Gilt is going there fast

Thought sample sales were just for the fashion elite? Meet Susan Lyne, the woman who has brought them online — so we can all pick up designer goods for less. Nancy Hess reports

SUSAN LYNE had fans. She was, after all, one of the ABC executives behind Desperate Housewives, and she ran Martha Stewart’s design empire when Stewart was in prison for insider trading.

But Lyne was unprepared for her newfound ‘fame’ when, in 2008, she took the reins at the Gilt Groupe, the e-commerce company that Wall Street expects to be 2013’s most anticipated initial public offering.

"People tag me by the sleeve and tell me it’s changed their lives," she says. "They tell me their stories of how, at 12:01pm, every day life just stops for them."

At 12:01pm daily, thousands of people, mostly women, in offices (and cars and cafes and at their kitchen tables) sign in to gilt.com, where, for a few tense moments, they vie for discounted designer merchandise, just a piece or two in each size, from a Marni blouse to a pair of Casadei stilettos.

Within 60 seconds, much of it is snatched up in the ‘flash sale,’ leaving everyone plotting the next day’s strategy.

"It’s magical," says Dawn Olmstead, a Hollywood producer. Olmstead logs on from her phone app while she is driving the kids to school. It reminds her of when she lived in New York and shopped at sample sales, the insider-only seasonal events (that inspired the creation of Gilt) where fashionistas line up to pick through leftover designer goodies.

"When you win, it’s fantastic, and even when you lose, the site is your guidepost. You see what went fast, and you know that’s what’s hot. It’s better than Vogue. It’s better than anything," she says. She may even read By Invitation Only: How We Built Gilt and Changed the Way Millions Shop, a business book released this month by Alexandra Wilkis Wilson and Alexis Maybank, two Harvard business school pals whom Gilt founding partner and CEO Kevin Ryan recruited to create the look and feel of the site and to be the demographically perfect public faces.

Lyne, a wry, elegant 61-year-old blonde, shakes her head with disbelief. "When you have that kind of engagement with your customers, when they think they can’t live without you, you can go anywhere," she says.

Gilt is going there fast. From its start, with five founders at two long tables in a sublet office, it has 900 employees and a sleek loft on lower Park Avenue, and a market value of $1bn. It’s the second-most-valuable e-commerce company with its own inventory, after the much-larger Amazon. It has five million members, ships 10,000 packages a day, and has expanded with ‘verticals’, including Gilt Kids, Gilt Home, Park & Bond (for men), the travel site Jetsetter, Gilt Taste for gourmet foods, and Gilt City, a competitor to Groupon. You can get more than a cute new pair of Missoni beach sandals on Gilt these days; there are $175 cuts of sushi-grade yellowtail, four private training sessions with Gwyneth Paltrow’s trainer, and trips to Balinese eco-resorts. And unlike many hyped digital operations hurling toward a stock offering, Gilt is expected to break even by the end of the year.

"I think that Gilt is Susan’s perfect platform," says Charles Koppelman, who was executive chairman of Martha Stewart Living Omnimedia when Lyne was CEO. Unlike Stewart’s company, which was a well-defined brand when Lyne arrived, Gilt has given her a chance to sculpt a new entity. "It’s creative, fast moving, and innovative, which describes her perfectly," Koppelman says.

Paco Underhill, the environmental psychologist and author of Why We Buy: The Science of Shopping, says the success of the flash sale is obvious. "The concept of brands has penetrated everywhere from the favelas of Brazil to the streets of Brooklyn. And we’ve created an aspirational population obsessed with getting things at discount."

The flash sale has advantages over bricks and mortar. Members who lose out on a sale put their names on a waiting list, sometimes hundreds of names long, so if the item is returned, as are 20%, the package is shipped out to the next person on the list. Gilt is rarely stuck with merchandise, the bane of department stores. But bringing Gilt into a new decade as an IPO looms has not been without challenges. Online flash sales hit their stride during the recession, because they were a godsend for designers who produced more than they sold.

The sales were a ‘safe’ place to wring profit from unsold items; better to sell discreetly over the internet than to consign your label to the dreary fluorescent-lit outlet floor.

But with the US economy on an upswing, critics worry there won’t be excess merchandise. Competitors have sprung up, and while Gilt has mostly beat them back — the next biggest is one quarter of its size — plenty of rivals are vying for choice items.