Exclusive Shopping Websites Catching On

Marketers See Lucrative Niche in Membership Concept

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NEW YORK (AdAge.com) -- Those elusive, engaged consumers -- those who are actually still spending -- are a marketer's dream. So where are they hiding? Well, a slew of new members-only websites that clear excess designer merchandise at steep discounts contend they can be found there.
Sites like Gilt.com that require members to be invited or sign up to view sales events are drawing substantial traffic.
Sites like Gilt.com that require members to be invited or sign up to view sales events are drawing substantial traffic.

Sites like Gilt.com, Ideeli.com, HauteLook.com and RueLaLa.com that require members to be invited or sign up to view sales events are drawing substantial traffic. The sites have grown steadily since launching last year, said Matt Pace, director-retail and consumer products at Compete.com. Since January, the number of unique visitors has skyrocketed from less than 20,000 to roughly 160,000 per month at both Gilt and Ideeli.

'Potentially giant'
Though neither of the sites reports sales, it's clear that members-only shopping can be a big business -- and is already so in Europe. One French company, Vente Privee, claims $700 million in annual sales, said Susan Lyne, former president-CEO of Martha Stewart Living Omnimedia, and newly minted CEO of Gilt Groupe. "France is a fifth the size of the U.S. You do the math," she said. "I came here because I think this is both a brilliant business model and a potentially giant company."

Indeed, Ms. Lyne's surprise move brought new attention to the emerging category. She pointed out that she brings a "different level of relationships to the table," which will help spur further growth at Gilt. "You can assume I'm talking to a lot of media companies and to a lot of potential corporate partners as well," she said. "This is a company, a platform, which allows us to host private sales for any membership group. We can white-label a sale very easily, and so we can bring unique experiences to the table for any media partner."

The concept, at its core, is fairly simple. Consumers join the groups, mostly through invitations from their friends. Some of the sites also partner with media, like The New York Times or Lucky magazine, in the case of Ideeli, to extend invitations. Members then have access to sales events, which are limited in number and duration.

Intriguing niche
While members-only shopping is still a relatively small niche, the concept is intriguing, according to marketers involved with it. Ideeli, for one, has added giveaway events to attract marketers, as a means to branch out into new categories such as prestige beauty and luxury travel that don't lend themselves to discount sales. Estée Lauder, which recently conducted a giveaway and plans more events with Ideeli, said it has found a highly engaged, qualified audience.

"[The concept] is capitalizing on the fact that women like to be a part of a community today," said Meryl Truffelman Macune, executive director-online marketing and new media at Estée Lauder. "They also like to feel like they're being given an exclusive opportunity. [And it's] time sensitive, so they feel like they have to get it now."

Because the sales prompt a sense of urgency, shoppers are driven to learn about a product and make a purchase decision before the event begins, lest the item sell out. Ideeli, on average, sells out in 3 hours and 36 minutes.

Paul Hurley, Ideeli's founder-CEO, says that because consumers are engaged, there is an opportunity to better educate them about brands in a way that doesn't feel like advertising. "If you go to Ideeli, it doesn't look like there's any advertising. It's fully integrated, and it's structured in such a way that we can solve a lot of different types of very practical problems that marketers have," he said. "We run six to eight different types of programs, depending on what you're trying to accomplish in your marketing or clearing of inventory."

Chaos could offer advantages
And while sales figures at many retailers are plummeting, members-only shopping sites could actually benefit from the recent economic turmoil. Indeed, as the market tanks, Ms. Lyne says that Gilt has been breaking all-time revenue records. "There may be multiple reasons for that. It may be escape for some people, but I think it's also because of the value proposition we bring to consumers," she said. "I hope this crisis is over very fast for all the obvious reasons, but we may be uniquely positioned to feel it a lot less."

Maybe, or maybe not, said Compete's Mr. Pace. "Their growth shows little sign of slowing. However, given the economy, all bets are off."
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