Deep Discount Sites Offer New Way to Shop

By Christina Binkley

Bleep. The text messages on my BlackBerry and cell phone begin: $250 Rag & Bone jeans on sale for $118 at Gilt.com, beginning momentarily. At Ideeli.com, Linea Pelle bags will be deeply discounted for the next few hours. Log on to Ideeli’s Web site, and a digital clock ticks away the seconds of the sale.

This is luxury discount heaven. Or hell, depending on how you look at it.

In recent months, a number of members-only Web sites have been launched to sell luxury goods at discounts of as much as 70 percent, using the marketing techniques of Internet pioneers like eBay. The timing is fortuitous. Amid a jittery economy, unsold luxury goods are piling up in storerooms.

While the new sites don’t have the vast inventory of catalog- style discount sites like Bluefly.com, their limited-time “flash sales” offer a new element, turning online shopping into online gaming. This can be distracting – as I found out by testing several sites. If you enroll in several of them, the day becomes a fast- paced race from the Zac Posen handbag to the Dolce & Gabbana coat.

The sales pitches sound very everything-must-go: Kwiat diamonds! Available for 36 hours only, while supplies last!

And yet the sites are pitched as members-only exclusive, and the aspirational products, such as Nina Ricci sunglasses, are aimed at bargain-hunters of all demographics, including the uppermost. The idea is pure wish fulfillment: The purchase buttons to buy goods on Ideeli read, “I WANT IT!”

Members of Gilt.com buy on average within 45 seconds of logging on, says Alexandra Wilkis Wilson, the site’s chief merchandising officer and a co-founder. During a recent Diane von Furstenberg sale, the site unloaded 600 dresses within six minutes.

Gilt, Ideeli, HauteLook.com and RueLaLa.com – all launched in the past six months – follow a number of French Web sites like Vente- Privee.com that have been selling off-price luxury goods for some time. The new sites report substantial growth from viral word-of- mouth marketing. HauteLook.com, launched in December, won’t release sales figures but says it has more than 100,000 members and a growth rate of 10 percent per week. This has come, says founder Adam Bernhard, a former apparel liquidator, with “not one stitch of advertising.”

The Web sites offer limited, members-only access and the thrill of the chase. Alexis Maybank, Gilt Groupe Inc.’s chief executive and co-founder of Gilt.com, says the site creates urgency with the flash sales, as consumers rush online to avoid missing out. Gilt.com, which launched in November, targets working urban women with high incomes and little free time, as well as women in the heartland who haven’t had access to New York or Los Angeles designer sample sales at which designers unload end-of-season merchandise.

Since nobody really needs a new Miu Miu clutch bag, the idea is to entertain – to be “addicting,” as Ben Fischman, founder of RueLaLa.com, puts it. “Every day, it’s the same women getting online,” he says.

Ideeli, which launched in December, gives away chic handbags sweepstakes-style and sells premium access to “First Row” members who pay $100 a year to get early access to sales via their cell phones. “Ideeli is a private-sale game,” says its technology- entrepreneur founder, Paul Hurley.

The brands themselves benefit from the discretion of a private sale. The goods are largely items from the end of the current spring season that companies need to get rid of as they prepare to ship their fall collections. This way, no one sees a telltale pile of unsold pants on a table to indicate that management messed up. For this reason, Gilt, which has a partnership with the industry’s Council of Fashion Designers of America, carefully keeps its goods from showing up high on Google searches.

The sites dress this up with videos, celebrity images and links to brands’ home sites. “When you look at Ideeli, it looks like there isn’t any advertising, but really, it’s all advertising,” says Hurley.

Luxury brands largely missed the Internet revolution. But recent studies suggest that the wealthy are shopping online these days. A survey conducted last fall by American Express Publishing and Harrison Group found that 99 percent of wealthy consumers shop online, expecting goods to be discounted at least 30 percent from store prices.

In return for the fun and discounts, some of the sites – notably Ideeli and HauteLook – cut back on customer service and limit returns. HauteLook can take a week to ship products. It says this is because it doesn’t have the products on hand but instead sends the orders for the manufacturers to fill. Ideeli apologizes for its lack of a customer-service department, saying it passes along the savings in the form of lower prices.

During the weeks I experimented, text messages bleeped from my BlackBerry at inopportune times. During a week’s vacation, my cell phone bleeped with sales messages so routinely that I began to ignore the messages.

Originally published by The Wall Street Journal.

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