsed ways forward for the business.

By this point, a fair bit of the audience seemed to have trickled out. Betabeat located them on the way out, gathered into tight clusters of seemingly intense discussion. Back on the sidewalk, we saw nothing but sunshine.

Mr. Patterson via @jetsetdrew

Today, Jetsetter, the luxury vacation deals site (think flash sales on villas in St. Vincent or a pied-à-terre in Paris) announced the appointment of its first-ever chief marketing officer, Barry Herstein. A former CMO at PayPal, American Express, and the Financial Times Group, most recently Mr. Herstein was responsible for revitalizing Snapfish, the photo sharing and printing service, after a decline in revenue growth.

(Ex-Snapfishers seemed to be everywhere these days. Former Snapfish CEO Ben Nelson recently set his sights on reimagining an Ivy League experience at half the cost.)

Betabeat chatted with Jetsetter CEO Drew Patterson about the need for a CMO, Jetsetter's role within the Gilt Groupe family, and those pesky tech blogs.

Over email, Mr. Patterson said that hiring a CMO was crucial because "investing in marketing to get the Jetsetter brand to a larger audience," is the next stage in the company's development. Jetsetter already has 2.2 million members since launching in the fall of 2009. Although 95 percent of travelers return to to Jetsetter after their trip, they have booked just over 500,000 nights.

Jetsetter also seems to be heading in the same direction as parent company Gilt Groupe by offering more full-price vacations--over the steep sales that may have initially lured you in. (Vendors, naturally, prefer not selling at a discount.) "I am most excited about the growth in Jetsetter’s full-price retail collection, which is contributing over 35% of revenue each month," said Mr. Patterson, noting the 800 hotels and resorts in Jetsetter's full-price retail collection.

Don't let the "deals," part fool you. Things can get pretty pricey, if you let it. The highest purchase on Jetsetter so far has been a $217,000 for renting Caribbean home for two weeks over Christmas. The highest price for a flash sale item, on the other hand, was a number of $42,560 packages for a cruise to the North Pole. Mr. Patterson also noted that the second highest flash purchase was a trip to Antarctica for $23,375. "Apparently the poles are both expensive and popular!" he said.

As for its relationship with Gilt, Mr. Patterson said setting Jetsetter up as a separate company has enabled them to offer a more tailored service. "Travel is a massive category, with different purchase behavior and product needs from fashion," he said. "The product and technology teams spend every day thinking about how we can improve the experience of booking travel and going on the road."

The companies still collaborate. "Gilt has been a big part of Jetsetter’s history and success, incubating the company with seed capital and introducing Jetsetter to passionate Gilt shoppers," Mr. Patterson, said, pointing to a number of cross-category initiatives. "For example, Jetsetter destination weddings and honeymoons will be presented alongside Gilt’s wedding apparel and product in an upcoming wedding sale later this week."

During the recent layoffs at Gilt Groupe, sources posited that there may have been too much overlap between Gilt City, an "adventures" and local lifestyles vertical and Jetsetter. When asked why Jetsetter has grown while Gilt City has been forced to close in six markets and layoff top staffers, Mr. Patterson said. "We’ve got a great relationship and work closely with the folks at Gilt City (and I happen to be a passionate consumer of their restaurant deals). My guess is that any chatter about overlap was just an attempt to drive PVs by gossipy tech blogs (which I also read passionately)."

Well, much of that gossip turned out to be true. Regardless, thank you kindly for the passionate pageviews?! We'll take it!

As Jetsetter scales, Mr. Patterson said the next challenge will be around execution. "It’s hard to keep the same level of service and focus as the enterprise expands. My goal is that we maintain the same attention to detail and service level for our millionth customer as we had for our first."

Sorry, GOOG, but we're gonna hold out for the Groupon of the Google Offer. Either that or keep it local and get Yipit to send up a round of deals on deals.

Mr. Ryan, at TechCrunch Disrupt New York last May.

Around 4 p.m. on a recent Thursday, all but 14 of the employees of the members-only luxury e-commerce site Lot18 got an email asking them to report to the new conference room for an urgent meeting. The remaining employees, including the vice president of operations and director of operations, received an almost-identical note but were asked to report to the “alt” conference room instead. They were told they were being let go, asked to leave the building immediately and instructed to return on Saturday to clean out their desks.

The survivors were shocked by the layoffs, which came a day earlier than planned due to inquiries by Betabeat. Lot18, which started with private sales for wine before moving into full-price wine and epicurean deals, has raised a total of $44.5 million from investors—its latest round spearheaded in November by the highly regarded Accel Partners. Lot18 also moved into a new office over the summer that features a tasting room, mounted LCD screens that pop up a buyer’s location on a map every time Lot18 sells a bottle and a permanent DJ booth. In its one-year existence, Lot18 launched several new verticals, bought Paris-based e-commerce site Vinobest, and announced a foray into Europe.

