Rue Gilt: Consumers Underserved by Current Discount Retail Offerings

Rue Gilt Groupe

When Rue La La launched over a decade ago, it — along with Gilt — was a pioneer of the online flash sale, helping bring forth a trend that countless others have used to keep customers coming back.

Now, Rue La La and Gilt — today a single company — are hoping that foresight and the acceleration of eCommerce adoption over the past two years can get investors as excited as shoppers seem to be about the company, which has filed for a public listing with the U.S. Securities and Exchange Commission (SEC).

Rue Gilt Groupe was founded as Rue La La in 2008, offering luxury brands at up to 70% off full-price retail. In 2018, the company acquired Gilt, which has a similar business model but only 7% overlap in customers with Rue La La; in 2019, Simon Property Group invested in the company and added Shop Premium Outlets, a digital outlet marketplace that Rue Gilt Group said in its S-1 filing “benefits from Simon’s strong relationships with brands and loyal following of visitors to its properties.”

Related news: Rue La La Snaps up Gilt From Hudson Bay

Also see: Simon Property Group Eyes eCommerce Play

More than 80% of Rue Gilt’s one million active buyers are female, and about 40% are between the ages of 18 and 44. The company said 72% of active buyers visit its mobile apps or websites at least quarterly, while 59% visit at least monthly and 39% visit at least weekly.

What makes the Rue La La and Gilt marketplaces stand out, the company noted, is its reliance on flash sales and exclusivity, which keeps customers coming back to see what’s new. Indeed, nearly one-third of consumers say they’ve recently participated in a flash sale, according to PYMNTS data, including 48% of Generation Zers and 47% of millennials.

Related news: 43% of Consumers Participate in Product Drops, Flash Sales

In a letter attached to the SEC filing, co-founders Mark McWeeny, who currently serves as CEO, and Mark Weinberg, who serves as CFO and COO, noted that although off-price retail has grown to a $100 billion category, it’s still largely dominated by brick-and-mortar retailers that don’t serve modern consumers’ needs.

“Today’s shoppers prioritize value, convenience, experience and entertainment when choosing where to shop,” McWeeny and Weinberg wrote. “We believe this audience has been underserved.”

PYMNTS research, conducted in collaboration with Carat from Fiserv, found that half of consumers are shopping online for items to have them delivered at a later date more often now than prior to March 2020, including 66% of Generation Zers and 58% of millennials — Rue Gilt’s core customer base. Additionally, the products most impacted by this shift are clothing and accessories.

More details: Half of Shoppers Making More Buy Now, Get Later Transactions Than Last Year

Rue Gilt said that in the trailing 12 months that ended Oct. 2, net revenue increased by over 28% as compared to the previous 12-month period, which the company attributed to “consumer spending patterns and preferences that were influenced” by the pandemic. Therefore, Rue Gilt warned that it may be unable to replicate similar revenue growth — though McWeeny and Weinberg said they believe the company is “still in the early days of our growth story.”

“We have never been more excited to lead this company and capture the bold opportunities ahead,” the co-founders wrote.

Tallying Losses

Not unlike other digital-first peers that have recently filed to go public, Rue Gilt noted that it has not made an annual profit since its inception, including a net loss of $15.9 million in 2019 and $16.3 million in 2020; for the trailing 12 months that ended Oct. 2, the company said its losses totaled $8.8 million.

Rue Gilt also said that the company’s total costs have increased every year, a trend that shows no sign of slowing down as the company tries to expand its customer base, develop “new strategies and product offerings,” and invest in infrastructure and personnel to improve operations.

Warby Parker, which went public via direct listing in September, has similarly struggled to balance revenue with expansion, reporting $55.6 million in losses last year and $1.7 million in 2019. Last week, the eyewear retailer said third-quarter losses reached $91 million, primarily because of stock-based compensation and direct listing expenses.

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