Gilt, Ruelala and the Industry’s Latest “Channel Conflict”

Much of my work this week has been learning about Gilt Groupe, ruelala, and other luxury “private sale” sites. (The list includes ideeli, hautelook, editorscloset, and a few others.)

These sites are doing big business, even in this economy, by offering discounted designer items for a fixed time to “invited” members. And they are starting to carry a substantial amount of designer jewelry; the “jewelry” category now represents 15% of gilt’s sales. But this offends some jewelers, who complain that the sites are selling products previously available only through them, at prices they would never be allowed to sell at.

I heard that relations are so bad, representatives of one site hid their name tags at Centurion.

Of course, this is the latest in a long series of “channel conflict” disputes in the industry.  Generally, in these disputes, the brands say that the new distribution channel—be it a “branded” store, a nationwide chain, TV shopping channel, or what have you – increases the brand’s overall profile, and benefits everyone.

That is what’s being said here, as well – as Renee Klein, Gilt’s jewelry buyer, puts it, “For many members, the biggest plus of working with us is exposure. A lot of these shoppers who grew up on the Internet do not traditionally shop at fine jewelry stores. These brands are not in the forefront of a 25 year old mind.”

The sites furthermore say they are no different than traditional “sample sales.” And Klein notes that Gilt is not selling new product, simply items that have been pulled back from stores. But I’ve heard retailers say they are not so sure about that.

These sites sell only to “members,” giving them a “velvet rope”-ish air of exclusivity and keeping their listings off of shopping search engines like froogle. But the truth is memberships aren’t that hard to get, and many jewelers do regularly check to see what’s on there.

One manufacturer told me (off the record, of course):  “While we need to be careful with what we put on there and how frequently we do it, it is a great opportunity for a brand to get exposure to new customers and get out of problems.”

So jewelers, I ask you: In the long list of things that make it difficult to be a retail jeweler, where does these sites fit? Do you check these sites, and how do you react when a brand you stock is on there? Or do you think they could actually increase your sales by increasing brand awareness, as the manufacturers and the sites will argue? And to manufacturers: What kind of feedback have you got from retailers by selling on these sites? Do you pro-actively inform your retailers that you will be on there? (As the sites advise them to do.)  What are the pros and cons?

You can comment here or write me at rbates – at – reedbusiness.com.  I can keep any comments confidential, if you like …

JCK News Director