Sample sales are an amazing resource for marked down goods for both mainstream and luxury brands. Online private sample sales are picking up serious speed. Here is how they work: big designers, such as Marc Jacobs or Versace, place excess inventory on a sale site at 50 to 70 percent discounts over a several day period. The sales are private, available only to members, with upcoming sales from brands announced via emails. Products include clothing for men, women and children as well as jewelry, handbags and home accessories. You can get invites from other members or request invites via the site.
Startups in the online sample sales space like Gilt Groupe, Ideeli and Hautelook are all raising huge amounts of money, growing their user base at a rapid pace and turning a strong profit. The concept has even attracted retail giants like Saks and Neiman Marcus, which are now jumping on the bandwagon to offer their own private sales. Even GSI Commerce, which previously wasn’t directly involved with selling luxury goods, is getting into the private sale business with the recent acquisition of sale site RueLaLa.
It’s worth noting how sample sales have evolved in the past decade. I attended my first sample sale in 1997 in a convention center in Baltimore, where women (and a few men) were scouring for deals on clothing from J.Crew. The items were placed in huge cardboard boxes in no particular order or size breakdown. It was utter chaos, but the deals were great.
Flash forward four years to my shopping life in New York City, where sample sales are a bit of a religion. At Kate Spade, I fought intense lines (waited in an hour long line in the middle of December, nearly got frostbite in my toes), pushed my way into packed fitting rooms, and found myself intimidated by the catiness of aggressive deal-seekers. At Gucci, I was asked to sign up for an hour-long “window” of shopping time. Only all the convenient times were already taken, and I was left with times in the middle of a workday. And yet I walked away from both sales with steeply-discounted designer stuff that I wouldn’t ordinary be able to afford.
You get the point. Sample sales offer great deals, but highly uncomfortable situations. Gilt and other online private sales are simplifying the sample sale market. The online sample sale was originally brought to market in Europe by Vente-Privee in 2001. US companies like Gilt, Hautelook, Ideeli and BillionDollarBabes emerged a few years later with a similar online model, offering users radical discounts on overstock goods from designers.
Sample sales are also proving to be a compelling market opportunity. Vente-Privee itself is on target to achieve €650 million in turnover globally this year. The price (in a possible sale) for Vente-Privee is estimated at $1.5 billion, with some sources even putting the figure at between $2 billion and $4 billion. The New York Times reports that Gilt Groupe, co-founded in late 2007 by a former eBay executive and, was able to bring in $25 million in it’s first year of operation. Gilt currently has 1.6 million members. And the startup recently raised an estimated $40 million in funding in July, which valued the company at $400 million. Ideeli, which was founded in November of 2007 and now has over one million members, is set to do $50 million in revenue this year, and the company’s CEO, Paul Hurley, expects to do $175 million in revenue next year.
So why is this model successful? Well, in addition to the fact that women and men can now avoid the chaos of the in-person sample sales, the sales are now brought to the masses. So it’s no longer shoppers in New York City who can solely benefit from the steep discounts, but consumers all over the world now have access to these goods. And because the sale only takes place in short amount of time, with limited stock available, shoppers feel the urgency to actually buy the product, because it may not be available within a few hours.
Most brands are also on board with the model. Since the sample sale site presents the brand in a luxurious, desirable way, via a “private” sale, designers don’t feel that these online sales are distorting the value of their brand in any way. So Gilt can get a premier designers like Marc Jacobs to sell his coveted handbags on its site for half the price. Plus, adds Hurley, the time frame of the sale ensures designers that their clothing or accessories aren’t just sitting in a bin somewhere. Hautelook even gives designers a real-time metrics dashboard that allows them to see what items are being bought, what parts of country where specific items are selling best and more.
As I noted earlier, the success of this model has now led to a number of retail shops and other technology companies sniffing around to either acquire or build private shopping sales of their own. Yesterday, DailyCandy released the news of their private shopping club and even designers themselves, like Tory Burch, are holding few-day private sales online. And as we reported earlier in the month, we hear that Gilt, Amazon and eBay are all actively looking at acquisitions in the European private shopping club space.
Online sample sites are drawing massive audiences, and monetizing them in a meaningful way. Of course, it’s a competitive space with every site duking it out for supply (the designer inventory) and demand (the buyers). And yet, even in recessionary times, the sample sales market seems large enough to sustain a market of startups, and keeps me looking like TechCrunch pays me a decent salary (joke!).
