Despite Paycheck Bite, Gilt Groupe Chairman Sees 1% Still SpendingJanuary 20, 2013
by Katie Little
Despite flagging consumer sentiment and a shrinking paycheck for most, the Gilt Groupe chairman sees opportunity for luxury brands as the 1 percent continues to spend.
During the holiday period, Gilt Groupe saw sales rise more than 30 percent compared to the year before as mobile commerce boomed for the flash sale pioneer.
This growth comes amid a challenging environment for some, including Tiffany, which posted flat holiday sales despite signs that point to rising demand for the broader luxury market.
"I think there is a new or relatively new desire for a deal — no question about that," said Susan Lyne, chairman of Gilt Groupe. "But I also think that there are plenty of luxury brands that are doing very well right now. I think there's been a lot of noise in that space because of the Tiffany earnings."
Last quarter, Tiffany cited lower-than-expected sales of the company's silver jewelry as one reason that its gross margins fell during the period. But sales of the company higher-end pieces (and lower margin) actually sold well.
In another positive sign for the luxury market, concerns about Chinese growth seem to have been allayed somewhat as the country's fourth-quarter gross domestic product growth picked up to 7.9 percent, rebounding after seven quarters of slowdown.
"So there is still the 1 percent out there spending," said Lyne, who added that she sees two different groups of customers for the company.
"One are young people, 20 to 30, who love great brands and are in their first or second job, and we're their way to access those brands at this point in their lives," she said. "And the other group is people like us, who have more money than time, and Gilt does a great job curating wonderful sales of great brands, and it's a very easy shopping experience."
Gilt Groupe has positioned itself as a leader in the space, but not all sites in the increasingly crowded and competition space are faring as well. Concern over the long-term growth prospects for competitor Groupon have sent the company's shares in free fall, shedding 80 percent since February.
Since Gilt Groupe began as an invitation-only site in 2007, it has branched out from offering just women's apparel and accessories to include categories including menswear, baby and kids, home, food and wine, travel and city-based deals.
"You know, I would say we're not going to be moving into new categories," she said. "What we're doing is trying to continue to really innovate in the space. So one area we see just incredible opportunity is in mobile sales."
Mobile sales now account for about 30 percent of overall sales, up from 5 percent a year ago.
"It's going to continue to just crush it, and that's a category that didn't even exist five years ago," Lyne said.
Lyne added that Gilt Groupe has not seen a correlation because the price of an item and consumers' willingness to shell out cash via mobile devices.
"We've sold $20,000 diamond rings on iPhones," she said. "We've sold cars on iPhones, so that's no limit to what people will buy."