Flash-sale site Gilt changing retail business in Japan

Flash-sale site Gilt changing retail business in Japan Joanna Dubin, CEO, Gilt Groupe KK

TOKYO —

The retail business in many countries is changing rapidly and Japan is no exception. One of the movers and shakers is Gilt Groupe, a flash-sale luxury branded site which offers its members access to the best brands at up to 60% off. Gilt focuses primarily on women’s and men’s apparel, accessories, home goods, children’s wear, restaurants and spa experiences. In Japan, sales begin at 9 p.m. each night on a first come, first served basis. 

Launched in New York in December 2007, Gilt opened its Japan office in March 2009, and entered into a joint venture with SoftBank in October 2011. Today, Gilt has nearly 2 million members in Japan – there are no membership fees or annual charges.

Overseeing the Japan office is CEO Joanna Dubin. After graduating from New York University, Dubin worked in the fashion business in New York. She got her first experience with Japan while working for Ralph Lauren, then spent some time with Coach, managing their Internet business. Dubin came to Japan with Gilt in November 2010.

Japan Today editor Chris Betros visits the Gilt Japan office in Ginza to hear more.

How’s business?

Since we started here since March 2009, we’ve seen massive growth. We have moved offices five times and now we have 135 staff.

How many locations do you have?

We have 3 floors in this office, a distribution center in Kawasaki and a photo studio in Shiomi. Everything we sell is photographed there. We’ll take up to 20,000 photos a month.

What exactly is a flash sale site?

It’s a relatively new business concept. Every night starting at 9 p.m., members are offered time-limited sales (for three days) of the best brands at the best value in women’s and men’s apparel, accessories, home goods and children’s wear. In the experience category, we offer primarily restaurants and spas. So far, we have handled more than 2,000 brands. Members can shop from anywhere on their desktops, smartphones and other mobile devices. The sooner you come onto the site after the sales start, the better inventory you have. Items sell out and you can’t order them nor see how many units of a particular item we have.

Why do you think the concept is doing so well in Japan?

The idea of finding great brands at a great value is still something that is fairly new to the Japanese market. Japan has always done well in luxury, but the mid-market has not always been well developed. I think one of the things that Gilt has done really well is find brands that are not only in the luxury market but also affordable luxury, introducing them to the Japanese market and creating exclusive experiences. Japan is Gilt’s biggest overseas market. We are changing the face of the retail business and that is exciting. Being the first in the market has served us quite well.

How many members do you have in Japan?

Nearly 2 million. Our customers are primarily women in their 30s in the Kanto region, more than half married with kids. There is no charge to become a member. All you have to do is sign up.

Is the business model for Japan the same as in the U.S.?

In the U.S., sales begin at noon because it’s common for people to shop at lunch time on their computers. In Japan, we started with the noon time slot but we found that people were not going to the site at noon. So we started the daily sale at 9 p.m. and it’s worked well. 

How do you market the business?

In the U.S., when we started the business, it was mainly word of mouth. It was almost entirely a referral business. In Japan, we use referral, Facebook which is a big driver for us, all sorts of SEO advertising and we are doing some print advertising in magazines like DRESS, Numero and Harper’s Bazaar. 

What sort of deals do members get?

Discounts range from 40-60% on fashion items. For restaurants and spas, it might be 30% off for a package deal, an exclusive experience you can’t get unless you bought it through Gilt. That may include a special bottle of wine, or if it is a spa, a facial or massage.

What is your revenue model?

We work on a margin basis and do some kind of a margin split with every brand partner we work with.

How do your partners benefit?

We can provide great exposure for up-and-coming brands – they are reaching 2 million Japanese. Others use us instead of building outlet stores. Why have inventory sitting in a store for six months when you can give it to us and we’ll sell it in three days. Famous brands can use us to move inventory that may be just about to leave the shelves.

We have 32 individuals in our merchandising team. They are product experts who go out researching brands, doing competitive shopping, to find what’s new and different. Then we approach the brand’s head office, explain our business model and share all the benefits of working with us.

How do you get feedback from your members?

We do surveys with members about what magazines they read, what products they like, what they can’t find on our site and so on. We have begun a platinum loyalty program for our best customers. We recently had a private dinner for some of them to ask them directly what they like and don’t like.

What’s your policy on returns?

We have a two-week return window.

Did the sales tax hike from April 1 affect your business?

It was certainly a big topic for discussion. We’ve increased the tax to 8% but made an effort to lower our prices to give the customer a little bit a price break. 

Where does the majority of your revenue come from – desktops or mobile?

Currently, the majority is coming from desktop but the traffic is starting to move toward mobile. About a year ago, approximately 40% of our traffic came from mobile. Today it is about 60%. Nowadays, when we develop new products for our site, our tech team are focused first on mobile. 

Tell us about your team.

We have 132 bright, dynamic employees and we are looking to hire more. We have a very international staff with 30% non-Japanese. We hire based on skills set. I think we have great variety in our organization.

What is a typical day for you?

I take Japanese lessons twice a week, so on those days, I’ll come to the office at around in the early afternoon. Otherwise, I am here bright and early with the team. I genuinely enjoy working with our employees and engaging in discussion that leads to strategic decisions.

How do you like to relax?

My husband and I love exploring Japan and traveling through Southeast Asia. I work out 3+ times a week, and enjoy cycling. I participate in a cycling event from San Francisco to LA every year in June to raise money for HIV.

Japan Today

1 Comment

  • 1

    M3M3M3

    I was shocked that over 130 people can be employed by one site like this, in what is essentially a super classy Group-On. I assume the margins are huge even after discounting 60%.

    The paradox of these online businesses is that the more popular and successful they become in building their brand the less people they can eventually employ. At some point you realise that you can jettison the logistics and just sell access to your customer base. The clothing companies can do all the work like taking all the photos, and keep a slightly bigger share of the profits. Essentially what is valuable at that point is the brand and you can do away with the overheads, hassel and risk of keeping physical stock (unless people come to you for your logistics, ie Amazon). But I assume with small foreign based clothing brands this is difficult to coordinate.

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