

Ask HN: How do these fashion discount sites operate (Gilt, etc)? - olegious

See more and more of them popping up in the US and abroad, where do they get their merchandise?
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SHOwnsYou
Many don't employ bulk purchasing in the traditional sense.

RueLaLa for example is actually run by GSI Commerce, the largest end to end
ecommerce provider. They have existing distribution contracts with hundreds of
companies.

When a product reaches its end of life period, GSI Commerce either buys it
from the retailer and adds it to RueLaLa or the product goes into "overflow"
where it is moved to RueLaLa but GSICommerce now takes a more significant
percentage of the income.

The reason it is so profitable is because no additional infrastructure nor
purchases are needed. GSICommerce keeps the old inventory in the same
warehouse, reclassifies it as RueLaLa material, and removes it from the client
website.

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ares2012
Bulk purchasing. It's a similar model to Groupon - if you can drive enough
volume for a single product you can get it significantly cheaper. Walmart
works the same way.

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famousactress
I get that... but I am interested in some of the intricacies that go on here..
For instance, I know someone who made an attempt at starting a site like this
and quickly ran into problems like only being able to purchase odd-sizes, etc
for cheap re-sale. Presumably sites like Gilt lean on their wholesalers and
set up rules to make sure they can provide enough product, and good enough
product to maintain an interested user-base.

I'd definitely be curious as to how complicated those arrangements get.

~~~
ares2012
It evolves over time as the retailer (Gilt) gains more volume and hence more
power. If you look at Gilt, Groupon, etc. you are looking at companies that
have spent a while gaining a very large channel for selling discount goods.
This means they can pick and choose between wholesalers and products.

When starting out they will typically have to guarantee a certain volume to
get the pricing they need and eat the product they can't sell. So it does
require a fair bit of capital to get started which is why they typically start
out with clearance inventory where the wholesale price is so reduced.

~~~
splish
The initial rounds of Gilt were very limited on offerings (unlike the 6 or 12
designers they now carry daily) it was still high end though, so that initial
entry point was indeed there for the early "designer" items, but as momentum
gained on revenue/capital they snowballed to the current state.

To further pad this shortcoming in the early stages Gilt was invitation only,
and had a lot of control of the influx of new customers to the site, which
helped two-fold: promote the air of exclusivity and buffer for the smaller
initial supplies/vendors from being out of stock too quickly. This also
promotes traffic to the site as items, as they do today, sell out in popular
sizes/prices fast, your users are logging in sooner/more frequently to grab a
"deal".

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natgordon
Here's a great interview with the founder of JackThreads -
<http://mixergy.com/jason-ross-jackthreads-interview/>

He goes into sourcing product etc.

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naithemilkman
Long answer here on Quora <http://www.quora.com/How-does-Gilts-business-model-
work>

