Hi there. I'm Matt. I'm a businessman, not a business, man1.

20 February, 2009 | Comments

Gilt Groupe is one of those sites that I never saw coming. No coverage on Tech Crunch. Hardly any blogger mentions. No Silicon Valley funding. But  it’s damn popular for a start-up under a year old: 417,000 visits last month; the perfect example of Nascar Blindness.

Gilt Groupe is not a web 2.0, social media, or long tail success story. No community or Twitter. Every blogger preaches that there are “new rules” for competing online. Well, Gilt Groupe is ignoring the “new rules” and staying true the old ones.

What is Gilt Groupe?

Gilt Groupe is an online sample (fashion) sale. Access is invite-only, limited to friends of other Gilt users (a la Gmail invite-only access). The sales are announced by email a week ahead of time. “Gilt Groupe offers several new designer sales each day, with most sales lasting 36 hours or until everything is sold.” (via VentureBeat). “The sample sale truly is a phenomenon that generates mass hysteria in the city,” CEO Alexis Maybank said. Gilt Groupe is an “opportunity to take it to a national audience” (via RedHerring).

And it’s crazy addicting (so I’m told). A popular sale eerily quiets my office. I’ve witnessed a director at Amex, during a meeting, open an email alert of the latest Gilt sale on her Blackberry. It must have been good–she excused herself from the meeting to run to her computer.

Following Old-World Rules

Browse Gilt Groupe. It’s almost as if the founders ported the physical shopping experience to an online environment. The “air of exclusivity” is maintained by the invite-only policy. Like sample sales, the site is no non-sense. People know what they want–the shopping experience is purely pictures and prices.

Digital experts argue that there are new rules for competing online. This includes many of the buzz topics of late: conversation, relationships, dialogue, engagement, social media, etc. Gilt Groupe does none of these. The site is ugly, designed as if it was 1998. No familiar nods to social media. And this is perfectly OK.

We must not apply the same web 2.0 formula to every site, brand, or category. Gilt works because it kicks ass meeting its customer needs: bring the sample sale to a national, scalable audience. Think it needs a community or “customer dialogue?” The reality is that Gilt’s customers don’t care, and it surely would not match the essence of the callous sample sale.

In short, the “new rules” are irrelevant if your customers don’t expect them (and definitely don’t use them). Gilt Groupe’s success is built by remembering that the old-rules worked for a reason, and exporting the traditional sample sale to an online platform reaped huge customer value. No new media. No “dialogues.” Just happy customers.

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  • @Rach: I agree with Gilt's product, but if anything it seems superficial. A deep product, at least in Guy's sense, would tackle every customer need. I believe that Gilt is closer to Seth Godin's assessment of "choosing your customers." Gilt consciously is ignoring many of the deeper needs of customers and focusing on those customers that are there purely for fashion. You probably know exactly what you want on the site; there's no need for a dialogue among yourself, Gilt, and other users.

    In terms of cross sell, other companies, such as AXP, are just as guilty. It's so easy to assume what is relevant for a customer and effectively exploit the customer relationship, spamming them with un-wanted marketing. You're right, I've yet to Gilt go down this path.
  • love love love gilt. the nice thing about giltis that it truly is all about the product. to your point - at the end of the day if your product is amazing, that is what counts. there is a great article on open forum by guy kawasaki on what makes a new product successful. one of his key points is that the product must be deep, in the sense that it meets the needs of your consumers on every dimension. gilt does that, and that is why it has such a following.

    many other sites like guilt exist - ideeli.com, ruelala.com, but they have made their platform a marketing channel with all sorts of cross-sell. As a marketer, you think that's a brilliant idea - you have a captive audience so why not make the most of it. However, if you are trying to create a 'gated' feel, cross sell of any kind simply sucks the cache out of your product / service.

    Long story short - gilt knows what they are doing when they don't opt for flashy and fancy. They are focusing on bare bones, but the most important bones, so their product is exactly what you want, and nothing more.
  • @amber: I think of Gilt as very similar to Woot.com, a deal of the day site with the same premise--products are limited quantity and available until they sell-out.

