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Gilt Tempts Japan With iPhone Apps

February 02, 2011
The Wall Street Journal
by Yoree Koh

In Japan, consumers have been scaling back their purchases of big-ticket luxury brand items and searching for bargains, due to the country’s continued economic malaise and deflationary pressures. Meanwhile, e-commerce sales have been gaining traction, making it a good time for Gilt Groupe - an online retailer selling brand items at discounted prices - to launch in the country. The site marries Japan’s weakness for high-end items with the new reality of modest spending.

The chairman of Gilt Groupe - which entered the Japanese market in March 2009 - said she expects the number of registered users in Japan to increase several-fold in the next couple of years as it bolsters operations in Tokyo. But much of the growth will come from greater social media outreach, starting with the Japanese version of Gilt’s apps for the iPad and iPhone that were launched earlier this week.

“Honestly we were late to that party,” said Gilt Group Chairman Susan Lyne during an interview with Japan Real Time on Tuesday in Tokyo, about harnessing the power of Japan’s social media environment.

The young company quickly became a juggernaut among online shopping sites in the U.S. since its launch in 2007 for its flash sales of designer goods. The response from Japanese consumers has been promising, but tepid. The online retailer entered Japan, its only overseas market, in March 2009. About 200,000 users registered within the first five months of the site’s Japanese debut, and its members have since grown to over 550,000. Japan sales jumped nearly two and a half times in 2010 compared to the previous year.

Still, the “invite-only” approach that spun the site into a shopping phenomenon among U.S. fashionistas hasn’t delivered the same viral results among Japan’s hotbed of supremely fashion - conscious consumers.

“The ‘invite a friend’ concept really drove an enormous amount of our membership growth because people would email 50 friends and say join Gilt and get $25,” said Ms. Lyne, about the U.S. market. “Here there’s more of a sense of privacy and a respect for not spamming your friends. You may invite one or two good friends saying ‘look what I found’ but it’s not the same I’m going to email all my contacts.”

Instead, news of the innovative shopping site’s launch here was ironically spread through the most traditional outlet: magazines. The marketing lesson is a common one learned by companies when they expand overseas. But now Gilt is shifting gears. In addition to increasing the weekly number of brand sales from its current 20 — a drop in the bucket compared to the roughly 200 offered in the U.S. – the company said it plans to lift its profile.

“There are still so many people in this country that don’t know that Gilt exists and without that viral piece that comes from ‘invite a friend’ it’s a somewhat slower process,” said Ms. Lyn. “So I think one of the things we’ll be more focused on here is social media as a viral component.”

About 1,300 Twitter users follow Gilt Japan, and roughly the same number are fans on Mixi, the Japanese version of Facebook. Meanwhile, Gilt’s U.S. Facebook fan page boasts quarter of a million users. (Its Japan counterpart has a mere 300).

“We built a strong Facebook following [in the U.S.] very quickly in part because you get a preview of what’s coming on the sales that day on our FB fan page so if you are a shopper who likes to plan what they are going after you get a little bit of a head start by going to the FB page. I think that’s probably something that would work very well here too.”

Gilt’s new applications for Apple Inc.’s iPad and iPhone will be a promising launching pad to grab a bigger slice of Japan’s retail market. Ms. Lyne said purchases made through the Apple devices in the U.S. account for up to 9% of the company revenue during the work week and 15% over the weekend, adding that the applications allow shoppers to buy sought - after items seconds faster than on a PC. And the iPad and iPhone were arguably among Japan’s must-have gadgets in 2010.

Gilt Tempts Japan With iPhone Apps

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