Ask HN: How do these fashion discount sites operate (Gilt, etc)? | Hacker News Reader

Ask HN: How do these fashion discount sites operate (Gilt, etc)?

5 pointsolegious8 comments

See more and more of them popping up in the US and abroad, where do they get their merchandise?

Many don't employ bulk purchasing in the traditional sense.

RueLaLa for example is actually run by GSI Commerce, the largest end to end ecommerce provider. They have existing distribution contracts with hundreds of companies.

When a product reaches its end of life period, GSI Commerce either buys it from the retailer and adds it to RueLaLa or the product goes into "overflow" where it is moved to RueLaLa but GSICommerce now takes a more significant percentage of the income.

The reason it is so profitable is because no additional infrastructure nor purchases are needed. GSICommerce keeps the old inventory in the same warehouse, reclassifies it as RueLaLa material, and removes it from the client website.

Bulk purchasing. It's a similar model to Groupon - if you can drive enough volume for a single product you can get it significantly cheaper. Walmart works the same way.

I get that... but I am interested in some of the intricacies that go on here.. For instance, I know someone who made an attempt at starting a site like this and quickly ran into problems like only being able to purchase odd-sizes, etc for cheap re-sale. Presumably sites like Gilt lean on their wholesalers and set up rules to make sure they can provide enough product, and good enough product to maintain an interested user-base.

I'd definitely be curious as to how complicated those arrangements get.

It evolves over time as the retailer (Gilt) gains more volume and hence more power. If you look at Gilt, Groupon, etc. you are looking at companies that have spent a while gaining a very large channel for selling discount goods. This means they can pick and choose between wholesalers and products.

When starting out they will typically have to guarantee a certain volume to get the pricing they need and eat the product they can't sell. So it does require a fair bit of capital to get started which is why they typically start out with clearance inventory where the wholesale price is so reduced.

The initial rounds of Gilt were very limited on offerings (unlike the 6 or 12 designers they now carry daily) it was still high end though, so that initial entry point was indeed there for the early "designer" items, but as momentum gained on revenue/capital they snowballed to the current state.

To further pad this shortcoming in the early stages Gilt was invitation only, and had a lot of control of the influx of new customers to the site, which helped two-fold: promote the air of exclusivity and buffer for the smaller initial supplies/vendors from being out of stock too quickly. This also promotes traffic to the site as items, as they do today, sell out in popular sizes/prices fast, your users are logging in sooner/more frequently to grab a "deal".

So would I, I always want to know how they made the initial connection with the wholesalers and not get crap like odd sizes or odd designs.

Here's a great interview with the founder of JackThreads - http://mixergy.com/jason-ross-jackthreads-interview/

He goes into sourcing product etc.

Long answer here on Quora http://www.quora.com/How-does-Gilts-business-model-work

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