It's just after 9 a.m. on the West Coast and the competition is already out in force at GiltGroupe.com. The countdown has started on the $129 turquoise Oscar de la Renta peep-toe pumps in my virtual shopping cart, where they will stay for just 10 minutes. If I still haven't checked out by then, the shoes will automatically go back onto the virtual selling floor.
The urgency and limited quantities are supposed to stoke desire, and it's working.
Over on RueLaLa.com, a message pops up onscreen telling me there are only six pairs left of the $99 Rafe ikat print wedge sandals I've been eyeing. While I'm going through a mental checklist of what's in my closet, the turquoise pumps at GiltGroupe.com disappear, and are quickly "clicked-up" by another shopper. I follow a link that says "waiting list" and enter my contact information. If the other shopper returns the pumps, I will get an e-mail giving me a second chance
Welcome to the sport of private online flash sale shopping, where Alexander McQueen dresses, Vera Wang jewelry, Moschino blouses, Judith Leiber jeweled evening bags, Tag Heuer watches and Gucci sunglasses can be bought for as much as 80% off retail, so long as you are the quickest one to the virtual checkout counter.
There are dozens of private flash sale sites online now, tantalizing shoppers every morning with an announcement of the day's new designer sale events and turning shopping into must-surf entertainment. The catch is that bargains, big and small, are available for just a brief window — one to three days — and you're competing against thousands of other private sale junkies for limited quantities.
GiltGroupe.com launched in November 2007, followed closely by HauteLook.com and Ideeli.com, just as shoppers wanted to satisfy their designer tastes at more recession-friendly prices. All three of the top sites have between 1.8 million and 2.5 million members.
"Discovery-based shopping is what excites the customer," says Adam Bernhard, chief executive of Hautelook.com, which is based in L.A. "We remerchandize our [online] store every night, and every morning you have an e-mail with eight or 10 new brands. Shoppers come for no other reason than to look and all of a sudden they've made a purchase."
This new way of shopping was born of the recession, when entrepreneurs recognized that manufacturers would need a place to discreetly sell excess inventory.
Rather than ditching high-end handbags and runway apparel at bargain-basement, bricks-and-mortar retailers — where they might stay on the floor for months and tarnish a brand's image — manufacturers and designers can turn to the private flash sale sites. Here, discounted merchandise is hidden from search engines, sells out quickly and is seen only by "members" who have signed up to participate, or buyers who've been referred by a member.
"The perfect storm of the recession put wind in the sails of these entrepreneurs because they had access to an excess of merchandise they never would have had, and manufacturers who never would have considered a sale online were left with their pants down," says Sucharita Mulpuru, e-commerce analyst for Forrester Research.
Private sample sales generated $1 billion last year, a relatively small piece of the $155-billion e-commerce pie. But the category is thriving, with more than $100 million in venture capital flooding into the space in the last six months alone and sites continuing to launch as recently as this year. Private sale sites are hiring seasoned brick-and-mortar retail vets from Williams-Sonoma, Old Navy, Urban Outfitters and more to sharpen merchandising and to focus on new segments of the business, such as men's and children's wear.
This new model of shopping has been so successful, in fact, that challenged department stores such as Saks and Neiman Marcus have experimented with their own 24-hour online flash sales, and eBay launched a similar model at FashionVault.ebay.com. Comcast also has entered the ring, launching Swirl.com earlier this year as an offshoot of the popular DailyCandy e-newsletters.
Now that the competition is heating up, private sale sites are working harder at branding themselves and differentiating their shopping experiences.
Some sites are expanding into lifestyle categories, offering discounted ocean view junior suites at Tortuga Bay in the Dominican Republic for $415 (regularly $640), Le Creuset French Ovens for $278 (regularly $370) and half-off QuikTrim dietary supplements.
GiltGroupe, which has projected revenue of $500 million for 2010, has launched a sister site, Jetsetter.com, specifically for travel packages. It is also experimenting with selling furniture and offering more localized deals, including restaurant and spa promotions targeted to members in different cities. "It's about curated luxury items," says Alexis Maybank, co-founder of Gilt Groupe. "We are the anti-Amazon.com."