Photo credit: Flickr/Ed Yourdon
Cattiness
http://www.thef...y.com/cattiness
Very interesting post. At Magento we’ve noticed the trend earlier in the year and built private (member only) sales as part of the Magento eCommerce platform. Retailers have the flexibility to launch multiple sites with various business models with our product.
It’s exciting to see innovative new models emerge in the market.
Roy
I’m really surrpised these are so successful sites. Why don’t the retailers just put the clothes in the sale section, or outlets section. Or are the mark downs much greater?
I love this catagory. I think Ideeli blows so low rent. gilt is awsome but to expensive, Rue LaLa has some good stuff sometimes but it’s super cheesy. My favorate is Hautelook. They always have great stuff at prices I can afford. And they turn me on to fantastic new things I would never find on my own.
Thank god for the virtual sample sale!!! About time I can’t stand TJmax…..
I think that private sales is more an adaptation of what we called ” Ventes presse” : ” Press Sales”.
First journalists received invitations for purchasing luxury goods at a a very discounted price.
Then a lot of the brands started to send this invitations to more journalists.
Then they launched ” Press sales” for consumers, as a way to destock in an elegant way to preserve the image of the brand and their resellers.
Finally ” Vente-Privée” adapted the concept to Internet, calling it ” Vente-Privée”.
Now, “vente privée” is not only a website, it is a concept, even applied to other goods (and not only fashion).
Mine is :
http://www.abso...umentprive.com/ , dérivated from private sales also
There is no such thing as a sample sale for music. Unlike clothing, music can be easily replicated. The sample is really the master. The only discounts on sampled music are in the fashion of promotional giveaways, cheap downloads, and free tracks.
Promotional Giveaways
Promotional giveaways turn music samples into free goods. Most promotional giveaways occur at radio or online for contests. The great thing about promos is that you don’t have to pay royalties on them. For clothing, rarely do you see promotional giveaways. Most of the time clothing like shoes or shirts are just heavily marked down.
Cheap music
Music is already marked down so much it couldn’t host a sample sale even if it tried. In some cases, music is sold at 75% off the 1.00 SRP, as I wrote about yesterday on the Bluebeat music store. In some cases, music even starts out as free and rises in value per demand, as in the Amie Street model. In fact, free is something you could never get away with on sampled goods.
Free Tracks
Free is 100% off. You would never see that at a sample sale, even with excess inventory. However, music is indifferent. Often times music the free downloads is used as a carrot to plead music listeners to buy the album or more tracks. Artists such as Moby has discovered that giving away a free track also leads to increased volume for that track. The great thing about digital music is infinite inventory, the law of scarcity need not apply.
Quite simply music samples cannot be sold at a discounted price. Music is either given away for free, cheapened so much that it already feels like a sale, or is given away free to incentivize customers. The physical world in no way mirrors the digital world and this is no more evident than in music.
Leena, Thanks for decoding sample sales for the male readership. Good post. I find the press covering these businesses is missing a big part of the appeal: the daily flash sale experience is very simple and relevant for its audience–in that way Woot is as much a parent of these businesses as Vent Privee.
The other part that is missing in the dialogue is the very serious economic and societal cost that “discount culture” (thanks author Ellen Rupel Shell, for that term) is creating in the US. When we train people that nothing should be bought at full price we squash innovation (because much of it comes from fragile entrepreneurial ventures who can’t fund deep discount retail), we eliminate choice (because we lose R and D budgets created by decent margins), and we reduce a huge swath of our living-wage professional job pool.
I’ve worked in consumer products most of my career. Costs have been slashed to a terrifying level–the ability for both big and small companies to produce meaningfully inventive products and maintain vibrant enterprises is seriously threatened by discount culture.
Deep discount deals have a real impact: environmental, cultural, technological, economic and aesthetic. In approaching each purchase, I try to think hard about what kind of companies (and society) I am supporting with my actions.
When we used to sell clothing we would over-produce a lot so that we could sell it at discount to TK-Max etc at the end of the season. Great way of making money by pretending its a special offer etc.
Can’t believe that this article didn’t mention DubLi, who have been doing this online for years now.