To industry insiders, the scenario sounded familiar. Mass flash sales—deep discounts that expire usually after one to three days—had been touted as the first real innovation in e-commerce in years, and start-ups that applied the flash-sales phenomenon to the luxury market had investors salivating. But the former venture capital darlings suddenly seemed to be hemorrhaging employees. Earlier this month, another site, Boston-based Rue La La, slashed 60 of its 550 employees after months of growth.

Suddenly, the question is being asked: Could flash sales for the well-to-do wind up being more of a marketing gimmick than a business model?

A week before Lot18’s conference room trail of tears, Betabeat broke the news that Gilt Groupe, the high-fashion flash sales powerhouse, was also shedding staffers. Back in November, Gilt Groupe CEO Kevin Ryan happily boasted about hiring a worker a day in 2011. But by late January, the company was admitting that 10 percent of its 900-person staff had been dismissed, despite the company’s having raised $138 million less than a year prior at a $1 billion valuation.

Mr. Ryan assured the press that Gilt would have its head count back up by the end of March. Insiders say the layoffs are part of a prudent debloating before the company packs up its PowerPoints and sets out to pitch investors in the ritual pre-IPO roadshow. Gilt has raised about $238 million from investors and Mr. Ryan says a public offering could happen by the end of the year, but insists it’s unrelated. “Forget IPO,” he told Betabeat by phone. “I think it’s the right time to cross over into profitability.”

The other companies had similar explanations for downsizing. Lot18 had grown too fast, management explained, and those being let go were “nonessential.” Lot18’s cofounder and CEO Philip James, an oenophile who has two wine start-ups and a Mt. Everest climb under his belt, emailed a statement: “Lot18 is a business built on core fundamentals and we expect to reach profitability on the money we’ve raised. I’m not going to preclude the possibility that we’ll raise capital in the future, but that would be for growth.” Rue La La brushed off its layoffs as a product of “restructuring,” “outsourcing” and “consolidating.”

With $500 million in revenue in 2011, Gilt Groupe is moving toward full-price and private label offerings, and is likely to emerge from the moment of reckoning on top of the heap thanks to its buying power with brands. (Unlike some competitors, sources say, it never resorted to the black market in flash sales early years.) But scuttlebutt from inside Gilt’s velvet rope is that some of its new verticals are falling short of hopes.

When Gilt Groupe arrived in November 2007, its sparse home page conveyed maturity, taste and exclusivity—a black and gold gateway into your own private sample sale. Super savings don’t have to be gauche, Gilt whispered, a relief amid the Great Recession, both for the luxury brands that found themselves unable to move handbags and for their status-conscious customers.

Mr. Ryan, a Doubleclick veteran from Silicon Alley’s early years, borrowed the idea for Gilt from Ventee-Privee, the grand-mère of flash sales sites, which launched in 2001 and claims a $3 billion valuation. But for the public face of the company, he put forth cofounders Alexis Maybank and Alexandra Wilkis Wilson: leggy, blond, accomplished Harvard Business School classmates, and living embodiments of the Gilt Groupe customer (chairman Susan Lyne joined later). Their first sale was a still up-and-coming designer named Zac Posen, whom they met at Harvard, natch.

As Gilt captured media attention, mindshare and $25 million in revenue in its second year, luxury flash sales sites began raking in venture capital. Ideeli has raised $64.8 million; Beyond the Rack is up to $53.6 million. In 2009, Rue La La was acquired in a deal worth $350 million; in early 2011, Nordstrom acquired Hautelook for a deal worth $270 million. One Kings Lane, the original Gilt Home, has collected a tidy $63 million in VC funding. Daily Candy launched a private shopping club; eBay launched a high-end fashion deals site. The luxury craze isn’t over: The Clymb raised $2 million for a members-based deals site for the outdoor market over the summer and Los Angeles-based LuxeYard just announced a $3.5 million investment last week.

Retailers had always struggled with the problem of unloading unsold merchandise without degrading their brands, relying on outlets like Ross Dress for Less or T.J. Maxx. Gilt Groupe presented a sleeker option, and the membership structure of “private sales” lent it an air of exclusivity. “It felt like you were walking through Barneys, it’s just that everything is 70 percent off,” said one former employee.

Gilt Groupe also found macroeconomic forces aligning in its favor. On the heels of the consumer boom that preceded the recession, estimates are that luxury goods inventory rose to 10 times its normal level. And Gilt was poised to help. By 2009, it was up to $170 million, and by 2010, $423 million. “They were just the shit, right?” said Matthew Carroll, founder of the outdoor brand Cloven Footwear and a Gilt Groupe vendor who has written something of a dissertation on the company’s meteoric rise on Forbes.com. “In 2009 I worked with them and I felt honored just to get an invite to the service. I felt cool.”

Soon, manufacturers began cutting production, and by 2010 the supply of high-end goods had dried up. Flash sales start-ups responded with varied approaches. Ideeli went downmarket. “I’m not the most popular guy at parties in New York because all our friends are after high-end brands,” Ideeli CEO Paul Hurley sheepishly confessed to Reuters. “But the opportunity is much larger elsewhere.”

