NEW YORK, United States — Rue La La, under parent company Kynetic, has acquired Gilt Groupe from Hudson’s Bay Co. to create one large flash sales entity called Rue Gilt Groupe. After merging, the companies are slated to reach $1 billion in sales.
The combined group will be the fourth largest player in the flash sales space, according to Rue La La CEO Mark McWeeny, next to QVC’s Zulily, Vente-Privee in Europe and Vipshop in China. After merging, the companies are slated to reach $1 billion in sales, he added.
The financial terms of the deal were not disclosed. Hudson’s Bay bought Gilt in early 2016 for $250 million — a significantly discounted price considering the $280 million the company had raised from investors. Founded in 2007, Gilt was once valued at $1 billion and primed to go public. But the flash sales model has since waned in popularity as off-price designer inventory became harder to secure and regular retailers began offering steep discounts to drive traffic.
“When we think about the space we’re in, the aspirational off-price space, we believe that’s a $50 billion-plus business,” McWeeny said. “If you narrow it down to flash sales, it’s a large global space that’s quite successful.”
Flash sales companies in the US have struggled in recent years as luxury brands regain control of inventory following the Great Recession. As Gilt rose in the late 2000s, a handful of competitors emerged, further tightening the supply of off-price inventory.
HBC bought Gilt to bolster its Saks Off 5th division, the company said in a statement about the sale. At the time, the company expected Gilt to add about $40 million in adjusted earnings before interest, taxes, depreciation and amortisation by fiscal 2017.
In order to accelerate HBC’s profit growth, “we have made the decision to divest Gilt,” a Hudson’s Bay spokesperson said in an email statement. “We are pleased to have found homes for the Gilt businesses in the U.S. and Japan that are more synergistic with Gilt’s core operating model. These transactions will allow us to focus time and resources on growth drivers that will have the greatest impact on our results.”
Gilt’s Japan offshoot, Gilt Japan, has been sold to Gladd, Japan’s largest online flash sales platform.
Gilt and Rue La La are similar in size in terms of revenue, McWeeny said. The latter reportedly post annual sales of about $400 million. “Our record sales was 2017 and we’re on pace to beat that again,” he added.
Together, Rue Gilt Groupe will reach 20 million members. The two brands will operate independently, however, with Rue selling both high- and low-end products and Gilt reaching a more affluent, urban consumer. But the shared infrastructure will allow for better relationships with vendors, McWeeny said.
Rue Gilt Groupe will focus on competing in the off-price channel by leveraging its customer data and focusing on mobile sales, which comprise more than 60 percent of the business.
“I remember the first time I bought something from Gilt Groupe, on November 13, 2007 — I bought my wife a Zac Posen top,” he said. “We’ve been in on-again, off-again talks to put the two businesses together for the last nine years.”