More on Gilt/Ruelala: Are We Developing a Discount Culture?

Following up on my post on Gilt, ruelala, and other flash/private sale sites, I found this excellent article in New York magazine. The article notes that the sites, which collectively are doing at least a half a billion dollars of business a year, popped up at exactly the right time…

Between the autumns of 2008 and 2009, according to Bain Capital, as little as 25 percent of all luxury goods moved at full price, and nearly half of all items didn’t sell all season. Some department stores canceled orders from designers, or refused to pay for shipped merchandise. Quite a few smaller retailers went out of business entirely. That was when Gilt stepped forward with its checkbook, and said good-bye to its supply problem.

Even so, the article notes: “Many designers wonder about the long-term consequences of the bargain they’ve struck” …

They worry that Gilt and its brethren may be undermining the expectation, carefully cultivated over many years, that the finest things always come at a premium. “There is always a risk to the integrity of your brand whenever you discount,” said Milton Pedraza, CEO of the Luxury Institute, a research and marketing group. “What you’re telling consumers is ‘We’re really kidding, it’s not really as valuable as we told you it was.’ …

I think this is a real issue for jewelry designers who sell on these sites (and plenty do), especially since so much of the appeal of jewelry lies in its image as a store of value.

Now, I do think most designers will survive their products being discounted on gilt  – as long as, as one manufacturer put it, they are “careful about how much [they] put on there and how frequently [they] do it.” Still, it raises the question: If they are letting gilt and other sites discount their products, shoudn’t they let non-cyber retailers do it as well? As we know, not every designer lets retailers discount. But isn’t it a lot more damaging to a brand’s image to have gilt, a nationwide site with millions of members, sell at a slashed price (even if that discount doesn’t appear on search engines), than to have it done by a mom and pop with far less reach?

JCK News Director