    But I suppose that this is the calling of every sample sale. I've only been to a sample sale once--and the line was around the block. Regarding chat, what if there was a forum for the sale preview...so that people could discuss the designer, their opinions of the fit/style, etc.? Wouldn't that add to the buying experience and the excitement that prevails when the items are for sale?
  • you're so right. you should see the frenzy in our office at noon when the Gilt Groupe sales begin.

    One of the things that I think makes it addictive, in addition to it being exclusive, is that there is a chance that time will run out, and someone will beat you to the item you want. It's the "limited time only" strategy -- once that dress is gone, it's gone, so you'd better get there first!

    That, to me, is what drives women to purchase more than anything -- if their items might be around for awhile, the frenzy wouldn't ensue. It's like the Barney's warehouse sale - you buy way too much stuff - things you don't even want - just so someone else won't get them ( I know, it's sick.) there isn't any time to chat,even if they offered that, and since it's a race against the clock, the other shoppers are sort of like your competitors. this sounds crazy, but that's how it is.

    interestingly enough, they just started running ads on Facebook, so I guess that takes away the exclusivity factor.
  • Thanks for the comment love.

    @Fell: Agreed. Women (and men :) ) want to go to sample sales, but the physical barriers are strong. Intuitively, the Internet is the perfect solution. And you hit it on the dot: Gilt didn't incorporate social features because they wanted to stay true to the sample-sale experience. Good point about traffic--I've sure the conversion is low, as in all luxury good businesses. But the traffic is still immense given the price/category of goods that they are hocking.

    @Rick: I realize now that I never articulated my thoughts on the old-rules in my post. I think of the old rules as using the Internet purely as a channel and not embracing the functionality (i.e., dialogue, social networking, 1-1 personalization) it has to offer. I believe that the old rules will work as long as the expectation is not there with the user. If I go a website and expect a forum, it better be there.

    and @Alan: I'm in the same boat--have not quite bought anything. What confounds me is that Woot.com (a more popular, cheaper version of Gilt) uses all of the social media elements with great success. I suppose that this is just a case of giving the audience what they expect.
  • Fell Gray
    The success of Gilt Groupe is based on one simple insight-- the women who want designer clothes but can only afford them at sample-sale prices cannot go to samples sales because they work.

    The simplicity of the site is also rooted in meeting this consumers need. Sample sales are not a social forum. The bargain hunter does not want to be distracted, lest she miss out on the *perfect* item in her size.

    I was invited in early (creators are a friend of friend) and have watched grow immediately among the first invites, and watching the buzz roll out to different groups of women over the course of the last year.

    So the numbers aren't surprising to me, though my guess is that the purchase base is much smaller than the 80/20 rule. Not all lifestyles provide opportunity for Alexander McQueen gowns.

    Get the insight right with the right product and you can write your own rules.
  • Great comments and great advise - of course in some arenas the "old rules" mean no on-line presence at all. I know some very successful small businesses that are still making it in a webless environment but I am not sure how long those "old rules" will continue to work.
  • Didn't realize Gilt Group was that big. A friend who is very into the fashion scene got me to join up, and I assumed that it was limited to that world, doing just what you lay out, but with a much smaller base. They do have amazing prices on items and while I've yet to buy anything, I have contemplated it.

    Well that explains why everything sells out so quickly.

    I agree with your big picture take Matt. Too often we try and force fit solutions on everything and everyone. Part of the charm of certain sites is their lack of bells and whistles. Would Gilt Group be more fun if there was chat? Doubtful. It would become a time suck, whereas now it's a quick glance.
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Hey. I'm Matt Daniels

I'm a B-School grad and brand-strategy consultant for Prophet in NYC. I write about digital biznass, with the occasional review of Gossip Girl.


You can also hit me up at matt [at] mdaniels.com