Nordstrom Acquires Flash Sales Site HauteLook For $270 Million | Hacker News Reader

Nordstrom Acquires Flash Sales Site HauteLook For $270 Million

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27 pointsssclafani13 comments

The whole local coupon / flash sales aspect seems really easy to launch - not too much technical complexity involved etc.

However, as established retailers try to launch their own 'flash sales' site, they realize that it is not as easy (operationally) as it seems from the outside. Flash sales / local coupon sites have to fight a dual battle: one to acquire users/customers and the other to acquire great merchants / deals.

That explains why many of them will end up acquiring existing players so that they can 'hit the ground running'

There is one key difference. Physical goods.

The logistical challenges of warehousing and shipping physical goods reliably, quickly and with the added complexity of the fact that every day you are dealing with around 100 brand new SKUs that will only be sold for that day... are significantly higher than delivering a virtual coupon to a customer via email. Significantly.

That is why there are many, many Groupon wannabes, and decidedly fewer Gilt wannabes.

actually, they're not that bad for gilt/hautelook etc. if you compare them with other online retailers. Most of the flash sales sites use some sort of dropshipping (brand / manufacturer ships goods to gilt/hautelook and they ship to customer after sale is over) -- contrast this with other retailers where a lot of them stock inventory before hand.

well, I do have something of an insider perspective - my startup is in this business :)

most flash sales sites will do a mix of warehousing and dropshipping depending on brand. it's faster to ship with warehousing so obviously for popular brands it's better to warehouse (your customer gets their order quicker). dropshipping has other benefits such as managing risk, but brings with it logistical problems e.g. the possibility that you could PO for stuff that doesn't exist because of a mess up earlier in the process, and then you have to explain to customers that sorry there was only 4 pairs of those shoes not 5, and you don't get yours - entirely possible when you work with a different brand (small/large companies) every day.

I can tell you that despite the lack of need for warehousing, dropshipping still brings with it many logistical problems of its own!

The whole local coupon / flash sales aspect seems really easy to launch - not too much technical complexity involved etc.

Flash sale sites with real inventory are hugely complicated. E-commerce and warehouse/logistics are already a giant pain in the ass, now combine those two with millions of people all submitting orders between 12pm and 12:01pm.

Here's a recent net@nite interview with Greg Bettinelli, senior VP of HauteLook, recorded Nov. 30, 2010: http://twit.tv/natn179 (Interview starts about halfway through)

High fashion sales is an interesting phenomenon. It is the equivalent of beanies babies for adults. They have high perceived value, limited quantities, and are designed to be very collectible. Brand designers can create limited editions that specifically sell through these flash sales outlet and not be worried they will cannibalise their price premium.

I use Hautelook a lot (don't ask :) ). They are a pretty useful site and they have good inventory. They've also done a good job of competing with Gilt (which is the 800-pound gorilla). Good exit for them

Tech Bubble? Yes, sir.

Not so fast. This is a site selling real stuff, making real income.

How are they making money? Are they taking a cut out of whatever is sold?

Yes.

Maybe if it were Nordstrom buying boo.com in 2001, maybe. But Hautelook has millions of subscribers, and it's in a market where Vente Privee, the pre-eminent leader in that space, made almost a billion dollars last year.

These quick sale sites for fashion are huge business, nearly as big as local coupons.

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