Reference no: EM132309815

Please read the following case study carefully and answer the questions given below.

A "Gilt"-Free Shopping Experience

It is noon on a typical weekday, and customers are waiting to pounce on the discounted merchandise as soon as the sale kicks off, eager to snap up a great deal on clothing from designers such as Rodarte, Derek Lam, Christian Louboutin, and others, because they know the best bargains go very quickly. Designer sample sales typically are by invitation only, and fashionistas work their list of contacts to finagle invitations to these private events, where they can purchase luxury brand merchandise at discounts of 50 to 70 percent. Shoppers line up around the block for the semi-annual Barneys Warehouse Sale in New York City and, because all sales are final, often strip down to their underwear between the racks to try on a $3,000 dress marked down to $600.

This particular sample sale has a different twist, however, because more than 100,000 customers will be attending, making this the most crowded store in the city. Except that there is no store. Gilt Groupe, founded in 2007 by Alexis Maybank and Alexandra Wilkis Wilson (who are known inside the company as A&A), runs "flash sales" entirely online. Access to Gilt's Web site is by invitation only (which gives it an air of exclusivity, exactly what the designers whose items are sold there are looking for), but, because the site has limited access, none of the sales or merchandise shows up in online searches. Landing an invitation to join is much easier than scoring an invitation to a brick-and-mortar New York sample sale sale, however. One of Gilt's 2 million customers (75 percent of whom are women) can issue an invitation or interested shoppers can contact the company's customer service department to receive one.

On its Web site, Gilt hosts about 70 sales each week and runs each one for just 36 hours before taking all of the merchandise down. "Whereas a department store might move a certain amount of product in a season, we can do it in 36 hours," says Amanda Graber, Gilt's public relations manager. The speed of the sales and the discreetness with which the company conducts them appeal to designers, some of whom were initially reluctant to offer their merchandise through Gilt. Thanks to the site's tremendous success and rapid growth rate, that reluctance has withered. "I have so many brands banging down our door, that I have to say 'no,'" says Wilkis Wilson. Gilt also boasts an incredible sell -through rate, the proportion of a designer's inventory that customers actually purchase. In the typical department s tore, the sell-throug h rate is about 65 percent across a 12-week season; at Gilt, the sell-through rate typically is 92 percent, which means Gilt customers tend to pick the virtual racks clean! "Most online shopping mirrors brickand - mortar stores," says Susan Lyne, Gilt's CEO. "They're not taking advantage of what's uniquely possible online, the heightened sense of entertainment and competition. A big part of the Gilt promise is discovery:

You come every day, and it's new every day." Recently, an ostrich feather jacket from Alessandro Dell'Aqua, originally priced at $3,175, sold for $618. Normally priced at $2,420, a Marc Jacobs leather bomber jacket sold for $548. Generating sales totally online means that Gilt has a tremendous cost advantage over its brick-and-mortar rivals, which incur the expense of operating physical locations.

Maybank and Wilkis Wilson have been friends since they were students at Harvard, where they met in a Portuguese class. After completing Harvard Business School, Maybank learned the ropes of e-commerce at eBay and AOL, and Wilkis Wilson embarked on a career as a merchandising executive at luxury brands Bulgari and Louis Vuitton. The two had been discussing ideas for starting a business and told Kevin Ryan, former CEO of DoubleClick and now a venture capitalist, about their ideas. According to Ryan, his "eureka" moment occurred one day when he saw a long line of women waiting in line to get into a Marc Jacobs sale on New York's 18th Street. "If there are 200 women who are willing to stand in this line," he recalls thinking, "that means that in the United States there are probably hundreds of thousands. But they don't live in New York, they're busy right now, and they just can't do that. We can bring the sale to them." The skills, experience, and networks of the three proved to be the ideal launching pad for Gilt Groupe. Ryan, who knew of a French company called Vente Privée that had achieved success in Europe with online designer fashion sales, invested some seed capital, and the Web site went live in late 2007.

Sales at Gilt have grown very rapidly. When Maybank and Wilkis Wilson launched the site, there were just 15,000 members, most of whom came through their network of contacts. Today, Gilt boasts more than 2 million members- and growing. Just 2 years after start-up, sales had reached $170 million, and 1 year later they were pushing $500 million. Gilt's success has convinced design houses to create clothing specifically for the site rather than merely selling overstocked merchandise. The company now works with more than 700 brands and has launched other sites such as Jettsetter, which offers travel deals; Gilt Fuse, which offers lower-priced brands such as American Apparel; and Gilt Man, which sells men's clothing . Since launching the Gilt Man site, the company's revenue from menswear has tripled. Some early Gilt members complain that the company has moved away from its original concept, including many brands whose names they do not recognize.

The Gilt Web site has a decidedly upscale look, with muted colors and no flashing "sale" signs and appeals to the company's target customers: upscale shoppers who are "aspirational" luxury buyers, people who are eager to purchase designer goods but cannot afford to pay full price for them. The key is to make sure that customers feel as though they are getting access to bargains that are not available to just anyone. The site also provides shoppers with extensive product descriptions and simple photographs of merchandise. "We deliver an incredible amount of information about the product," says Lyne, "and we have a direct line to our customers every day." The company also offers an iPad application for shoppers .

Gilt's management team is exploring an initial public offering for the company, whic h was valued at $400 million in its latest round of venture capital financing. Challenges do exist, however. "This is a pretty easy market to enter," admits Lyne, "but the operational aspects of it are incredibly complex. We change out the store every night. Receiving, sale preparation, and shipping and fulfillment are incredibly complex." Lyne is focusing on the company's e-commerce strategy. "We have to be thinking about what the Internet makes possible," she says. "Can we do something that drives the next wave of excitement in e-commerce? We need to get better at personalization. We need to be able to offer you different sales than we might offer somebody in Minneapolis or your mother."

Task

Submit a work proposal for this assignment by week 10th, which must include:
- Understanding of deliverables - a detail description of deliverables
- General overview of proposed plan - initial understanding of solution to all tasks
- Resources identified

QUESTIONS:

1. What advantages the Guilt Group Company will be getting by operating solely online offers. ? What are the disadvantages?
Note: (Students are asked to provide at least 3 advantages & 3 disadvantages)

2. What advice can you offer the Gilt Groupe's management team as they continue to develop their e- commerce strategy? What steps can they take to stay connected to their customers and to keep their customers coming back?

Note: (Student answer must discuss the e-commerce strategy with all parameters and impleemnation plan with details)

3. What Social, Legal and Ethical issues they must consider while developing the strategy for e- commerce for Gilt Groupe's so that they must not face procecution.

Note: (Students are expected to mention 3 points for each type of Issue)

4. Documentation and Referencing.

Note: (Students are expected to submit a well documented report along with at least 15 references.)