Gilt Group sale shows it’s hard to turn disruption into profit

gilt

Having raised $286 million in funding, Gilt‘s sale to Hudson’s Bay last week for $250 million is hard to see as anything but a failure of Gilt to turn its flash sale model into a major stand alone business. According to CNN Money:

Gilt Groupe is one of the originators of the flash sale model. […] Its user base has soared over the years. […] Hudson’s Bay said the deal is a play to continue growing its discount business and that Gilt will integrate with its Saks OFF 5TH locations.

Several years ago, we saw something similar happen to Groupon, which thought is was going to revolutionize retail, and ended up doing much, much less. Here’s another quote from the CNN article:

“We plan to continue to foster Gilt’s culture of innovation, which has helped create a strong brand with a loyal and devoted millennial following,” said Jerry Storch, CEO of Hudson’s Bay, in a statement.

I think we’re seeing a couple of things:

We’re seeing the need for retail-oriented businesses to make money, and lots of it. It’s getting harder and harder for even the coolest startups to claim they’ve changed the world until they prove they can sell a lot of stuff. This is a good thing. The vendor landscape is littered with “disrupting technologies” that added little value. Turns out it’s much easier to be disruptive than to be meaningful.

We’re also seeing how hard it is for big retailers (like Saks Fifth Avenue) to innovate internally, how their cultures don’t really support change, and how – in many cases – they still haven’t wrapped their heads around what it means to be a relevant company in the Amazon.com era.

Rare is the company that creates something truly game-changing, lasting, meaningful to customers, and hugely profitable. So maybe Gilt did exactly what it was meant to do – create an experience that could terrifically augment an established brand and make it relevant to a whole new group of customers. Maybe Gilt’s greatest value is in extending its culture of innovation to Hudson’s Bay, ushering in a new era for the combined company.

Maybe that’s enough.

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