High-Impact Entrepreneurship

Gilt Groupe entrepreneurs tell their story: By Invitation Only

Gilt Groupe is an e-commerce website that provides instant insider access to today’s top designer labels, at up to 60% off retail. Founders Alexis Maybank and Alexandra Wilkis Wilson are active members of Endeavor’s global network, and were honored as High-Impact Entrepreneurs of the Year at our 2010 gala in New York City.

Now, Alexis and Alexandra have co-authored a book, By Invitation Only, that tells the story of Gilt Groupe’s establishment and its eventual rise to success as the #1 luxury flash sale website in the United States.

(To purchase the book, which hits stores on April 19th, click here and use the code “endeavor”.)

For further insights, Endeavor interviewed the successful duo. Here’s what they had to say…

What was your ‘AH-HA’ moment that lead to founding Gilt?

We loved shopping the bins of New York sample sales, and we knew that millions of people would respond if we could transfer to the Web the excitement of competing for top brand bargains.

Alexandra, with your experience in retail and Alexis, yours in e-commerce- how did this experience help shape the vision of Gilt?

Some of the core elements that define Gilt’s vision were influenced by our prior work experiences. These include well managed growth, a strong level of trust from customers, word of mouth marketing. When Alexis was at eBay it was the fastest growing company in history, so her expertise on how to manage explosive growth was invaluable when Gilt got on its own growth fast track. Alexis also learned plenty from e-Bay about e-commerce and the power of grassroots, word-of-mouth marketing. Not only did Alexis get the chance in her twenties to run a company within a company (eBay Canada) and help launch eBay Motors, she also drank the Kool-Aid of startup optimism and inspiration that would prove irresistible when she later launched her own startup with her cofounders.

Alexandra’s jobs at Louis Vuitton and Bulgari prepared her for tough sales meetings and gave her insights about customers by working with them face to face. She learned at these jobs that she would establish the trust of customers if she refused to sell them something that wouldn’t look right on them. Much of Gilt’s success is due to the insights Alexandra learned about earning the trust of customers and curating selections shrewdly to help customers look their best and get the best value. Plus, Alexandra knew firsthand that most brands had overstock that they literally burned, and that this was a problem waiting for an entrepreneurial solution.

Many Endeavor Entrepreneurs own family businesses. Were you friends before you started Gilt? Can you comment on maintaining your friendship as partners? Any advice?

We became friends when we met at Harvard University as undergrads and then became best friends at Harvard Business School. Being close friends who complemented each other well was an essential ingredient to Gilt’s success. The secret to staying friends when you’re in business together is to always make sure your professional relationship doesn’t busnify your friendship—your friendship should take priority and the time you spend together shouldn’t be just about business.

Was there an instance at the beginning where you had to veer from your path and change direction? What happened and how did you implement this change?

Our original business model had been designed to purchase brands’ leftovers. But if we stuck to this model, we would be left vulnerable to the booms and busts of the marketplace or be left dry in months like August when there is little excess inventory to buy. So we started reaching out to brands to try to buy into their current-season merchandise—in other words, place our order at the same time as department stores and full-price retailers. We figured that this would help brands drive their costs down (because manufacturers typically charge less per unit for larger orders). We were right: many brands were eager to work with us as more of a partner, instead of just giving us their excess inventory. We promised not to sell their merchandise at deep markdowns until it had been put on sale on the department store floors. But buying at the beginning of the season was not the same as buying leftovers. For one thing, we were not able to secure nearly as big a discount off the wholesale price. Merchandise produced specifically for us, rather than products taken off designers’ hands at the end of the season (at which point they were essentially sunk costs), was just never going to be as cheap.

We knew we were making ourselves slightly vulnerable because placing our orders six or nine months in advance didn’t exactly allow us to be nimble or to anticipate changes in fashion trends or in our membership growth. We’d even start having leftovers of our own to liquidate, in “final” sales, at even steeper discounts (luckily, our members loved these sales).

We also began discussions with certain brands about the possibility of producing capsule collections exclusively for Gilt. This would guarantee our brand partners more orders, allowing them to meet factory minimums, drive down their costs and increase their margins.

Gilt has an all star senior management team. Can you talk about the process of bringing in more people and scaling? How did you develop a senior management team and decide to bring in an outside CEO?

At the same time that Alexis was feeling the need to switch out of the CEO role, Susan Lyne was on our board and was interested enough in Gilt to consider becoming our CEO. We knew having a CEO of her stature would be a golden opportunity. We had to carefully prepare the rest of the company for this change and make sure that the culture would remain intact. One way we did so was by hiring and identifying evangelists that live our company values and can inspire their fellow employees.

Many of our entrepreneurs are looking to expand internationally. How did you decide to tackle the Japanese market? What have been your greatest challenges in growing abroad?

The appeal of launching Gilt in Japan was simple: an untapped market, no competitors, and access to the biggest luxury spenders in the world, not to mention plentiful inventory. By April 2008, with the very strong urging of the board, we’d made the decision to launch our first international business out of Tokyo. The biggest challenge to the Japan launch was learning that what worked to launch Gilt in the U.S. wouldn’t work there for cultural reasons. While the Japanese love the concept of “invite only” and “private” sales, they don’t really find it acceptable to e-mail friends outside their immediate circles with offers, or especially to profit from friends’ purchases. So much for our social and monetary incentives that we had used very effectively to grow Gilt in the U.S. But we learned what would work instead, which included a Tokyo press conference during which both of us spoke in carefully rehearsed Japanese.

The flash sale market has become saturated. How does Gilt continue to stand out among your competitors?

We have by far the strongest relationships with the very best brands and we’re very careful about how we curate our offerings to serve our customers and earn their trust accordingly. We also invest heavily in presentation and photography which makes all the difference in showing our customers the appeal of any item we sell. We also offer one of the fastest ecommerce experiences around.

Equally, how did you decide to go into other markets like home, food and travel? what have been the challenges in this expansion so far?

We’d always known the site would sell much more than women’s and men’s fashion, and in each category—partly because our competition was nipping at our heels—we made it a priority to launch fast and get a foothold in the home, food and travel markets before other companies did.

What inspired you to write a book on your experiences? How much of ‘by invitation only’ offers lessons to inspiring entrepreneurs?

Helping other entrepreneurs or entrepreneurship dreamers is exactly why we wrote this book. We take readers through all of our toughest decisions and share many lessons we learned along the way from how to get funding to scaling, hiring and leading and everything in between. We hope the book will help entrepreneurs start the business of their dreams and grow it to its full potential.

What’s the greatest advice you received when launched Gilt?

To avoid the dire consequences of rapid growth by anticipating what could overwhelm your systems.

What are you most excited about in the next year? Where do you see Gilt five years from now?

We continue to refine our business model according to the changing needs and desires of our customers as we deepen our relationship with them. We hope to improve personalization for our members by creating a shopping environment that feels tailor made to the preferences of each of our members. Many surprises to come, but Gilt will stay true to its core.

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