Gilt stayed the luxury course, opting to sell more categories to that same affluent urban sophisticate. After Gilt for women, there was Gilt Man, then sites for kids, design, travelers, foodies and so on. Around Christmas 2010, they even sold a few Volkswagen Jettas. “Gilt was one of the first ones to get into flash sales and I think they wanted to do that for every luxury vertical and be the Amazon of luxury, rather than a flash sales site,” said a former Gilt employee. “It was really a sprint to own the market,” said another former employee about the new verticals. “At the time we were growing faster than eBay did, we were growing faster than Amazon did out of the gate. It’s slowed now.”

Mr. Ryan prefers to err on the aggressive side. “I certainly would rather launch five new things—and they might be verticals, initiatives or different promotions—and maybe one of them doesn’t work and that’s O.K. That’s fine. Being the last person to market? Certainly you’ll be a loser,” he said, adding, “From my point of view, to date, all of our verticals have worked.”

Not everyone agrees. Some of those new verticals, like Gilt Home and Gilt Taste, involved increasing the ratio of full-priced to discounted items. The men’s site Park & Bond, on the other hand, was Gilt’s first exclusively full-priced venture. To sell its move up-market, Gilt Groupe borrowed some gloss from the glossies, tapping Ruth Reichl, Gourmet’s raven-haired high priestess of haute cuisine, for Gilt Taste and partnering with GQ for Park & Bond. “They really went after people, really recruited, really made a big deal [of marquee hires] to the press, dangling stock options,” said one former employer. “I have to ask was any of that done with a sustainable business in mind.”

The reaction was mixed. “I understand there’s foodies out there, but then why did Harry & David go bankrupt last year?” said a Gilt Groupe fashion vendor. “They had people who had bought their shit at Christmas every single year for like 20 years and they still go out of business for specialty food.”

Park & Bond “was a huge, huge bomb,” one former employee said. “That whole part of the business is essentially being picked apart and sort of let go.” The departure of Park & Bond president John Auerbach was announced at the same time as the layoffs (Gilt said he left to pursue other projects). “Everybody knew Park & Bond was in trouble because they were trying to be aspirational, and being aspirational as a retailer is dangerous,” explained one Gilt Groupe vendor. “They were trying to buy these $10,000 jackets because ‘we need to be high-class, we need to be ultra-luxury.’ Well, that’s cool if that’s your goal, dude, but if it doesn’t work it doesn’t work.”

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.

In a statement, the company said, "We don't foresee additional layoffs at this time."

Betabeat heard word Friday that part of the restructuring would involved shutting down certain markets for Gilt City, the company's location-based deals service that offers discounts on luxury events and experiences. In the statement, Gilt Groupe confirmed that it will be closing its offices in six secondary cities "effective immediately," namely San Diego, Houston, Philadelphia, Seattle, Dallas, and Atlanta. "We have not been as successful in smaller markets and the resources they require take away from growing our core business," the company said.

Prior to this move, Gilt City operated in thirteen markets, so this represents a significant reduction. Going forward, Gilt Groupe said it will be "servicing those smaller markets through a centralized sales force."

The company maintains, however, that in larger cities, Gilt City, which competes with other deals sites from Groupon to LivingSocial to Jetsetter (another Gilt property) has a market edge. "Regarding Gilt City, that business has developed a clear market position and terrific offerings in our core cities, with NY, LA, SF, Chicago, Boston, DC and Miami all showing growth over the last year. "

On Friday, sources also told Betabeat that several high-level staff members from Gilt City were let go, including the division's president, chief revenue officer, and senior director of sales. In the statement, Gilt Groupe confirmed that Nate Richardson, Gilt City's president, will soon be leaving be the company, although the company says it was of his own accord:

"This restructuring has accelerated some changes that were percolating on the management level. Nate Richardson has expressed his desire to return to the start up world, a place where he thrives.  He'll continue to stay on through a transition phase before moving on.  Nate was initially brought to Gilt to build and launch Gilt Man which has gone on to become one of Gilt's marquis businesses.  He then launched and expanded Gilt City which has grown significantly under his entrepreneurial direction."

Betabeat was the first to report impending layoffs at Gilt Groupe. At the time, sources said John Auerbach, head of the mens site Park & Bond, had been let go. Mr. Ryan responded via AllThingsD that Mr. Auerbach was "still working there as of now." However, today, he tells the site that Mr. Auerbach is indeed also leaving because he is, "better suited for running start-ups."

The past few months have been a period of reckoning for flash sales sector. After laying off nearly half its staff, BuyWithMe, another daily deals site, was acquired by Gilt City along with 20 to 25 of its 190 employees. Earlier this month, Mr. Ryan told AllThingsD that after Gilt City was fully integrated with BuyWithMe, they probably wouldn't need as many employees.  Like both BuyWithMe and Lot18, Gilt Groupe, which expects an IPO as soon as Q4 2012, raised significant venture capital before laying off employees. In May, Gilt Groupe raised a $138 million series E from Goldman Sachs, Draper Fisher Jurvetson, and others, at a rumored $1 billion valuation.

We will be updating this story as we learn more. Please email tips@betabeat.com.